Amazon is playing the long game with low-income Americans

For the many, or the few?
For the many, or the few?
Image: Reuters/Brian Snyder
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Amazon announced an expansion of its discounted Prime membership for low-income Americans earlier this week, saying its $5.99-a-month program would now also be offered to qualifying recipients of Medicaid.

“We hope to make Prime even more accessible,” Cem Sibay, vice president of Amazon Prime, said in a press release. “With more than 100 million products to choose from, low prices, time savings, and fast and convenient delivery options, the combination of shipping, shopping, and entertainment provide tremendous value to customers.”

The move is part of Amazon’s long game to get low-income America buying from the site. Last year, Amazon and six other e-tailers got US government approval to accept food stamps in a trial program beginning later this year, although generally people on food stamps can’t use them to buy groceries online. In June 2017, Amazon introduced the discounted Prime membership, originally available to anyone in the US with a valid Electronic Benefits Transfer (EBT) card. Between 60 million and 90 million US households subscribe to Prime, but most of them are thought to earn $75,000 or more a year.

America’s EBT card holders include households enrolled in various federal and state-level government aid programs, such as food stamps or the Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF), child care, and unemployment. The exact number of EBT card holders are difficult to calculate, but SNAP recipients are a big portion of them—and worth a lot of money.

In fiscal year 2018, about 43.6 million people in the US, or 21.5 million households, were enrolled in SNAP and received an average monthly household benefit of $278.51, according to data from the US Department of Agriculture (USDA). In the previous fiscal year, SNAP benefits totaled $63.7 billion.

Together with Medicaid recipients, that’s a lot of new potential Amazon customers. The $5.99 a month fee is nearly a 30% discount to Prime’s usual $99-a-year fee, plus eliminates it need to pay up all at once.

While the real prize for Amazon might be online spending of those SNAP funds, low-income Americans can already spend their benefits in-store at Amazon-owned Whole Foods, or spend their own income on all the goods Amazon has to offer. It’s not hard to envision a future in which Amazon lobbies for and receives full approval to accept food stamps for online grocery sales. It can afford to wait.