Second quarter results are coming out for big internet retailers, and the industry seems to be in great shape. Amazon reported $78 million in profit on $2.89 billion sales. A year ago, they reported $22 million in profit on $2.14 billion in sales.
Amazon CEO Jeff Bezos attributes this 255% increase in net income largely to Amazon Prime. Amazon Prime is a membership program that costs $79/year. Members get free second day shipping and overnight shipping for only $3.99.
Being one of those people who always order at least $25 from Amazon in order to get the free shipping, I can’t really fathom why many people would spend $80/year to get their books a day or two sooner. But, I am obviously wrong, and Amazon has again demonstrated why they are the top e-tailer on the web. I can only imagine how much the lifetime value of customers participating in that program has jumped.
As customer acqusition costs continue to rise online, increasing the lifetime value of customers should be a top priority for most retailers. A membership program such as Amazon Prime might be a great idea to implement.