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During Tuesday's Prime Day sale, Amazon will be scouting new members to enroll in its annual subscription service. But as the number of people paying for unlimited free two-day shipping grows, the pool of non-subscribers is getting more shallow.
New data released hours before Prime Day estimates Amazon has added 19 million Prime members in the U.S. since last year's inaugural event, when it lowered prices on an array of items to celebrate the service's 20th birthday. That equates to growth of 43 percent, for a total 63 million members, according to the figures from Consumer Intelligence Research Partners.
And with membership growing 9 percent in the three months ended June 30, the second quarter marked the first time a majority of Amazon's U.S. customers were Prime members, the research firm said.
"Amazon promoted the service aggressively starting with the first Prime Day in July 2015, and continuing with exclusive product offers and enhanced services throughout the year," said Josh Lowitz, partner and co-founder of CIRP.
That includes expanding its membership options to cater to shoppers who aren't ready to commit to a full year. In April, Amazon starting offering a monthly Prime subscription for $10.99, compared with an annual membership fee of $99. About 22 percent of the quarter's new enrollees chose the monthly plan, CIRP said.
Because Amazon does not disclose the number of members who subscribe to its Prime service, analysts' estimates vary. Also Monday, Cowen & Co. analyst John Blackledge said U.S. Prime memberships grew 23 percent in June over the prior year, to 45 million. While that number is substantially lower than CIRP's estimate, Blackledge likewise estimates that Prime members accounted for roughly half the people who made a purchase on the retailer's website last month.
Even as Amazon's subscriber base grows, challenging it to beef up memberships among a smaller pool of shoppers, Prime has "maintained healthy growth" largely because it keeps upping its value proposition, Blackledge said. He cited Prime Now, which offers free two-hour delivery in some 30 markets, as an example. That Amazon raised its free shipping minimum for non-Prime orders to $49 from $35 could also encourage more people to sign up, Blackledge said.
"Over time, we think Amazon Prime can continue to drive penetration of U.S. households," the analyst said.
Last year, Amazon said Prime Day caused more people to try the subscription service than on any day in its history. Getting shoppers to enroll in Prime is crucial to Amazon's growth, as paying members tend to be more loyal and spend more on its site. Whereas non-members spend an average $500 a year on Amazon, Prime participants spend an average $1,200, CIRP said.
Amazon will not go unchallenged. Retailers from eBay to Toys R Us are also promoting Tuesday deals, often highlighting that shoppers don't need a membership to participate.
Wal-Mart, in particular, is going head to head with Amazon. The world's largest retailer is eliminating its $50 free-shipping minimum through Friday, and launched a slew of deals to compete with Prime Day's discounts. Wal-Mart is also offering a free 30-day trial for its ShippingPass subscription program, which is designed to compete with Prime. An annual membership costs $49.