Not So Prime Any More?

If you visit “About Amazon Prime” today, you will see the regular blurb on the advantages of being a Prime customer:
“Receive all the benefits of Amazon Prime including FREE Two-Day Shipping for eligible purchases, unlimited access to stream movies and TV shows in Prime Instant Video, and the ability to borrow books from the Kindle Owners’ Lending Library for an annual membership fee.”
However, if you visit today, you will also see this disclaimer:
“Important: If your membership renews before April 17, 2014, you’ll be charged at a membership rate of $79. If your membership renews on or after April 17, 2014, you’ll be charged at a membership rate of $99.”
The student Prime membership fee will go from $39 to $49 annually, also beginning on April 17, 2014. As Amazon notes, this is the first fee increase since 2005.
So, what does this mean for Amazon and its customers in moving forward? Here are some observations by Retailing: From A to Z by Joel Evans:
  • Amazon needs the revenue stream. There are an estimated 25 million users of Prime. This means additional revenues of several hundred million dollars each year.
  • Amazon promises to make enhancements so Prime it is even more attractive — such as more movies and additional products available for Prime shipping.
  • With more items being eligible for free Prime shipping, sales volume should go up even if Amazon loses some customers due to the increase.
  • Amazon Prime customers spend more on average than non-members partly because they like the two-day free shipping with no minimum purchase amount so much. For these shoppers, Prime will remain a big attraction.
  • With the growth in streaming movies and new original video content at Amazon Prime, many of those who enjoy such streaming will view the price increase as a relative bargain.
  • Who will be upset with the Prime fee increase?
    • Those who are occasional shoppers at Amazon. They will probably revert to paying per order or visit other sites. But many of these people are  low-margin customers any way.
    • Those who feel that any price hike is unfair. But in fairness to Amazon, consider this: Since 2006, the price of the U.S. postage stamp has risen on six different occasions.
Click on the image to access a Businessweek article with a different take on this story.

Photograph by David Paul Morris/Bloomberg


This entry was posted in Online Retailing, Part 2: Ownership, Strategy Mix, Online, Nontraditional, Part 3: Targeting Customers and Gathering Information, Part 6: Merchandise Management and Pricing, Part 7: Communicating with the Customer and tagged , , , , , , , . Bookmark the permalink.

1 Response to Not So Prime Any More?

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