Amazon.com (NASDAQ:AMZN) keeps the number of members in its Prime service a well guarded secret. That's not a huge shock since the company also refuses to share sales figures for its Kindle devices, Fire TV, or even the handful of people that bought its ill-fated phones.
The online retailer, led by CEO Jeff Bezos, shares information in the same way New England Patriots Coach Bill Belichick does -- it only gives away the exact amount it's forced to. Amazon reports the numbers it's required to as a publicly traded company in the same way that the hoodied football coach lists Tom Brady on the injury report every week even though there is no doubt as to whether the QB will play.
But, information is currency and just like Belichick fights for every tiny advantage, so does Bezos. The CEO, like the six-time Super Bowl Champion coach (four with New England and two as a New York Giants assistant), does not give out numbers when he does not have to and nothing is to be gained by doing so. Prime subscriber numbers fall squarely into that category.
Those users -- who pay $99 a year for unlimited, free two-day shipping, a streaming video service, and more -- represent a competitive advantage for the company that may be even more important now as retail rivals led by Wal-Mart (NYSE:WMT) try to make digital inroads. Amazon has an advantage because of Prime members and it's not going to go out of its way to tell its competition exactly how big that advantage is.
How many Prime Members are there?
While Amazon does not release Prime membership numbers, Consumer Intelligence Research Partners, LLC (CIRP) regularly analyzes buyer shopping patterns on the site to make its own well-educated guess as to how many there are.
"This analysis indicates that Amazon Prime now has 54 million U.S. members, spending on average about $1,100 per year, compared to about $600 per year for non-members," the research company said in a press release that looked at Q4 of 2015. This new estimate compares to an estimated 40 million U.S. members at the end of 2015, or an increase of 35%, according to previous CIRP figures.
"U.S. Amazon Prime membership increased steadily in 2015," said Josh Lowitz, Partner and Co-Founder of CIRP. "Amazon added a net 7 million members in the holiday quarter of 2015, and 14 million members in all of 2015. Notably, the growth was spread more evenly across the year, in a large part due to the success of Amazon Prime Day on July 15."
CIRP drew its conclusions from surveys of 500 U.S. subjects who made a purchase at Amazon.com between October 2015 and December 2015.
Why does this matter?
Prime is essentially a moat that makes it much harder for Wal-Mart or any other retailer to poach Amazon's customers. If you already pay $99 a year for the service, which has grown to much more than just free shipping, it simply makes sense to use it. Users already know the online retailer offers good prices, so throw in the idea that ordering more makes the initial $99 a better value, and Amazon's membership becomes a self-fulfilling prophecy for the company.
Essentially, Prime is a good deal that becomes a better one the more you use it. That makes it unlikely that Amazon's best customers will check prices at walmart.com or any other retailer for routine purchases. And, of course, that makes it very difficult for another retailer to win market share, even one with the national physical footprint that Wal-Mart has.
Joining Prime is basically a customer pledging loyalty to Amazon, which makes it very hard for any other retailer to get their attention. In some ways that takes the 54 million Prime users off the gameboard for Wal-Mart and others trying to increase their digital sales. Barring some sort of massive loss-leader big-ticket item backed by heavy promotion it's hard to imagine a Prime member buying from any company other than Amazon.
This makes Prime not just a current value to the online sales leader, but also an insurance policy. Simply matching Amazon's prices and even its shipping efficacy won't be enough for Wal-Mart or anyone else to compete. Catching Amazon and winning over some of its user base would require upping the ante -- probably in the form of discounts -- in a way that's if not impossible, is at least not sustainable.
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Daniel Kline has no position in any stocks mentioned. He buys from Amazon nearly everyday and almost never shops at Walmart.com. The Motley Fool owns shares of and recommends Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.