Amazon Just Raised the Cost of Prime

0
5

If you are a month-to-month Amazon Prime subscriber or a Prime Student subscriber, it’s time to adjust your budget as your subscription rates have been increased.

Prime subscribers who pay a month-to-month will now be charged $12.99. This is up from $10.99. Monthly Prime Student subscriptions will now be priced at $6.40 per month. This is up from $5.49.

The annual membership subscription rate which is currently $99, remains unchanged.

Following is the statement Amazon issued on the price increase.

“Prime provides an unparalleled combination of shipping, shopping and entertainment benefits, and we continue to invest in making Prime even more valuable for our members,” the company said in a statement. “The number of items eligible for unlimited Free Two-Day Shipping increased in recent years from 20 million to more than 100 million items. We have expanded Prime Free Same-Day and Prime Free One-Day delivery to more than 8,000 cities and towns. We also continue to introduce new, popular and award-winning Prime Originals … Members also enjoy a growing list of unique benefits like Prime Music, Prime Reading, exclusive products and much more.”

Financial advises Cowen and Co. estimate that the price increase will allow Amazon to generate an extra $300 million in annual revenue from Prime membership fees. Their analysis is based on the monthly customers, including students and low-income users who pay a lower rate.

Amazon did not provide any indication as to why they decided to raise their prices. The price increase comes less than two years after month-to-month plans were introduced.

For Amazon, Prime members are great for the bottom line. They buy more and shop more frequently so it did not come as a surprise that Amazon introduced the monthly payment option as a way to attract new members to Prime who either couldn’t afford the annual membership price of $99 or who didn’t want to commit to using the service on a continuous basis.

A clue as to the reason for the price increase may be found in findings reported by Morgan Stanley late last year. The survey which was based on 1,000 U.S. adults in the third quarter of 2017, concluded that 40 percent of American consumers are currently Prime members. This is the same percentage seen in a similar survey that was conducted for the fourth quarter of 2016.

Morgan Stanley attributes the slowdown to the fact that in higher-income markets, the membership program is nearing saturation. This finding is also supported by a survey conducted by financial advisors Piper Jaffray in June. That survey revealed that 82 percent of U.S. households with incomes of $112,000 or more are already Prime members.

Amazon Prime is a membership service offered by Amazon that comes with shipping, streaming, shopping, reading and other benefits.

Some of the shipping benefits include free 2-day shipping, free same-day delivery and, free-2-hour delivery. Some of the streaming benefits include Prime Video and Prime Music that give members access to unlimited streaming of movies and TV episodes and unlimited, ad-free access to hundreds of Prime Playlists respectively. Shopping benefits include the Amazon Prime Rewards Visa Signature card that gives eligible Prime members 5% back every day on all Amazon.com purchases.