Amazon announced this week it will offer a discounted membership rate to its Amazon Prime service to customers on EBT (Electronic Benefits Transfer) but one analyst thinks the move is unlikely to sway many shoppers.
Amazon Prime membership is $10.99 monthly or $99 annually. Benefits include free shipping, video and music streaming, online deals and photo storage capacity. EBT customers with a valid card can join Prime for $5.99 monthly and order food products online, but the discount will not apply to AmazonFresh, the grocery delivery service.
“We designed this membership option for customers receiving government assistance to make our everyday selection and savings more accessible, including the many conveniences and entertainment benefits of Prime,” Amazon Prime VP Greg Greeley said in a prepared statement.
Chuck Grom, an analyst with Gordon Haskett Research Adviser thinks Prime may miss its mark due to competition from Walmart, Dollar General and Dollar Tree.
Grom says “roughly 80% of consumers not willing to pay the current $10.99 monthly fee would still not pay the lowered $5.99 rate.”
Grom said the Amazon announcement put Wal-Mart and Dollar General stocks “under duress” but the move is unlikely to gain traction.
Gordon Haskett conducted a 500 person survey over the 24 hours this week focusing on the low-end consumer ( less than $40,000 household income) about current Prime penetration and willingness to join at both the old and the new discounted rate.
The survey showed that 26% of those surveyed were already Prime members despite their income status. Of the remainder, 80% said the discounted rate would still not make them willing to join Prime.
“This is much higher than we would have expected, and suggests across the board adoption is certainly not imminent,” Grom said. “Said differently, while the Prime news certainly falls into the ‘risk bucket’ for the low-end retailers, we see the concerns (and recent negative stock reactions) as a bit overblown.”
The Amazon Prime offer will be available to customers with a valid EBT card, commonly used to disburse funds for government assistance programs like Temporary Assistance for Needy Families (TANF), Supplemental Nutrition Assistance Program (SNAP), and Women, Infants, and Children Nutrition Program (WIC). EBT cannot be used to pay for the actual membership.