Amazon may hike the price of 'Prime' by up to $40
The e-commerce giant says it's considering a more than 50 percent increase for the popular service, which offers members free 2-day shipping and streaming video.
By Greg Bensinger, The Wall Street Journal
Amazon.com (AMZN) said it is considering a more than 50 percent increase in the U.S. to its popular "Prime" two-day delivery membership program to help cover increased shipping and fuel costs.
The change – of between $20 and $40 annually – would be the first in the nine-year history of the Prime program. Amazon has brought in millions of higher-spending customers through the program, which promises unlimited shipping on many items, as well as video streaming for U.S. customers.
Chief Financial Officer Tom Szkutak announced the possible change on the company’s earnings conference call, prompting a question from nearly every analyst covering Amazon.
"With the increased cost of fuel and transportation as well as the increased usage among Prime members we are considering increasing the price of Prime," Szkutak said. He revealed little else about the program, other than to reiterate its import.
The Prime program is considered to be one of Amazon's chief competitive advantages because it encourages members to keep spending with Amazon, rather than with competitive retailers. Indeed, market research firm Consumer Intelligence Research Partners last year estimated Prime members may spend more than twice as much — $1,340 per year – than non-Prime members using Amazon.
As well, Amazon offers exclusive streaming video content as part of the U.S. Prime membership and the company has been beefing up its library to compete with Netflix (NFLX) and draw new users.
But Amazon risks alienating some potential customers because even at the low end of its proposed Prime price bump it would cost more per month than a Netflix account: $8.25 versus $7.99.
More from The Wall Street Journal
Sales are down so they are going to hike prices.
That always works.
If Amazon increases Prime, I will be cancelling my membership. The $79 per year is well worth it for me because I do stream movies and I do a considerable amount of shopping on Amazon because of the 2-day no freight charges. To increase the cost by $40 is a big mistake. The rich get richer and the poor get.......
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