Takeaway: Why more people are not talking about this as a key AMZN issue boggles my mind.

I scratch my head – really hard – to understand why more people are simply not focused on the fact (and it is a fact) that AMZN is going towards the sub-Prime end of the credit spectrum.  Maybe it’s because this is covered by either retail analysts or tech analysts – with no insight from Consumer Credit Analysts (they need #Steiner).  Here’s my thinking…

  • We all know that Prime is sitting in roughly 50% of households today – 49% by our math. Is it going to 100%? No. 70%? Probably. But with 2,000bps increased penetration in Prime in just 18 months, there’s little question for us that Prime growth is #slowing.
  • Before all the uber-Amazon bulls send me hate-mails (which I’m ok with) keep in mind that I am NOT saying that Prime dollars are slowing. Just household penetration. That means AMZN has to put more value in the box, build/buy content across all categories, AND draw in a lower income customer.
  • Consider our survey results of 1,000 Prime/Non-Prime consumers across demo groups. The first chart below shows the new Prime members by FICO score over the past five years. New members are lower credit quality – full stop.
  • That’s EXACTLY why AMZN launched the upgraded Prime Card w 5% off all AMZN purchases, and between 1-3% on everything from gas to a $15 burger, to a $3,000 Labradoodle, to a $10,000 Harley. Most other store cards can only be used at the store in question. Not AMZN – it’s got the ‘go big or go home’ thing going for it.
  • What’s even more surprising than less overlap in Amex than you might think (this even surprised Steiner – and supports his negative call on Amex as theres now added risk to the ‘card wars’ we’re seeing out there) is the number of ‘other’ cards people carry.
  • Why? Those ‘other’ are store cards – KSS, M, BBY, etc… These are cards that people use at a 24% APR – probably bc that’s among the only credit they have. AMZN is looking to disrupt that.  
  • And yes, AWS is funding this – as it is drones, blimps, anchor tenant real estate, and subterranean delivery networks. Good idea or bad idea…I don’t care. The fact is that AMZN will try, and that’s disruptive enough.

This is all part of the best game of Chess I have ever seen a CEO play in my career. Fortunately for us, the appreciation of all these trends is obfuscated by the fact that Analysts are too focused on singular parts of the business (retail, AWS, credit) instead of the whole company in its entirety. There’s your opportunity.

We’re hosting what I’m calling a ‘mega Black Book’ on March 6th to review how the retail supply chain -- everything from Asia to Taxes, to Reflation, to product replacement cycles, to Durable and Non-Durable brands, to Mall REITs, to transformational cross sector deals) will play out in the face of the most disruptive cross currents in our lifetimes (so far).

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