Amazon is offering Prime at a discount to Medicaid recipients (AMZN)

Daniel Keyes
amazon net sales

BI Intelligence

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Amazon will now offer Prime subscriptions at a discounted $5.99 per month rate to the over 68 million people enrolled in Medicaid, the US government-funded health insurance program for people with lower income, according to a company blog post.

Amazon’s stated goal is to make Prime more accessible by offering this discounted rate to consumers and families who may need it.

  • This is another step in Amazon’s courtship of lower income consumers. Amazon began offering the same discounted price to customers with an Electronic Benefits Transfer (EBT) card in June 2017 in an effort to attract new consumers. Offering the same option to Medicaid recipients is clearly a part of the same effort; Amazon is looking to expand Prime’s consumer base, and lowering its cost for Medicaid consumers should help entice them to sign up for a subscription.
  • Amazon is looking to expand Prime’s subscriber base beyond its core of affluent consumers, as its growth may be slowing. It's estimated that half of US households have Prime subscriptions, and that subscribers are generally affluent millennials who are more likely to live in cities and suburbs than rural areas. Prime has clearly been successful with these consumers, considering its massive reach, but its growth is reportedly slowing to a halt. Making Prime more affordable for the millions of consumers who are enrolled in Medicaid, many of whom are not as affluent, young, or urban as Amazon’s core consumers, gives the company a chance to restart its growth with a whole new set of subscribers.

Making Prime more affordable may help Amazon battle Walmart and other traditionally inexpensive retailers for the business of lower income consumers. Prime offers free two-day shipping on thousands of items, while many other retailers have an order minimum for free shipping. If a lower income consumer shops online enough that free shipping offsets the discounted cost of Prime, they may choose to subscribe to the service.

These additional subscribers would not only give Amazon more Prime customers, but also more control of US e-commerce in general. And if retailers like Walmart lose their price-conscious consumers to Amazon, it'll become even harder for them to take on Amazon, as it'll have strong positioning with yet another consumer segment.

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