Amazon is considering a 50 percent increase in Amazon Prime. Here's what's wrong with that plan.
Amazon, are you sure you've thought this through?
Amazon is facing rising fuel costs, and they missed their earnings target this quarter. But don’t worry, shareholders, they have a solution: increase the cost of Amazon Prime. By 25-50 percent.
This would be terrible. Amazon considering raising Prime price by $40. https://t.co/yC1C7xFzJo— Farhad Manjoo (@fmanjoo) January 30, 2014
Amazon Prime is Amazon’s paid subscription service. Prime subscribers get streaming movies and free 2-day shipping AND access to the Kindle lending library. Not bad.
Here is Amazon’s problem: their main competitor on Prime is Netflix. Unless you love the Kindle library and buy a lot of stuff on Amazon, but you also love Netflix’ selection of movies and their original shows, you probably aren’t going to have both. The free shipping and the lending library are nice perks, but you probably wouldn’t pay for them on their own, unless it was just a couple of bucks a month or you buy enough that the shipping alone starts to justify the cost.
Uh oh. Possible Amazon prime price increase: http://t.co/3mqwQ4YB7F This would definitely count me out.— Estelle (@thatsostelle) January 31, 2014
Essentially, Amazon’s biggest advantage—that it’s the Everything Store—has turned against them. They can and do offer a lot more than Netflix for their subscription service, but they are trying to do so for the same price. With the Kindle perk, that’s no real problem—it’s just some extra data processing. Shipping, however, requires fuel and manpower, and unless the whole delivery drone thing happens (don’t count on that anytime soon), the cost of shipping an item aren’t going to drop.
Been a Prime member since my Amazon student days ended & love it BUT I'm just LOOKING for a reason to cancel & a fee increase will do it— Roni V (@MissRoniV) January 31, 2014
To Amazon’s solution—raising the price of Prime to above Netflix’ subscription cost—that could be a good idea in the long term, and one that they can justify to customers, especially as they get better at same-day delivery and whatever other perks they have planned for the future. How they’re planning on doing that, however, is nuts. If you gradually raise the price of something, people will grumble, but they’ll mostly stick with you. If you raise it dramatically in one shot, you’ll inspire thousands of customers to check out their other options.
Right now, Amazon Prime is $79 a year. That’s not a bad price, and one they could justify raising. But a jump immediately to $99-119 will make people jump ship. Go to $84 and people will barely notice.
Unless this is all just a ploy to get people to sign up for Prime right now!
Amazon says Prime prices may rise by between $20 & $40. People rush out and sign up at current price. More subs = no price hike. Job done.— Matt Brian (@m4tt) January 31, 2014