Earlier this week, Morgan Stanley announced that U.S. Amazon Prime membership growth was flat in the latest quarter, perhaps signaling that penetration limits had been reached. However, research from Magid's Retail Pulse study shows just the opposite—that Prime is still in its early adoption phase.
According to the data, 58% of millennials currently have a Prime account and 31% of Baby Boomers have one. And more specifically, younger millennials (ages 20 to 26) have a smaller penetration, 47%, compared to their older peers. About 41% of Gen Xers have an Amazon Prime account.
Therefore, Matt Sargent, senior vice president of retail at Magid, believes that Prime growth will not slow until penetration rates are equal across all age demographics.
"Consumers are driven to Amazon thanks to free shipping and competitive pricing along with the wide selection of products available," Sargent told FierceRetail. "Because most of these consumers are already Prime members, the expectation of free, two-day shipping is an expectation among consumers that retailers must deliver on. If they cannot provide this service, consumers will continue to flock to Amazon and might get those that have not yet signed up to join the service."
Sargent believes it will be another five years or so before penetration is equal across all age demographics. He notes that the penetrations that are lagging in adoption are already frequently shopping Amazon, so if they continue to use it, they will eventually want to get the perks of Prime membership.
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He does admit that there is certainly a barrier for equal penetration rates given the fact that drop-offs among age groups will occur, but Magid believes that consumers will become comfortable enough to signing up for Prime regardless of life stage.
"The fact that all age groups currently use Amazon, whether it is through Prime or not, suggests there is a big enough market among consumers," He said. "While the overall market Amazon users has likely topped out, Prime membership (and increased engagement with Amazon) is likely to continue to grow. Consumers will be willing to pay the $99 yearly fee because they are already using the site frequently enough, so it will pay off in the end."