In the latest quarterly earnings release call last week, Amazon's CFO Tom Szkutak indicated in his prepared speech that the online retailing giant is thinking of raising the price of Amazon Prime (transcript from SeekingAlpha, emphasis is mine):
We launched Prime in the U.S. nine years ago with free, unlimited two-day shipping on 1 million items in an annual membership priced at $79. Today Prime Selection has grown to over [19] [ph] million items.
Even as fuel and transportation cost have increased, the $79 price has remained the same. We know that 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 and transportation as well as the increased usage among Prime members we’re considering increasing the price of Prime between $20 to $40 in the U.S.
I have been using Amazon Prime for a year now. The all-you-can-eat free two-day shipping is a good match to our busy lifestyle. As a result, over the course of 2013 we had over 50 orders with Amazon ranking from an USB charger of $5.99 to a $399 portal generator. (We actually ordered a $1099 3D Plasma TV from Amazon too but twice in a row it delivered a TV with cracks on the screen and the delivery crew had to take it back on the spot.)
Amazon Prime also includes free streaming of over 41,000 movies and TV episodes. On that front, we used the service for a couple of months but pretty much exhausted all titles of our taste, and routinely frustrated by the lack of some blockbuster movies and our favorite TV shows. In the end, we gave in to Netflix's $7.99/month plan for a much wider selection. We never looked back at Amazon Instant Video since.
Amazon Prime also includes the benefit that a Kindle reader can borrow from over 350,000 titles for free. Nice benefit but we are not a Kindle user.
So, should Amazon Prime raise its price to $99 or even $119, the calculus for our family becomes whether we will be saving enough on the shipping cost over the course of the year to recoup the annual subscription free.
It might be a hard call. We know we won't have 50 more orders for Amazon this year, after many purchases in 2013 to set up our new home. We still love the convenient two-day shipping, but I guess we have some patience to wait slightly longer -- Amazon does offer free shipping for orders of over $35 (recently raised from $25) for most items. If Amazon chooses to raise the Amazon Prime price to $119, we might well hold off renewal and figure out how long we can live without the convenience of two-day shipping.
What will be your choice?
