In a recent article entitled “Why your Amazon Prime membership may not be worth the price,” Jeniece Pettitt considered what you get with your Amazon Prime membership and compared it to other services. She concludes that the better value is to choose services on an a la carte basis, and that fast, free shipping isn’t worth all that much unless you use it on a regular basis. This is in the context of a price rise to $119 per year. All of her points are valid on an absolute basis for the value conscious consumer, but for the investor, her article misses something very important. A massive theme in tech investing is the idea of an ecosystem.
One major aspect of whether Prime is a value proposition has to do with your utilization of free expedited shipping. For me, this is worth the membership, and it would be cheap at twice the price. I hate brick and mortar retail and consider buying toilet paper at a physical store in the same short list of distasteful tasks as cleaning the toilet. If you couple the free shipping with the Pantry program and the Subscribe and Save program, you become an Amazon addict. I am extremely value conscious, but Amazon’s pricing power is very good on most items, including shelf-stable food items. If you are busy and there never seems to be enough time in the day to get everything done, then subscribing to things like batteries and deodorant is a very appealing prospect. My point is that Prime alone may not inspire incredible loyalty to Amazon, but the sum of the parts does.
In the Amazon versus Netflix debate, there isn’t much point in choosing. I am one of the many that have both. Amazon provides what you want when you want it if you are willing to pay up for extra features such as renting new releases and paying a subscription fee for premium channels. I’m happy to pay up for a premium channel subscription to get the few shows that I actually want to see on a regular basis. You can also buy season passes for many shows. I cut the cord on cable years ago because of the lack of value, and Amazon video making Game of Thrones and other hit shows available played a role in that decision.
I am not a retail aficionado, and I find shopping a deplorable waste of time. For me, I’d rather have a few sites as possible to deal with. I think that this is why Apple’s service business is growing at a never-ending pace. I’m not an Apple product fan, but I am hooked on the Google ecosystem, and Amazon and Google account for the vast majority of my online life. I probably could get a few extra services and save a few dollars by divvying up retail, video, music, software and a host of other products and services, but it isn’t worth it to me. I’d rather have a familiar interface and a good track record for quality at a good price. Make my life easy and put what I want at my fingertips, and I will reward you with fierce loyalty. Many Tesla fans are devotees because of Mr. Musk’s grand vision of the future, but very few companies can say that. Most of us are driven by a time premium that places value on convenience and ease of use. Simply put, you can have my Prime membership when you pry my phone from my cold, dead hands.
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