The change, effective from May 11, will allow new subscribers pay $119 a year for the shipping and entertainment membership program, instead of the normal $99. The new annual fee would apply to current Prime members starting with renewals on June 16. Amazon last raised Prime’s fee in 2014, when it costed customers only $79 a year.
Prime is the most important lever in Amazon’s dominant online retail machine. Prime members make more purchases on Amazon than non-Prime members and spend more per year. However, the program is incredibly expensive to fund by Amazon. The number of products available for free two-day shipping through Prime has grown from 20 million in 2014 to more than 100 million today. Amazon CEO Jeff Bezos disclosed in his annual shareholders letter that Prime had more than 100 million members worldwide — a surprise unveiling since the company had never previously reported the number of Prime members.
Amazon CFO Brian Olsavsky mentioned on the call that “Amazon has invested heavily in its own logistics network to supplement UPS and FedEx deliveries and also to meet demands”.
Since the last increase, Amazon has also introduced a two-hour delivery service called ‘Prime Now’ that offers free speedy deliveries of a limited selection of groceries and other popular merchandise from Amazon and local merchants. Prime Now, today includes Whole Foods inventory in 10 U.S. metro areas.
Earlier this year, Amazon hiked the price of the monthly Prime plan in the U.S. from $10.99 to $12.99 per month. Amazon also offers a standalone Prime Video subscription option, which for now, will remain at $8.99 per month. However, Amazon still offers a discount to students. The company will keep that unchanged at $59 per year for an annual Prime Student membership.
Amazon announced the U.S. price hike for Prime’s annual plan after smashing Wall Street expectations for Q1. It reported $51.0 billion in sales and net income of $1.63 billion — more than double the year-earlier period— sending shares to record highs in after-market trading.
Amazon’s earnings comes after Donald Trump’s Twitter-fueled attacks on the e-commerce giant a few weeks ago. His vague threats to make life difficult for Amazon, based on his claim that Amazon doesn’t pay its fair share of taxes as well as his untrue assertions about the company’s deal with the U.S. Postal Service, drove the stock down as much as 13% but shares have since rebounded.
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