Yesterday, Amazon revealed in a quarterly earnings conference call with its shareholders that
it might raise the annual subscription price on its Prime service by $20.00 or $40.00. Amazon Prime has been priced at $79.00 since the program's introduction in 2005, and its paid program membership numbers in the tens of millions.
You can read about the possible Prime rate hike
over here and
over here. (Hat tip to Avery S. for telling me about this.) I'm sure it will be all over the web very shortly. Here's an excerpt from Amazon's report:
We launched Prime in the U.S. nine years ago with free, unlimited two-day shipping on one main items in an annual membership priced at $79. Today Prime Selection is growing to over 90 million items.
Even as fuel and transportation cost have increased, the $79 price has remained the same. We know the customers love Prime as the usage of the shipping benefit has increased dramatically since launch. On a per customer basis, Prime members are ordering more items across more categories with free two-day shipping than ever before.
With the increased cost of fuel, transportation as well as the increased usage among Prime members were considering increasing the price of Prime between $20 to $40 in the U.S.
We remain [headstone] focused on driving a better customer experience through price, selection and convenience. We believe putting customers first is the only reliable way to create lasting value for shareholders.
What can you do right now to protect your membership rate? Well, actually, nothing. We don't know if the Prime membership rate hike will really be going through or not, and more importantly, we don't know if Amazon will be grandfathering in its current members, and if they do, whether it will be long-term or short-term. We have very little real information at this point.
Interesting factoid: according to Morningstar Reports, Prime members spend approximately twice as much as their non-Prime counterparts each year, shop more frequently, and buy pricier items. Make sense. Once you are financially invested in a program, you want to take advantage of its service. There's some chicken-and-egg marketing going on here. People want a Prime membership because they buy so much stuff on Amazon, and people buy so much stuff on Amazon because they have invested in a Prime membership and want to take advantage of its perks. It's because of this relationship that I think Amazon is going to be very protective of its current Prime membership rolls.
My prediction? I think Amazon will grandfather in its current Prime members, but for a short period only, maybe one or two years. I want to reiterate that I'm just guessing and I have no solid information on which to base this. But I would hang on to my Prime membership if I were already a member (as I actually am), and if you're not,
now might be an excellent opportunity to join and possibly get in under the wire.
Amazon has got a one-month trial for Amazon Prime that is free for the first 30-days and then, (if you don't cancel) after the free period, they start your paid $79 Prime membership. Given that this possible rate hike information was just released yesterday, I'd jump into that free trial right now. If there will be any grandfathering, I'm speculating that they will be strict about the timeline, as well as which Prime members they will be covering.
But bottom line is, we don't know.
This year, we saw for the very first time, an increase in the Amazon SuperSaver shipping minimum threshold from $25 to $35, with no warning from Amazon. Given that they actually have fired a warning shot and already told us that the increase might happen, I'd gear up for it. I do believe an increase in Prime membership is coming down the pike.
My $0.02 about the value of a paid Prime membership? It's worth the money. While Amazon is not the most consistently frugal vendor in the marketplace,
when they have deals, boy, do they have deals. Last year, I surprised myself and did an overwhelming portion of my Passover shopping on Amazon, and because of their deals, I was able to come in significantly under my budget, which is always a struggle for me. I do believe in the long run, I come out way ahead on Amazon Prime. (Of course,
I share my membership with friends, so the $79 cost is not such a huge sting to me.) I also like their free unlimited streaming video access and Kindle lending library, but to me, the main perk of Prime membership is the free two-day shipping.
So now it's your turn. What do you think? (Please feel free to comment.)
