Amazon announced on Tuesday that it will be offering a discount for Amazon Prime to individuals who receive government assistance.
Amazon Prime consumers normally pay a $99 annual fee for this service or $10.99 a month. But now individuals who have a valid Electronic Benefits Transfer Card (EBT), which is used for programs such as the Supplemental Nutrition Assistance Programs (SNAP), or food stamps, will pay $5.99 per month for Amazon Prime instead of $10.99, the Associated Press reported. Amazon Prime members benefit from many perks such as free two-day shipping, unlimited streaming of movies and TV shows and free unlimited photo storage.
Amazon designed this option to make its “selection and savings more accessible, including the many conveniences and entertainment benefits of Prime,” Greg Greeley, vice president of Amazon Prime, said in a statement.
Walmart, Amazon’s top online competition has been gaining ground in the online business world since its purchase of online retailer Jet.com last year, so the move could also be meant to outrun this competition. In the first quarter of 2017, Walmart’s U.S online sales were up to 63 percent, compared to its 29 percent increase it saw the previous period. Walmart now offers free two-day shipping for online orders of it’s most popular items with a purchase of $35. And online shoppers who collect their purchases in store receive an extra discount.
Amazon’s aim with the latest move is two-pronged, Ken Perkins, president of research firm RetailMetrics, told AP. “It is part of Amazon’s overarching goal to inexorably move into every corner of retail,” he said. “Secondly, it is a direct move to pull consumers away from its chief retail rival Walmart, which has been far more aggressive competing with Amazon on price, offerings, delivery and building out its formidable e-commerce operations.”
Even though Walmart has dramatically expanded its online offerings, the company is still far behind the hundreds of millions of products Amazon offers, the AP reported. In May Amazon’s stock hit the $1,000 mark for the first time ever, putting it among just 14 other U.S companies that have shares trading above $1,000. Its $484 billion market value is twice as much as Walmarts.
With the new discount, Amazon Prime will be more accessible to lower-income households and families. Data from a Piper Jaffray study last year showed that half of all households in the U.S were prime members– up from about 35 percent two years ago. The study also showed that more than 70 percent of upper-income households– those in the U.S. earning more than $122,000 a year were Prime members. But now with the new discount, individuals on government assistance– those who earn less than $15,444 a year will be able to afford Prime. According to the most recently available government data, about 18% of U.S. households receive government assistance for food.
Amazon said EBT cards can’t be used to pay for the Prime membership fees, and that customers can qualify every 12 months up to four times.
Internet consultant Sucharita Mulpuru-Kodali says Amazon’s move “seems inevitable” because it’s saturated a good part of the affluent and middle-class sector — but describes it as a “head scratcher,” the AP reported.
“These consumers have always indexed lower in online transactions, and their living circumstances are often not well-suited to package delivery, and many of these consumers don’t have vehicles to drive to a location pick up packages,” she wrote in an email. “Of the long list of business that Amazon could target, this doesn’t seem like the biggest one.”
Besides this, Amazon along with other online retailers including Dash’s Market, Fresh Direct, Wal-Mart Stores Inc., Shoprite and a few other online retailers are working with the United States Department of Agriculture (USDA) and the Food and Nutrition Service (FNS) to launch “SNAP Online Purchasing Pilot.” The retailers are working to enable SNAP online transactions, a program FNS hopes to launch in early 2018.
