How Charles Schwab Is Becoming The Amazon Of Investing

Amazon (AMZN – Free Report) has become a behemoth in the retail world.

Sure, the company’s most recent earnings report may have left a bit to be desired, but there is no denying how far Amazon has come in a few short years. The company easily dominates the consumer world, and it has left a variety of big box retailers in its wake in the process.

While we can point to a number of reasons for Amazon’s ascent, a key to their rise is clearly Amazon Prime. This subscription service—which costs $99/year—gives users free two day shipping, video content, music, and a number of other features as well. The deal is so good that some estimate close to half of the country’s households have a Prime account, with plenty of new subscribers now being added in foreign nations too.

What is the point of this? Well, Prime members (at least in the U.S.) spend roughly twice as much as non-Prime users on Amazon, while the service has an insane renewal rate in the United States,over 90% according to the Consumer Intelligence Research Partners, so people are clearly seeing the value.

But with so many services and offerings in the Prime package, how does Amazon make any money? Well, the idea is clearly to suck people in to the Amazon ecosystem via Prime, and then keep them there for years. And with such a high renewal rate and spending that is double non-Prime users, it is clearly paying off. One only needs to look at the demise of other retailers in a number of areas to understand just how much Amazon is dominating the consumer world these days.

So, the strategy is to give people an offer that is too good to refuse in order to get them in the door and looking at higher margin products later on. As Jeff Bezos said, Prime is ‘such a good value, you’d be irresponsible not to be a member’.