Analyst: Across the board adoption of Amazon Prime not imminent

Approximately 80% of low-income households will not opt for Amazon's new discounted Prime program.



That's according to a broadlines and hardlines retail report by Gordon Haskett Research Advisors analyst Chuck Grom, which looks at Amazon, Walmart, Dollar General and Dollar Tree as Amazon announced discounted Prime membership for those on federal assistance. Here are excerpts from Grom's report:



With news out that Amazon will be offering a 45% membership discount for those on federal assistance interested in Prime ($5.99/month vs. $10.99/month currently), shares of Walmart, the dollar stores (Dollar General, Dollar Tree), and other retailers (largely auto part retailers) that cater to the low-end consumer have been under duress. In order to evaluate the potential success of the new initiative, we conducted a 500 person survey (over the past 24 hours) focusing on the low-end consumer (less than $40,000 household income) around current Prime penetration and willingness to join at both the old and the new discounted rate (key takes herein).



Two points: First, 26% of those surveyed were already Prime members (lower than our national avg. estimate of two-thirds). Second and more importantly, roughly 80% of consumers not willing to pay the current $10.99 monthly fee would still not pay the lowered $5.99 rate. This is much higher than we would have expected, and suggests across the board adoption is certainly not imminent.



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 and view the pullbacks in Dollar General and Dollar Tree, in particular, as an opportunity on the long side.



For additional thoughts/survey results, click here.