Amazon ups Prime fee to $99 from $79: Customers likely to absorb it

Amazon ups Prime fee to $99 from $79: Customers likely to absorb it

Summary: Amazon raises its Prime subscription fee by $20 a year to cover fuel, transportation and video content costs.

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TOPICS: Cloud, Amazon, E-Commerce
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Amazon in January hinted that it may raise the annual Prime fee, which covers free two-day shipping, video and Kindle content, from $79 and made good on the move Thursday.

amazon prime

The company sent an email to customers indicating that Prime prices would go up $20 to $99 a year. A discounted student rate will be $49 a year from $10. The moves in the U.S. come after price increases in U.K. and Germany. In those countries, Amazon added video content from Lovefilm into the Prime membership. In the U.K. Amazon's Prime fee went from £49 to £79, and in Germany the prices went from €29 to €49.

In a letter, Amazon said:

Even as fuel and transportation costs have increased, the price of Prime has remained the same for nine years. Since 2005, the number of items eligible for unlimited free Two-Day Shipping has grown from one million to over 20 million. We also added unlimited access to over 40,000 movies and TV episodes with Prime Instant Video and a selection of over 500,000 books to borrow from the Kindle Owners' Lending Library.

On Amazon's fourth quarter conference call, the company said that it was considering raising the Prime fee by $20 to $40. Amazon opted for the lower price increase.

Amazon admits its mulling over Prime fee hike

Analysts generally think consumers will swallow the price increase. For instance, Wells Fargo analyst Matt Nemer has noted that Amazon has to give a nod to profits at some point. 

Meanwhile, Amazon has increased the Prime perks in recent years.

Nemer said:

The higher price could generate hundreds of millions in high flow through operating profit and possibly signals a profit “check in.”

Amazon may need more than Prime price increases to offset shipping costs. BGC analyst Colin Gillis has said that Amazon's biggest barrier to profits is really shipping. In a research note, Gillis said:

The shipping losses the company incurs to help drive revenue remain a barrier to profitability that is proving hard to tap down. The company incurred (fourth quarter) shipping losses of 4.7% of total revenue and 5.7% of net product sales, the difference between its reported net income of 0.9% and a respectable profit....Shipping losses are growing at approximately 23% YoY, and the losses were approximately 2x the shipping revenue in the December quarter. Increasing the cost of the Prime membership by 20-40% can help shipping revenue, but the losses are going to continue. Even if shipping revenue in the most recent quarter increased 40% to $1.59 billion, shipping losses would still be 47% greater than the losses. While raising Prime pricing and pitching “drone delivery” solutions make good headlines, shipping losses remain a burden on profits.

Topics: Cloud, Amazon, E-Commerce

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62 comments
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  • Not a big deal

    I have had Amazon Prime for years, and although I'm not happy, I will still pony up. I use the shipping extensively, and the video is a good bonus.

    I am unhappy that they quote video licensing as a reason for the increase. That's supposed to be a "bonus". I wonder if they will consider a two-tier system, "shipping only" and "shipping plus". Also, I would be very happy with the increase if I were able to borrow the e-books for my non-kindle devices.
    vermonter
    • shipping only, please

      Since I have zero interest in
      “We also added unlimited access to over 40,000 movies and TV episodes with Prime Instant Video and a selection of over 500,000 books to borrow from the Kindle Owners' Lending Library.”
      How about you just having a rate of Prime Shipping without me having to buy these unwanted and not used add-ons?
      johnsh@...
      • Re: shipping only, please

        Prime was ORIGINALLY shipping only. Then they added the other perks. That's what they are...PERKS.
        lead-trumpet1969@...
        • And when it was shipping only...

          It was free. I was one of the first to sign up. I didn't have to start paying for it until they added everything else. Make no mistake. We're paying for that extra content. It's not a "Bonus."
          d20dad
          • When Prime was "only free shipping" it was free?

            That doesn't make sense, unless it was some sort of beta program. Why would they have created a "free" program to offer free shipping, when they could have just offered free shipping to their entire customer base?
            dh1760
          • It was free shipping

            It had a minimum requirement for the free shipping. It was $25 minimum order.
            marie.drozdis@...
    • Amazon forgetting that Prime increases product sales too - dropping prime

      Wounder why no one is pointing out that with Prime, most customers make Amazon their default shopping site and without it, more likely will use other sites with equal standard shipping or free using ShopRunner. I for one will drop as the content is not as good as Netflix and don't want to pay to be a Prime member at this price.
      If they added 10% off coupon's for prime members to recognize that we buy more, then I'd stay.
      Going to use Ebay and other sites more once my membership expires.
      ai78730
      • The decision was not made in a vacuum.

        Regardless, there are some (my family included) who will definitely opt out. That's the risk Amazon knows it is taking. For us, the "perks" of video and lending library have not been worth a dime - it was all about (practically) instant gratification for only the annual subscription cost. Indeed, their rate has not changed in 5 years, but our income has ALSO not changed in a longer time than that, regardless of what has happened to shipping costs - *AND* recently we have noted when doing shopping research that Amazon's prices have become non-competitive in many areas - we can find same products locally, in stock, at lower cost, and arrange our shopping trips to include visiting vendors of best costs, so incremental driving expense is small.
        Bye bye Bezos!
        Willnott
    • I Have to Agree

      It would be nice to have a shipping only option but still no big deal. The reason why is how much and what you use it for. One Kindle book from the owners library at $3 is $36 at one per month, selection of videos not the greatest but also adds up over a year.
      I've noticed lately that Prime shipping has went up compared to Non Prime items but still 90% make it in Two days, so Amazon is making up $$ there. Hey they're a business.
      The number 1 reason I keep it and Amazon is the customer service and a return policy which is awesome. It is what separates them (Imho) from all the rest of online retailers.
      NettJS
      • dont agree

        For $99 year here is what I'll get:
        1. Some of the most expensive pricing on the web. Yesterday, I bought an RCA LED40C45RQ TV as a gift. Amazon sells it for $389.99 and then they undercut their own price and offer it for $370 under their "more buying options". Best Buy sells the TV for $289 without any nonsense. Why would I want to pay amazon 34% more for the same TV or $80-$100 more for the same product. I have saved thousands by shopping bing,google,ebay,target,best buy or thefind.com and not by blindly buying on amazon. Amazon is usually the most expensive. Also bought a Whirlpool washer/dryer. Amazon was $240 more than my local store. And, the local gave free delivery, hook up and cart away of the old units.

        2. Free shipping for a fee. Why do I want to pay amazon $99 per year for "free shipping" when most vendors offer free shipping for free. And most charge no sales tax. EBay has better deals and target gives 5% off very item and free shipping with their FREE red card.

        3. Free video for a fee. Free video can be found many places. Hulu and Crackle are completely free and collectively they offer an ever growing selection for FREE. Why pay amazon $99. With the money I save by shopping everywhere else and not amazon, I'll sign up for Netflix which has better service, selection, user interface and user experience.

        There are some many incredible vendors all over and the internet offers a vast sea of choices. I don't want to be locked into amazon and pay them $99 to overpay when I can get everything they sell for far less elsewhere. Amazon has become nothing more than a glorified middleman who has copied the eBay model except fortune fact that eBay vendors offer better pricing, free shipping and no sales tax the majority of the time. No thanks, Amazon. No thanks Bezos.
        $vix
        • RE: dont agree

          1. I have not found Amazon to be the most expensive. Really can not say that. I bought a high end Samsung and mid-end Vizio from them - just two examples and the price still holds up after almost almost a year and a half. You are

          2. You need to shop enough to make the two day shipping and the ($79/$99) fee pay for itself.

          3. Anyway, looks like Amazon Prime is not for you - was not for you.

          4. $99 is making it difficult - but I will stay - with their credit card and Prime and Video it kind of works out.

          5. No problem with the video stream - not so far.
          apathak123
        • Another don't agree

          1. Amazon is not always the cheapest, but they usually are. If you find an item cheaper online or at a B&M store. Most B&M stores will match Amazon.com pricing.

          2. Amazon still offers "free shipping" on anything >$35, and that can include multiple small purchases if the total >$35.

          3. Different people have different tastes. I found HuluPlus content not worth the monthly subscription fee, and canceled my trial after watching one show. I also had a Netflix trial for a month, and found that I preferred Amazon's content and user interface.

          No local sales tax is an advantage of online sites that is quickly dying, and I suspect that by the end of 2014, legislation will kill it. Re Amazon vs eBay, I have used both, but far prefer the way Amazon works, and I have far more trust in both their merchants, and in their customer service. I recently bought a used iMac through Amazon at a terrific price (and no sales tax), and was comfortable doing so because of Amazon's A-z guarantee. Amazon consistently ranks #1 on customer satisfaction; eBay trails by a significant margin.
          S_Deemer
        • I haven't been to crackle lately

          But Hulu is not completely free. There is free content, yes, but the good stuff costs $$. As for Amazon, I've never bought enough from them to even consider signing up for Prime, so pfft. I usually shop around for the best price, including calculating shipping. Because of that, I haven't bought anything from Amazon in years.
          ReginaPhalange
          • Just watched Crackle

            Just watched Midnight Express on Crackle. It was annoying. They cut out the good parts and there's a lot of advertisement breaks. It's like watching a movie on network tv. A sub-optimal experience for sure.
            Maha888
        • Re: Don't agreee

          Another point - in fact "free Prime shipping DOES come at a cost - which can easily be seen by checking "other offers" and seeing that other vendors often offer lower list price, and sometimes even "free shipping", although THAT free shipping may take up to several weeks.... So, it is obvious that Amazon has the shipping cost (or at least part of it) integrat4ed into the selling price. No free lunch.....
          Willnott
      • Ripoff

        When I took a trial membership and then tried to watch a video of a recent tv show i had missed during a satellite outage, Amazon Prime was going to charge me a fee to watch, even though I was a member. Needless to say, I declined and just let the trial expire without using it again. Not only, did I find another way to watch the missed video for free, but I felt good I was not an Amazon customer when I found out about the deplorable, slave like employment practices used by Amazon. They will never see even a nickel of my bisiness
        eddzpc@...
    • it is a big deal

      For $99 year here is what I'll get:
      1. Some of the most expensive pricing on the web. Yesterday, I bought an RCA LED40C45RQ TV as a gift. Amazon sells it for $389.99 and then they undercut their own price and offer it for $370 under their "more buying options". Best Buy sells the TV for $289 without any nonsense. Why would I want to pay amazon 34% more for the same TV or $80-$100 more for the same product. I have saved thousands by shopping bing,google,ebay,target,best buy or thefind.com and not by blindly buying on amazon. Amazon is usually the most expensive. Also bought a Whirlpool washer/dryer. Amazon was $240 more than my local store. And, the local gave free delivery, hook up and cart away of the old units.

      2. Free shipping for a fee. Why do I want to pay amazon $99 per year for "free shipping" when most vendors offer free shipping for free. And most charge no sales tax. EBay has better deals and target gives 5% off very item and free shipping with their FREE red card.

      3. Free video for a fee. Free video can be found many places. Hulu and Crackle are completely free and collectively they offer an ever growing selection for FREE. Why pay amazon $99. With the money I save by shopping everywhere else and not amazon, I'll sign up for Netflix which has better service, selection, user interface and user experience.

      There are some many incredible vendors all over and the internet offers a vast sea of choices. I don't want to be locked into amazon and pay them $99 to overpay when I can get everything they sell for far less elsewhere. Amazon has become nothing more than a glorified middleman who has copied the eBay model except fortune fact that eBay vendors offer better pricing, free shipping and no sales tax the majority of the time. No thanks, Amazon. No thanks Bezos.
      $vix
      • Free 2 DAY?

        Sure lots offer free shipping but you have to wait 10 days sometimes. I personally like getting something in two days. There are things I can't get locally easily and the prices are fine.
        drappit
    • Not Me...

      I will not be "ponying up" the additional $20 for Prime when my membership expires. That's over a 20% price hike!! Remember what happened to Netflix when they jacked up prices on customers? I'm hoping Amazon experiences the same backlash.
      Masari.Jones
  • I wonder

    how this will affect those of us who are on the monthly Amazon Prime membership.
    roteague