Tags: amazon | average | paycheck | consumer | spending

Amazon Consumes a Larger Part of the Average Paycheck

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Monday, 29 October 2018 12:42 PM Current | Bio | Archive

In September, Amazon became a trillion-dollar company for the first time, reaching territory only previously explored by Apple. And though more turbulent stock market forces have toyed with large-cap company valuations in recent months, one thing is clear: Amazon is popular with a broad swath of the populace.

Its popularity is reflected in more than just its size, however. As PYMNTS.com recently noted, "Amazon now accounts for 2.1% of all consumer spending — some $1,320 of the total annual paycheck for a household that earns roughly $63,000 a year."

When weighed against total retail spending, Amazon's share gets even higher — an estimated 6.4% of what people these days are spending their money on. Even more remarkable is the growth Amazon has demonstrated in recent years, nearly tripling its retail spending share from 2014.

That's a lot of progress to make in four years. Is this a good deal for consumers, who gladly migrate to Amazon for its convenient shopping?

Is Amazon's Dominance Good for the Average Consumer?

Amazon currently controls almost 50% of the overall e-commerce market in the U.S. —but how many consumers are complaining? Statistics show that high engagement with Amazon is increasingly popular, as Amazon Prime boasts about 95 million members and the average shopper spends about $1,500 at Amazon.com per year. People continue using the service because it delivers quality, low shipping costs and a wide range of available retail options at affordable prices.

The online retailer further incentivizes savings through offerings like co-branded credit cards. The Amazon.com Rewards Visa Card, for example, currently offers 3% cash back on Amazon and Whole Foods purchases. The Amazon Prime Rewards Visa Signature—offered exclusively to Amazon Prime members—is even more generous with 5% cash-back rewards. That's a significant discount for regular Amazon shoppers. A consumer who spends the annual average of $1,500 with Amazon Prime would expect to earn about $75 per year in rewards from that deal alone.

For consumers who are conscious about their spending and loyal to brands like Amazon, this setup can yield significant rewards. Not only does a membership to Amazon Prime yield free shipping for purchases, but the rewards program offered by an Amazon credit card makes it possible to earn back much of this investment. And given Amazon's expansion into other offerings—such as cloud services and streaming TV—Amazon Prime offers far more rewards than free shipping.

An Increasingly Amazon-Centric Retail Environment

Amazon's strategy is clear: Become a one-stop hub for anyone shopping online. That includes forays into entertainment, online payments, cloud storage and just about any other essential Internet service under the sun. Making Amazon Prime membership so attractive—and so necessary for the loyal Amazon customer—is just one part of this strategy.

For consumers who are happy to spend at Amazon, the most immediate result is convenience. For example, about 500 million people actively use Alexa, Amazon's voice-activated device that offers functions like streaming music and making immediate purchases. According to recent projections, Amazon customers could spend up to 15% more simply because they have an Alexa device nearby.

For consumers, Amazon's increased hold on the average paycheck can mean one of two things: Either Amazon is adding more incentives to get consumers to spend more. Or, Amazon may simply be adept at getting its users to spend more at Amazon. Either way, each consumer is left to make their spending choices themself. For a frugal and smart consumer, it's entirely possible to use Amazon's wide-ranging services to buy plenty of retail items without breaking the bank. For others, it's just as possible to fall into the Amazon trap of buying more and spending more without a second thought. But Amazon is positioning itself for both types of consumers.

Joe Resendiz is a Research Analyst at ValuePenguin, where he focuses on personal finance and credit research to assist consumers. Previously, Joe specialized on public sector and infrastructure financing at Goldman Sachs. He graduated from the University of Texas at Austin with a BBA in Finance.

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JoeResendiz
As PYMNTS.com recently noted, "Amazon now accounts for 2.1% of all consumer spending — some $1,320 of the total paycheck for a household that earns roughly $63,000 a year."
amazon, average, paycheck, consumer, spending
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2018-42-29
Monday, 29 October 2018 12:42 PM
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