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Ruth Tinsley made two major changes to her life in the past year. In December, she had identical twin girls. A few weeks later, she signed up for Amazon.com‘s shipping service, Amazon Prime, which guarantees delivery of products within two days for an annual fee of $79.
The two events combined turned the graphic designer from Birmingham, Ala., into an Amazon loyalist who buys software, jewelry and birthday gifts on the site. Her total heading into the holidays this year: 150 items, up from 82 in 2009.
“Now, if I see or hear about a product somewhere else, I’ll always check first to see if Amazon has it,” Tinsley says.
Amazon Prime may be the most ingenious and effective customer-loyalty program in all of e-commerce, if not retail in general. It converts casual shoppers like Tinsley, who gorge on the gratification of having purchases appear two days after they order, into Amazon addicts.
Jordan Rohan, an analyst at Stifel Nicolaus & Co. in New York, describes Prime as one of the lead factors driving the company’s stock price - up 296 percent in the past two years - and the main reason sales grew 30 percent during the recession, when other retailers flailed.
Prime has also proved difficult to copy: It allows Amazon to exploit its wide selection, low prices, network of third-party merchants and finely tuned distribution system, while keying off that faintly irrational human need to maximize the benefits of a club you’ve paid to join.
Now, six years after the program’s creation, rivals are rushing to respond. Wal-Mart Stores Inc., Best Buy Co., Target Corp. and J.C. Penney Co. have unveiled free-shipping promotions for the holidays, turning the fall shopping season into a cost-lowering contest.
In August, San Jose’s eBay announced its first rewards program, eBay Bucks, which gives shoppers 2 percent back on items purchased on the auction site using PayPal. Last month, a group of more than 20 retailers, including Barnes & Noble Inc., Sports Authority Inc. and Toys R Us Inc., banded together with their own $79, two-day shipping program, Shop Runner, for products across their websites.
“As Amazon added more merchandising categories to Prime, retailers started feeling the pain,” says Fiona Dias, executive vice president at GSI Commerce Inc., which administers Shop Runner. “They have finally come to understand that Amazon is an existential threat and that Prime is the fuel of the engine.”
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