“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,” Amazon CFO Tom Szkutak said during the company’s fourth-quarter earnings call on Jan. 30. “Even as fuel and transportation cost have increased, the $79 price has remained the same.”
On its home page, Amazon is running a promotion that will allow new Prime customers to lock in the $79 annual membership for one year. That offer expires on March 20.
Amazon said Prime members will still receive free shipping for eligible purchases, unlimited video streaming and the ability to borrow books from the Kindle library.
Amazon does not disclose the number of Prime members, but Szkutak said on the Jan. 30 call that the number is in 10s of millions globally. More than 1 million customers around the world became new Prime members in the third week of December.
Rob Martinez, president and CEO of Shipware, said last month that a price increase to more than $100 would have caused Prime customers to think twice before renewing their subscription.
“I personally believe a better price is $99, which of course takes into account the psychology of maintaining the under $100 price point,” Martinez told Multichannel Merchant. “At $99, fewer existing members would cancel, and it would not have a significant curbing effect on new member acquisition.”
What will the price increase mean for its competitors? Most-likely, it will have zero impact.
In an article he wrote for Multichannel Merchant last week, local delivery vendor Grand Junction founder and CEO Rob Howard said Amazon will continue to win business away from retailers who cannot adapt to its growing model.
“Amazon Prime members comprise nearly 10% of Amazon’s purchases, and spend twice as much as non-Prime members,” Howard said. “Additionally, Prime membership numbers are expected to grow from 10 million in 2012 to 25 million by 2017.”
Last month, third-party marketplace Newegg announced it was starting its own subscription-based program similar to Amazon’s Prime.
For an annual $49.99 fee, Newegg Premier subscribers will receive free expedited shipping, early-bird notifications for sales and events, no restocking fees, free returns, a dedicated customer service line and exclusive members-only deals.