02 February 2022 @ 14.56pm | Dan Wilson
A price hike on Amazon Prime subscriptions is predicted by business analysts, according to Reuters.
Citing increased shipping costs and rising fuel prices as critical to any decision, Amazon has not commented on the speculation. But in October 2021 Amazon CFO Brian Olsavsky said no increase was planned but that “we always look at that.”
In the US, the premium delivery and media service subscription currently costs $119 a year up from $99 four years ago. In the UK it’s £79 annually. Amazon founder Jeff Bezos famously said of the Prime service that it represented such good value offer that it should be a “no brainer” for consumers.
Globally 200 million households are Amazon Prime subscribers, including one half of all US homes. Additional Amazon Prime perks include access to Amazon Music and Amazon Video. Any price hike could potentially mean billions of extra revenue for the company.
Amazon is suffering from the general rise in costs like every household and organisation but its scale magnifies the problems. Staffing remains a headache and has become more expensive post-pandemic. At peak Amazon needed to offer signing on incentives to attract seasonal and new staff, especially in its logistics operations. The cost of fuel has increased globally and even supply side constraints, such as increased price of steel which impacts the price of constructing new facilities, are all material.
Mark Mahaney, an analyst at Evercore ISI say considering the current economic climate and inflationary pressures that it’s not hard to pitch a price rise to consumers. “They have pricing power because the value proposition is so strong,” said Mahanay. Other analysts have noted that shipping delays in the 2021 peak Holiday season may make subscribers question whether Amazon Prime remains a “no brainer.”
Amazon has forecast an operating profit between $0 and $3 billion for Q421 but pundits estimate profits at the high range of that window. Any announcement would likely be made when Amazon livecasts its quarterly and annual performance results on February 3rd.
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