November 16, 2012

Prime Wars: Amazon's Battle to Remain Top of the Shopping Heap


There isn't much good that can be said about a soft economy, but one of the few good things that can be said is that businesses start taking customers a lot more seriously than commonly done when times are good. With fewer customers in the mix, those that are left are getting treated like royalty. Not long ago, Amazon opened up its Prime operations, allowing users to pay $7.99 a month for Amazon Prime instead of only the annual fee version.

Not only did this provide free two-day shipping on orders, it also allowed users access to the Amazon Prime Instant Video library, a Netflix-style operation with loads of video goodies. But that move wasn't unique to Amazon, as competitors followed suit, and now, more recently, Amazon is striking back with a move of its own.


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Amazon Prime is nothing new. It actually launched seven years ago, though more recently it's taken on a new life with 30,000 movies and TV episodes as well as a whopping 200,000 books in the Kindle Owners' Lending Library and of course the shipping bonuses. Recently, though, other competitors have taken their steps into that sandbox, as was the case when Sears started up an online free shipping program where, for $79 a year, users would get unlimited free two-day shipping. That's a match for Amazon's offer, though without the extra streaming benefits. Amazon, for its part, is stepping up its own offering to respond by allowing users a free one-month trial in which they can get in on the shipping and streaming joy as well.

This is where things start getting interesting. Brick-and-mortar retailers (even those with an online component) like Sears have found themselves struggling in the face of online retailers like Amazon pretty much since online shopping really started to come into vogue a few years back. The practice known as "showrooming"--in which customers go to a store to get hands-on with a product and then go look for the best price online--is alive and well and doing plenty of damage to brick-and-mortar operations. So Sears is out to take a page from Amazon's playbook, offering Amazon-style deals on Sears and Kmart products. Naturally, Amazon's not taking this lightly, opening up the floodgates to only those users who want monthly service.

Amazon's monthly-style change of heart represents not only a shot across the bow of major retailers like Sears who are looking to usurp Amazon territory, but also in response to perennial streaming greats like Hulu Plus and Netflix, both of which offer up their all-you-can-watch buffet for that same $7.99 a month. While Amazon may not have the offerings of Hulu Plus and Netflix, Amazon is making itself a lot more attractive to those users who both shop frequently on Amazon and want a streaming plan for their evening's entertainment. This is undoubtedly a pretty substantial number of users, and may well mean a few subscriptions get cut over at Netflix and Hulu Plus in the face of a really good offer from Amazon.

Will other retailers--Walmart, Target, et al-- follow suit in the face of what may be a growing movement? Will Netflix and Hulu Plus suffer at the hands of Amazon's push into streaming? There are plenty of implications around this move, and the fullest extent of implications won't be known until at least the holiday shopping season's conclusion. But it's clear nonetheless that a bad economic environment may just mean good things for customers, and that's what we're seeing now.




Edited by Brooke Neuman



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