Dive Brief:
- Amazon has introduced a discounted Prime membership fee of $5.99 a month for low-income households, according to NPR. There is no annual commitment and members can cancel anytime. In comparison, the standard Prime membership costs $99 annually, although consumers can opt to pay $10.99 a month.
- In order to qualify, users must have a valid Electronic Benefits Transfer (EBT) card, which is used for government-assisted programs such as the Supplemental Nutrition Assistance Program (SNAP) and the Women, Infants, and Children Nutrition Program (WIC).
- All Prime benefits remain the same. People who qualify for the discounted program get free two-day shipping on all purchases, plus access to Prime Video, Prime Music, Prime Reading and Prime Photos, among other services.
Dive Insight:
This is a bold move for Amazon as the e-commerce giant is taking direct aim at retailers historically recognized for catering to low-income shoppers, most notably Walmart. Other discounters such as Aldi and Lidl, which is due to open its first U.S. stores on June 15, and dollar store operators like Dollar General and Family Dollar, also likely to be impacted.
Traditional grocers aren't immune, either. Major supermarkets could lose sales to Amazon as the e-tailer ramps up its grocery offerings and extends benefits such as Prime free same-day delivery and Prime Now two-hour delivery to more geographic areas.
This doesn't mean Walmart and other retailers will sit idly by. Amazon’s move could ignite another round of price wars. Walmart will likely initiate more price cuts to retain its position as the grocery space's low-price leader. Kroger, which recently announced its largest one-year price investment in company history, has already started lowering prices throughout its Columbus, Ohio division. Consumers once again stand to be the biggest beneficiaries as price competition heats up.
To protect its turf — especially among its core low-income shopper base — Walmart could counter Amazon’s discounted Prime membership by once again lowering its purchase threshold on home deliveries. Earlier this year, the retailer scrapped its Prime-like ShippingPass program and instead initiated free two-day shipping to all purchases more than $35. Shipping to stores still remains free on eligible orders.
The real question is whether a discounted membership will entice low-income shoppers to try Amazon Prime. It also will be interesting to see if shoppers will be inclined to use Prime to buy food and beverages.
Grocery home delivery — whether through Amazon or other retailers — could present a viable solution to food deserts, or poor neighborhoods with limited access to retailers that sell fresh fruits and vegetables. But since AmazonFresh is currently only available in select cities and requires an additional monthly fee of $14.99, the likelihood that low-income shoppers will gain increased access to fresh foods through a discounted Prime service seems minimal at best.