People do really get their money's worth from Prime: "40% of Amazon Prime members spend over $1,000 a year on Amazon, while only 8% of non-Prime shoppers do so."

I'd be really interested to see what Amazon's numbers as a whole would look like if Prime didn't exist, clearly it is profitable enough for Amazon to be able to keep bundling "free" stuff into the package like video / music, file storage etc.

82% of households making more than $112,000 a year have a Prime account (https://www.thebillfold.com/2017/06/at-what-age-do-teens-get...). Once you take that into consideration your numbers aren't that surprising.

I think a similar effect is at work with Costco memberships.

Nope, you must be thinking about hotdogs. Hotdogs are a loss leader for Costco. Memberships make them money.

"The most important factor about membership fees is that they go straight to the company's bottom lines. Costco operates its warehouses on essentially a breakeven basis, making its profits on memberships instead of merchandise. "

https://www.fool.com/investing/2016/08/18/what-do-membership...

Not that they lose money (they hardly give you anything besides the right to shop at the store) but that they cause people to buy more than they otherwise would because they feel like they've made an investment and would otherwise be wasting the money they spent on the membership.

I haven't done the math, but I don't know how accurate this is given that 2/3 of their sales are to members who receive 2% cash back ($110 executive members). The executive membership would need to average $5500 in purchases to wipe out any Costco profit on their memberships. $8250 average to wipe out ALL membership profit.

I'll have to come up with a formula based on the numbers in your article. It'll be interesting to see how accurate that "profit from memberships" statement really is.

Please post if you figure it out :) I've heard the statement for a while and am curious as well.