Amazon Prime Price Hike
Amazon is raising the price of its most prestigious service – Amazon Prime – from $99 a year to $119 a year in just a couple of weeks.
This comes as little surprise after Amazon raised the monthly Prime membership fee from $10.99 to $12.99 this January, but some are suspicious of Amazon’s intentions with the incoming money.
So What’s the Difference?
The price raise for new memberships will be installed on May 11, with the price rising to the same range for renewals coming on June 16. Amazon Prime Student will also increase from $49 per year to $59 per year.
Some people might be upset with the new price change, but Amazon believes the benefits it has added to members in the last few years make the difference worthwhile for its customers.
In fact, experts think that customers will be just fine with the increase, according to TechCrunch:
“Since we increased the annual price of Prime four years ago both the value of Prime and the cost to offer it have increased significantly,” Amazon said in a statement to TechCrunch.
Analyst Doug Anmuth added that he does not believe consumers will be too upset over the price increase.
“We do not expect the company to get much of a push back from consumers given the increasing value of the service,” CNBC reported.
The number of new services that Amazon has added to Prime is too much to list, but some of the biggest features includes same-day shipping on select items, free two-day shipping on an exponentially higher number of items, and partnerships with other companies and services such as Whole Foods and Chase Bank that makes being a Prime member all the more convenient.
Amazon Prime Price Hike – Why the Increase?
Additionally, CNN Money reports that Amazon plans to continue to add benefits for Amazon Prime members.
“We continue to increase the value of Prime,” Amazon CFO Brian Olsavsky said on the call, adding that the company has added “digital benefits,” like Prime Video.
Amazon claims that the continually increasing benefits for Prime members are the primary reason for the price hike. In order to add more benefits, you have to get more money; something has to pay for the new features to be funded.
CNBC’s Michelle Castillo is a little more skeptical, calling out Amazon CEO Jeff Bezos for going back on his word to make services more affordable for customers:
Bezos said, “There are two kinds of retailers: those folks who work to figure how to charge more, and companies that work to figure how to charge less, and we are going to be the second.”
Perhaps he’s had a change of heart.
Castillo also pointed out that Amazon hasn’t specifically outlined what the upcoming benefits to Prime are going to be. Perhaps if Amazon noted what the money was going to be used for, the transparency would put the minds of both sellers and customers at ease. The announcement is only a few days old as of this writing, so maybe a public budget plan is forthcoming. But it’s more likely that Amazon will keep things under wraps to avoid tipping its hand to competitors.
Should We Be Concerned?
Until we see a notable decrease in memberships, there’s no need to be overly concerned about the Amazon Prime price hike.
Amazon is coming off an extremely strong first quarter in 2018. The $1.6 billion that the company rolled in during that period is greater than double the amount of money Amazon earned in the first quarter of 2017. The company is on a high right now, and even if it comes down slightly, it won’t be enough to significantly cripple it. In fact, the raise in membership prices should more than make up for what Amazon may lose from un-subscriptions.
As CNET points out, people will be unlikely to ditch Amazon in droves despite the large raise in subscription fees.
But analysts quickly concluded that Amazon isn’t in danger of a mass defection from Prime, saying the benefits of the program were too great to ignore.
John Blackledge, a Cowen analyst, even pegged the value of the program at $400 a year — well above the new price of $119, which is up from $99. That’s why you may grouse about the change, but you’ll likely pay up and renew anyways.
The Amazon Prime faithful might make threats to leave the service, but the benefits are too great to pass up. People who are used to shopping online aren’t going to change their habits and become physical shoppers just for $100 a year, money that might be spent on gas costs and parking fees at local malls anyway.
Amazon’s stock shares took a slight bump after this news came out, so people around the industry are expecting Amazon to improve based upon this development rather than to lose money.
Amazon Prime Price Hike – Conclusion
Don’t let people tell you that Amazon is doomed because of the Amazon Prime price hike for members.
Sellers and customers alike should sleep easy knowing that benefits for Prime members are going to continue to improve, which will only attract more customers to sellers’ products and services.
Even if Amazon is being a little secretive over exactly what the new benefits will be, new programs continue to roll in. Just this month, the company announced that it will start delivering packages to trunks of customers’ cars in select cities in the United States. We’ll have more on that later, but for now stay tuned for more developments that could improve the experience of sellers and consumers alike.
Anders is a content creator for Rosenbaum Famularo, P.C., the law firm behind AmazonSellersLawyer.com. Anders will be earning his degree in journalism from Hofstra and has five years of professional journalism experience. He has written for numerous online and print publications including SB Nation and The Hofstra Chronicle.