Consumers with high incomes are increasingly making their purchases online. And contrary to popular belief, discount sites like Amazon are very popular among wealthy households.
83% of consumers who live in households earning $500,000 or more say "Amazon is better than other stores," according to a 2015 survey conducted by Shullman Research Center.
Wealthy consumers’ preference for Amazon suggests that they place a high value on convenience — an area that Amazon is competing heavily in by offering services like one-hour delivery, online grocery ordering, and product refills.
Anyone surprised by this has to be still thinking about an Amazon and an online market of 10 years ago. It is not (just) the price but also, and in the long run more importantly, the convience. Being far above the competition in the convenience aspect is more profitable and leads to a higher customer loyality. Hence Dash, Echo, Pantry, ”fast shipping’ with Prime, same day delivery and so on.
When you are the most convenient alternative and the default choice you create the best kind of natural monopoly: Your customers could leave but they are so happy with you they are not even seriously contemplating that.
The best part: Price elasticity increases.
The risk: Again, concentrating on the high end of the market, taking to the extreme with concentrating on the ‘whales’, Amazon could risk missing out on big growth segments of the coming transformation towards an ‘e-commerce only’ market context.
(It is not looking right now like this is happening or that it might in the near future. But negative side-effects caused by incentives have a way of being invisible until a serious competitor (or several) emerges. Lets call it ‘invisible opportunity costs’.)