CEO Tom Caporaso discusses how consistent value from Amazon keeps driving members to join Prime despite the price increase.
(As originally published on Chain Store Age on April 27, 2018.)
Amazon’s annual Prime memberships are getting a price hike — and it goes into effect right away.
Due to “rises in costs,” an annual Prime membership will jump from $99 per year to $119 annually, effective May 11. The new price will apply to renewals starting on June 16.
“The value of Prime to customers has never been greater,” Brian Olsavsky, Amazon’s CFO, said during the company’s first quarter earnings call on April 26. “And the cost is also high … especially with shipping options and digital benefits, we continue to see rises in costs.”
This is the company’s first annual price increase since March 2014. The price was originally $79 before it jumped to $99.
“When Amazon last increased their Prime membership price in 2014, Prime had roughly 28 million members. Now, Prime has 100 million members,” said Tom Caporaso, CEO of Clarus Commerce.
“Prime members show their unwavering loyalty by spending nearly five times that of non-Prime members,” he added. “Judging by the massive increase in membership since 2014, I think consumers see and appreciate the consistent value they can get from Amazon Prime. I don’t think this new membership price increase will negatively impact the standard bearer for all loyalty programs.”
While this is the first annual price increase in three years, Amazon did impart a price hike on its monthly Prime option in January. Monthly subscribers now shell out $12.99 each month, compared to a previous $10.99 monthly fee.
The online giant will continue to offer this monthly payment option, as well as discounted student plans, and “discounts for other groups,” he added.
These include discounts for qualifying recipients of Medicaid, a government-assisted health insurance program for low-income individuals, as well as a $5.99 monthly membership for electronics benefit transfer (EBT) cardholders. The card is commonly used to disburse funds for several government assistance programs, including Temporary Assistance for Needy Families (TANF), Supplemental Nutrition Assistance Program (SNAP), and Women, Infants, and Children Nutrition Program (WIC).
Prime’s price increase comes on the heels of Amazon CEO Jeff Bezos’ announcement earlier this month that the Prime loyalty program has more than 100 million paid members globally. In addition, more new members joined Prime in 2017 than in any previous year – both worldwide and in the United States.
The price hike also follows the company’s announcement of strong first quarter results. Amazon’s profits were $1.6 billion — more than double the $724 million it reported for the same period last year.