Amazon targets low incomes with cheaper Prime subscription

American Amazon launched a cheaper Prime subscription for those people who depend on government assistance. The first reactions vary from “scandalous” to “genious move”.

Price cut in half

The new Prime only costs 5.99 dollars, about half of the regular price, but only those consumers who have so-called “food stamps” or similar programs can actually access this new Prime subscription.

Amazon faced immediate backlash when it revealed the new formula, because it targets low-income consumers and households. Critics felt Amazon was preying on vulnerable consumers that are in financial distress already. Motivating these people to buy online may not improve their situation.

Experts also wonder whether Amazon has anything to gain with these low-income families, because they usually do not have the same access to broadband internet compared to richer families. Data also shows they do not buy as much online anyway and their housing situation often does not really enable home deliveries nor do they possess a car to pick up orders themselves.

Another front with Walmart

On the other hand, other experts believe Amazon will not require a large share of this particular market to turn the cheaper Prime subscription into a success. About a fifth of Americans gets government assistance in one shape or another, but most of those consumers head to Walmart, which happens to be Amazon’s largest competitor in the United States. Nearly twenty percent of government assistance funds were spent at Walmart last year.

Even if Amazon only manages to capture just a small part of that market, it will have created another growth market for itself. Plenty of larger incomes already have a Prime subscription, leading to a nearly saturated market.

This is the first time Amazon is directly targeting Walmart’s largest group of customers, while Walmart is increasingly looking for ways to make life difficult for Amazon as well. It seems the war between America’s two largest retailers will rage on for quite some time.