As the growth of Prime continues to plateau, the retail giant will drive growth through other areas of the business while maximizing revenue per customer through more Prime offerings and corresponding increases in price. In 2018, Amazon not only doubled the number of products eligible for two-day shipping, but proved Prime was about much more than retail. Prime now includes a breadth of services including Prime Wardrobe, Prime Video, Twitch Prime, Audible Channels, Prime Reading, Prime Now, and Amazon Key In-Home and In-Car Delivery. But will Amazon continue to increase the price of Prime to drive growth as the number of subscribers starts to plateau? Even more critically, will the remaining subscribers feel the new services justify that higher price?
Amazon’s services business is booming. Third-party seller services grew 28% and Amazon Web Services grew 46%. Though its advertising business did not maintain triple digit growth, the roughly 97% growth was nothing short of impressive. With roughly $10.1 billion in advertising revenue for the year, Amazon tremendously exceeded analyst predictions of $4.5 billion.
For the first time since the Whole Foods acquisition, Amazon reported its first year-over-year comparison of revenue from physical stores which surprisingly declined 3%. The retailer attributed this to a fiscal year adjustment and to the fact that orders placed online and picked up at Whole Foods count towards revenue from online stores. In an apples to apples comparison, revenue from Whole Foods grew 6%; however, next quarter’s earnings will serve as the real indicator of the health of the Whole Foods business after the Amazon acquisition.