Amazon Ups the Ante for Low Income Consumers

  • 28% of black adults under 65 are on Medicaid

  • 51% of U.S. households will be Amazon Prime subscribers in 2018

Amazon (AMZN -0.64%) is looking to reel in more low income shoppers through its Prime membership program. The company will extend its $5.99 monthly Prime membership to the roughly 20% of the U.S. population that is signed up for Medicaid.

Why This Matters: Everything that glitters is not gold. According to the Kaiser Family Foundation around 28% of black adults under 65 are on Medicaid. These consumers are primarily shopping at traditional brick-and-mortar stores because they can pay with cash or a SNAP card (typically used for government assistance). Right now the Prime services roadmap continues to reflect convenience and speed to serve high-income families. Revenue from Amazon’s subscription services rose to $3.2 billion, up 47% from the same period a year ago.

Lower-income consumers have been the fastest-growing segment of online shoppers, which could make this Medicaid play a very good one for Amazon. Herein lies the problem, many people who fall into this category don’t have access to the internet or  banking resources like credit cards. Amazon currently has 90 million U.S. subscribers and a recent Morgan Stanley (MS -1.49%) report stated 51% of U.S. households will be Amazon Prime subscribers in 2018.

Situational Awareness: Since people on Medicaid are already living below the poverty line does it truly make sense to encourage online shopping, even with a discounted membership rate? Perhaps putting more attention on providing internet access to improve the economic situation of potential customers would be an even better long term play.

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