Amazon flexes its brand power with Prime price hike

The e-commerce giant has raised the price of its Prime service by $20, and its members are sticking around.

By Motley Fool Investor Beat Mar 14, 2014 2:08PM

Amazon.com (AMZN) announced Thursday that it is increasing the price of its Amazon Prime service, from $79 to $99. In this video, "Stock of the Day" host Mark Reeth and Motley Fool analyst David Hanson take a look at the reaction to this move -- which David says has largely been that, though customers aren't thrilled, they won't be cancelling their service.

The guys also point to the idea that rather than this being a move of necessity where the company is reacting to pressure from Wall Street to turn a profit for shareholders, David sees this much more as a move from a position of power. Amazon, like any good business, has the brand strength to increase prices without scaring off customers, and is taking advantage of that pricing power.

So is Amazon a buy today? The valuation of Amazon is a notoriously difficult one to understand considering its massive growth but tight margins and lack of a profit, but David does see the move today as an incremental positive for the company, that should bring in more cash quickly that can be allocated towards even more growth in the future.

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Tags: AMZN
11Comments
Mar 14, 2014 7:13PM
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"Brand power" is silly. I never joined it for $79. It only pays if you order a-lot of merchandise. Some products at Amazon are a good deal. Others I can get a better deal locally.
Mar 15, 2014 12:24PM
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Before you proclaim "brand power", see if it is successful.
Mar 15, 2014 3:28PM
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I doubt very seriously i will renew at 99 buck. It was a toss-up at 79 but it's just not worth the extra 20 bucks to me. I can usually get a better price deal elsewhere if you consider the cost of the shipping has now gone up 20 bucks more a year. I will not be staying with them. They have a lot of other merchants on the internet that are very close on price and they require NO yearly fee.
Mar 15, 2014 10:53AM
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An up-front membership fee is a marketing rip-off. The faster we flush crap out of America, like big boxes and virtual big boxes that fleece America, the faster we get back on the road to recover. Just say NO to this garbage. 
Mar 16, 2014 11:27AM
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For me the price is still a bargain, but then I use all facets of Prime. I average around 50 purchases a year through Amazon. Several are recurring purchases from suppliers I was dealing with already and was paying $6-10 S&H with each order. I have a Kindle and get 12 free books a year. I use the Prime video streaming for both free and VOD. The VOD pricing is cheaper than my cable provider. But more importantly I like the convenience, I can do my research on line  check prices both locally and at Amazon, COSTCO and make my purchase. I hate shopping and the time to drive around to me is worth a lot more than saving a couple of bucks, plus the customer service is better than any big box and most "local" stores
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