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Amazon Prime Gives 2% Cash Back on Debit Card Purchases


Amazon.com, Inc. AMZN has announced a new Prime exclusive cash back program called Amazon Prime Reload. It allows shoppers to earn 2% cash back on all Amazon purchases with debit cards.

All they have to do is to subscribe to Prime, provide a U.S. bank account and routing number, a debit card number and a U.S. driving license number to Amazon and reload their gift card balance. Amazon will add the reward on every reload.

The new move underscores the company’s push to extend advantages exclusively to Prime members, thus encouraging them to spend more on Amazon and lure more users to the program. Prime memberships help in repeat sales of not just general merchandise but also media (books, music, video, etc). Prime members are much more loyal and spend double the amount spent by non-Prime members.

Additionally, this could be Amazon’s way of keeping its working capital ticking. Customers have to preload and maintain their gift card balances and that adds to the company’s working capital.

We note that year to date, Amazon has underperformed the Zacks Internet-Commerce industry. The stock returned 30.3% compared with the industry’s gain of 38.8%.

Despite this underperformance, we believe there are a lot of factors that could turn the wheels in favor of Amazon. These include expansion of Prime, Fulfillment By Amazon, its grocery initiatives and efforts around Amazon Web Services (AWS). The company capitalizes on its execution strength, robust performance and technological prowess.

Amazon’s Intensified Payment Push

Amazon has been increasingly testing waters with payment options mainly to attract relatively untapped demographics and fend off competition.

In January, the tech titan launched a Prime exclusive Visa V card in collaboration with JPMorgan Chase. Known as Amazon Prime Rewards Visa Signature Card, it offers 5% back on all Amazon.com purchases, 2% back at restaurants, drugstores and gas stations and 1% back on all other purchases.

Amazon.com, Inc. Revenue (TTM)

Amazon already has two other cards that offer similar benefits. The Prime Store Card offers 5% back but exclusively on Amazon purchases (not a regular credit card). Amazon Rewards Visa is a credit card but offers 3% back.

In April, the company launched Amazon Cash, a service that enables customers to add cash to their Amazon.com accounts using a barcode generated from its website. The move is a part of Amazon’s push into the U.S. e-commerce space by catering to underbanked and unbanked customers and those who are reluctant to use cards for online shopping fearing cyber theft.

It is also offering Prime Subscription at a discounted rate ($5.99 per month) to Electronic Benefits Transfer (EBT) card holders i.e. those who receive government assistance.

Our Take

A solid loyalty system in Prime has been keeping Amazon’s retail business unbeatable on price, choice and convenience. That’s crucial especially in the face of slow e-commerce growth and mounting competition from the likes of Wal-Mart WMT and Alibaba BABA. In addition, Prime’s saturation in the U.S. market seems apparent because of Amazon’s high penetration rates.

So, Amazon is leaving no stone unturned to boost the popularity of Prime.

Currently, Amazon carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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