It's been a decade since Amazon introduced its Prime service, which waives fees for two-day shipping and includes perks such as access to Amazon's streaming video library -- for $99 per year. When Amazon first announced Prime in a 2005 earnings call, skeptics wondered how the company would make the then-$79 annual fee palatable to consumers -- and how it was going to foot the bill if the program caught on.
A decade later, Amazon says Prime memberships number in the tens of millions and are growing. Over the past year alone, memberships have shot up 53 percent. On the day after Christmas, Amazon said 10 million people had signed up for Prime "this holiday season."
Greg Greeley, the vice president of Amazon Prime Global, was there at the start of Prime and returned to lead the team in 2013. He spoke to The Washington Post -- which is owned by Amazon.com chief executive Jeffrey P. Bezos -- about 10 years of Prime, what lies ahead and why he doesn't fear his inbox.
The interview has been edited for length and clarity.
Hayley Tsukayama: Talk me through the evolution of Prime in the past 10 years.
Greg Greeley: We have always thought of it as the best bargain in shopping -- Jeff [Bezos] went on record again saying that -- in 2005 when we launched it with unlimited two-day shipping on 1 million items. But we did not think of it as a shipping program, but as a convenience program.
Prime introduced three concepts. It had two-day shipping at a time when people expected to pay for shipping and still not get their items for four to seven business days. It was very predictable: We put it on the Web site that if you ordered in the next 3 hours and 20 min., for example, you could have it in two days. And it was an unlimited, single membership fee that made fast delivery an everyday experience instead of an occasional indulgence.
Prime initially found many skeptics, and we were obviously watching closely to see how members responded.
How did the growth look? When did it change?
On the first day of launch, we had tens of thousands of members join -- 4 out of 5 are still members with their original accounts. Obviously, with that response knew we were on to something. From 2005 to 2010, we have had very steady, healthy, impressive numbers. Then in 2011 we introduced Prime Instant Video, Fire Tablets and the Kindle Owner's Lending Library and growth shot up.
Did the tablets come with Prime? How did the addition of video change the growth curve?
They came with an invitation to join Prime, a 30-day trial, though they were a great way to watch all of that video. Skeptics thought we were crazy then. We built up a delivery service -- that meant one thing to individuals. But then we added other elements and people thought we were a bit nuts.
But we gained lots of people from streaming and over time, we've added more and more content. That includes "Downton Abbey" -- the most-watched title of all time on Prime -- and the award-winning "Transparent." We have tens of thousands of titles here, and recently announced we're working on original movies for theatrical release.
There's more to come on that. We've got a lot of original series out there, and consumers can engage and vote and help produce those pilots.
What are some other factors that contributed to growth?
In addition to the growth of digital content, we expanded the number of [Prime-eligible] items in our warehouse. We started with millions of items and now we have 20 million items eligible across all categories. We also expanded our fulfillment centers worldwide. That's a big enabler for us. Prime’s really only possible because of the huge innovations and investments. We continue to add warehouses -- now we have 109. That's making fast, free shipping a reality on a massive scale.
How have people's habits changed?
People originally came for all-you-can-eat two-day shipping, then found out the menu included so much more. Having the menu of benefits allows us to do all we can for those tens of millions of members. In 2014, the growth got more dramatic, when we added features such as Prime Music, early access to lightning deals, photos, Get it Today.
As we look to the future, obviously we will continue in how to invest faster shipping, add selection -- the physical and the digital -- will look for things members can watch, read and listen to. Over the long term, we'll want to be able to unlock benefits across the whole ecosystem.
You have millions of Prime members right now -- but not everyone who shops at Amazon is a Prime member. What's the sweet spot for you, since the program is expensive to run?
We don’t think about a particular mix. We would want everyone to join and appreciate it’s the best value in shopping. So for me it's about continuing to innovate, making sure that all the benefits are ones that target a segment of Prime members and appeals to a part of every consumer.
How do Prime customers act differently from normal Amazon customers?
They are much more engaged. One of the benefits to them and us is that we’re top of mind -- they don’t have to drive around for a hard-to-find item. On the app or on the PC, they're engaged on the other benefits as well.
There have been some reports from consumers -- I get them in my own inbox -- that say that Prime members pay more for products than non-Prime members.
I'm happy to have a chance to address that. It's an outright misconception that comes from people occasionally confusing third-party offerings from the Prime offerings -- which are always either [fulfilled by Amazon] or retail.
But whether you're in the program or not, everyone sees the same price for the same item on the same offer. It's a misconception I'm happy to nip in the bud.
I also get questions from readers about the price of Amazon Prime. The price of Prime went up to $99 last year, from $79. Should people anticipate more changes?
We have no plans to do so. We make sure it remains the best deal in the history of shopping. Speaking to the last year’s price increase, we launched in 2005 at $79. Looking at inflation and the price of transportation, it would be valued at over $100. So it's more of a reset than a price increase.
But it was painful, particularly for Amazon because we work so hard to provide low prices. It was painful to think about the price increase. But we knew the value of the program. Look at the rates for a two-day parcel delivery -- it's $15 to $45. Even we charge $12.98 for a single book being shipped in two days.
Going back to the early days for a second. You mentioned there was external criticism -- was there ever any internal doubt that this experiment wasn't going to work?
We never thought it wasn’t going to work. This was one experiment we knew we were going to make work -- failure was not an option.
Is there a Prime feature that gets overlooked the most?
The newest ones tend to be, just because they're new. Now it's photo and music -- photo is the newest one, though we have over a billion photos uploaded. It’s being used -- but people lead busy lives. They don’t read their e-mail or stay on top of the ways we introduce them to new benefits.
How does Prime fit in with the company's product strategy?
There's been lots of device innovation. We're working to make sure that Prime makes the devices better, and the device makes Prime better.
What's the biggest lesson you've learned in 10 years of Prime?
One of the things in coming back -- I'd run the European businesses [in the interim] -- one thing that struck me is how passionate customers are with Prime. Customer service gets so much mail saying, "Oh, I forgot about a birthday and Same Day Delivery saved me from having to go for a birthday party empty-handed." Or "I really love Prime Pantry, it saved me a half day." Everyone is trying to analyze the financials -- is it a good value -- and it's really about the convenience.
So what you're saying is that you're not scared to check your inbox.
I'm not at all scared of my inbox. As a side note, I used to work for [a major airline] and I'd go to parties and hear [travel] horror stories about the company. Now I tell people I have the privilege of managing Amazon Prime -- and my cocktail parties are better.