primetime memberships
Issue 70 - February 4th, 2022
In addition to my love for real estate and learning all about interesting concepts and things happening within our industry, I love to spend just as much time learning about massively successful businesses in other industries and how they came into existence.
One of the most interesting companies of all-time is Amazon, and over the last year I have devoured multiple books on Bezos and his fascinating business and how it was started. One of my favorite stories about the early days of Amazon is shared in today’s post!
How many times a week do Amazon boxes show up at your door? The Amazon Prime membership program has been one of the most innovative customer loyalty programs of all time.
What most people do not know is the interesting story of how Amazon Prime came to be in its early days.
Amazon launched their Prime subscription in February of 2005 at the initial price point of $79 a year, offering unlimited 2-day delivery on over 1 million in-stock items (or as they announced it “all-you-can-eat express shipping”).
Here is Bezos’s letter announcing the program:
How did Bezos think of this concept for Amazon Prime?
In his superb biography, The Everything Store: Jeff Bezos and the Age of Amazon, Brad Stone discusses in Chapter 4 a breakfast meeting that Bezos once had with Jim Sinegal, founder and then (2001) CEO of Costco. They met at the Starbucks inside the Bellevue (WA) Barnes & Noble.
Sinegal explained the Costco business model to Bezos: it was all about customer loyalty. “Though the selection of products in individual categories is limited, there are copious quantities of everything there – and it is all dirt cheap. Costco buys in bulk and marks up everything at a standard, across-the-the-board 14 percent, even when it could charge more. It doesn’t advertise at all, and earns most of its gross profit from annual membership fees.”
Sinegal observed, “The membership fee is a one-time pain, but it’s reinforced every time customers walk in and see forty-seven-inch televisions that are two hundred dollars less than anyplace else. It reinforces the value of the concept. Customers know they will find really cheap stuff at Costco.
“My approach has always been that value trumps everything. The reason people are prepared to come to our strange places to shop is that we have value. We deliver on that value constantly. There are no annuities in this business.”
The Monday after that meeting, Bezos met with his senior managers and announced that Amazon.com would immediately be cutting prices of books, music, and videos by 20 to 30 percent. Later during a quarterly conference call with analysts, he observed, “There are two kinds of retailers: there are those folks who work to figure how to charge more, and there are companies that work to figure out how to charge less, and we are going to be the second, full-stop.”
I love to learn and think about the “membership fee” concept as it applies to other industries, and we are implementing some of these ideas at our company, Pinnacle Realty Advisors. If we can continue to provide more value to our agents at a lower cost than our competitors then in the long run it will be tough for others to compete with us. I hope my thoughts are right, but time will tell!
Enjoy your weekend!
“a new chapter”
Check out my most widely read Substack post yet: at our brokerage firm we made a HUGE announcement a few weeks ago announcing our rebrand from Archetape to Pinnacle Realty Advisors. We are PUMPED for the year ahead!
Newsworthy Links To Share
How Rent Hikes Make Buying a House Even Harder: Higher rents are eating into buyers’ down-payment savings, while rising home prices mean they need to come up with a bigger down payment to compete with other buyers. As of January 2022, the median home price increased to $357,300, up 14% year over year, according to Redfin. “A lot of people couldn’t find a way to get into a home last year,” said Daryl Fairweather, chief economist at Redfin. “A lot of people were thinking ‘I’ll rent instead,’ and that got rents up.” (WSJ)
Host Hotels & Resorts has acquired the Hotel Van Zandt, a 319-room luxury lifestyle hotel in Austin, Texas for a purchase price of approximately $246 million.
Apartments across the USA are on FIRE:
Extended Stay Hotels ‘Print Money’ for Investors in Covid-19 Downturn: Leisure travel flourished after Covid-19 lockdowns eased. Business travel is still depressed. But one type of lodging has filled rooms throughout the pandemic: extended stay hotels. These properties, which cater to guests staying a week to three months, were popular with first responders, nurses, military and construction workers during the early months of Covid-19. As the pandemic wore on and more Americans began to travel, they attracted vacationing families, project managers and information technology workers. (WSJ)
US rent prices highest in decades — and they aren’t coming down: The cost of rent rose by more than 4% on average in the US last year, easily surpassing the 3.3% average annual increase seen in each of the five years before the pandemic, according to data from the Bureau of Labor Statistics. And rent isn’t likely to go down anytime soon: Analysts expect rent costs to keep increasing while other sectors of the economy start to cool down as landlords reap a windfall from the lifting of eviction moratoriums that were enacted at the height of COVID-19 — kicking out old tenants and bringing in new ones at higher rents. (NY Post)
Metaverse real estate sales top $500 million, and are projected to double this year (CNBC)
Housing shortage: The housing market is short 5.24 million homes, and new homes are being built at the slowest pace since 1995. The lack of new construction puts pressure on costs, pricing out many would-be homebuyers. If growth remains lackluster, affordability may decline for both homeowners and
renters.Dining and soccer are teaming up at a unique new venue in the Dallas Design District. ⚽ @tocasocial will be a new place to eat, drink, and play, with soccer-themed entertainment and immersive games designed for all skill levels. It's a relatively new concept from TOCA Football, Inc. and the Dallas location will be its first venue in the U.S. Link in bio for opening details and more.