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This is Edition #12 of the newsletter. You can find the previous editions here.
Amazon Prime is a paid subscription service offered by Amazon that gives users access to services that would otherwise be unavailable, or cost extra, to the typical Amazon customer. This includes free same, one or two-day delivery, streaming music and video, and other benefits.
Amazon Prime subscribers have kept growing in the US since the launch of Prime. The rates have also increased - from $79/yr in 2013 to $119/yr in 2020 as Amazon bundled more offerings for the Prime subscribers. In the launch release, Bezos said
Many of our customers will find Prime very rewarding. We expect the Prime Membership to be expensive for Amazon.com in the short term. In the long term, we hope to earn even more of your business, which will make it good for us too.
Amazon Prime now has more than 150M subscribers in the US.
Rundle - Recurring Revenue Bundle
NYU Stern Professor of Marketing, Scott Galloway, has coined the term Rundle to describe the power of bundled recurring revenue subscriptions like Amazon Prime. Less choice is more. As Galloway describes it, “monogamy is the ultimate business move.” Unfortunately, it is typical for both shoppers and businesses to mistake an abundance of choice as a good thing. Bundling solves this by giving customers the option of consolidating many of their purchases with a single retailer or service provider.
The Rundle (recurring revenue bundle) allows brands to
Generate a consistent source of revenue from users even when they are not actively purchasing
Increase user retention in a competitive market. If you are a prime user, you are incentivized to purchase from Amazon.
Predict Revenues more accurately
Grow Average order value and move less popular or newer products by including them in the bundled subscription service.
More businesses are now moving to a Rundle business model. Some examples:
ET Prime membership
Economics Times has started bundling its offerings into an annual subscription for Rs. 2500/yr (USD 33). This gives readers unlimited access to all ET Prime content, community discussions, invites to members-only events, and a Times Prime subscription.Uber Ride Pass
Uber is experimenting with a $24.99 Ride pass that bundles free uber eats deliveries, free jump bike trips, and discounted fares on Uber rides. Not only does this generate new recurring revenue for Uber, but it also keeps its users loyal to Uber Eats, Uber Cab, and Jump - which are all super competitive businesses. In India, Ola has a similar model with Ola Select which gives riders a no-surge fee with priority booking for a fixed monthly fee.Walmart+
Walmart announced a $98 annual membership that bundles unlimited same-day grocery deliveries, discounts on fuel at Walmart as well as some access to Walmart’s express 2-hour delivery. Seems like they are finally catching up with Prime.IKEA
Ikea has announced plans of renting furniture for a recurring fee. While customers may want to upgrade frequently, higher price points make doing cost-prohibitive for many customers; subscription services may make those plans more affordable.Adobe
Adobe, once stuck selling one-time licenses for upwards of $2,500, has transitioned to Creative Cloud, with $45/month revenue streams. Adobe’s share price increased by 700% since the switch.Twitter
Twitter is the latest to join the Rundle bandwagon by announcing its project Gryphon. Although the company hasn’t announced many details, it is highly possible that it is adopting the Substack/Patreon model of exclusive content on subscription. The share price jumped 8% on the news of the new project.Substack Newsletters
And now, even newsletters are exploring the Rundle model.
As evident, more companies are now following Amazon’s model and setting up a recurring revenue bundle. One company that has not yet exploited this model is Apple - with Apple Care, Apple Music, Apple TV and the entire ecosystem of Apple devices, I can foresee Apple launching a bundle for say $100/yr to take on Spotify/Netflix while offering a seamless experience across Apple devices.
Do you know of other companies that have benefited from a Rundle business model?
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