Will Amazon Prime price go up?
Last increase four years ago

When Amazon.com Inc. (NASDAQ:AMZN) reports its holiday quarter results on Thursday, one of the top questions will be whether the retailer will finally raise the price of Prime, its fast-delivery and media subscription.
The company has every reason to do so, analysts say. Amazon had to pay higher wages and sign-on bonuses to attract employees in the face of labor shortages. The company had to spend more on shipping because it couldn't get the products to the right warehouses. Even steel for construction projects cost more.
Amazon has forecast operating profit of between $0 billion and $3 billion, with analysts expecting it to be at the higher end of the range, around $2.5 billion, according to market research firm FactSet. Nevertheless, the analysts expect a price increase for Prime soon. Annual fees for US subscribers were last raised from $99 to $119 four years ago, and from $79 four years earlier.
"It's about time," said Michael Pachter of Wedbush Securities. "Shipping costs have gone up, period."
Evercore ISI analyst Mark Mahaney said a price increase is easy to explain: fuel is more expensive, transportation is more expensive, and the goods themselves cost more. Subscribers -- more than 200 million worldwide, including the majority of US households -- would pay more because they want fast delivery, he said. That's potentially worth billions of dollars to Amazon's bottom line.
"They have the pricing power because the value proposition is so strong," Mahaney said.
Competitor Netflix Inc. (NASDAQ:NFLX) also raised its standard tariff in the US weeks ago.
Amazon declined to comment on Prime's pricing. In October, CFO Brian Olsavsky said the retailer didn't have a price increase to announce, but "we're always looking at it." He cited the value of Prime and the time since Amazon last raised it as points to consider.
Among the factors he didn't name was reliability. Three people who have worked at Amazon said the company would think twice before raising prices until operations return to normal, citing some shipping delays. The company hasn't rolled out a major Prime benefit recently and has yet to standardize on the same-day delivery it promised nearly three years ago.
"Given the delivery challenges in the fourth quarter, a price increase for Prime does not seem appropriate," said Scott Jacobson, a former senior manager at Amazon who is now with Madrona Venture Group.
The decision is also a mathematical matter. More valuable than the fees is the way Prime is changing customer behavior, leading them to spend more on Amazon to get the most out of their membership. Would the additional revenue from subscriptions outweigh the lost spending for those who cancel?
Amazon said it has been working to minimize the impact of the pandemic and operational difficulties on customers. In recent years, the company has added Prime benefits such as: B. Savings on medication when paying without insurance, and it has expedited delivery and added popular programming to the stream.
The source of Amazon's recent challenges could be revealed in Thursday's results, whether it's a surge in demand, the ongoing labor and supply crunch, or both. The National Retail Federation said holiday sales rose 14.1% in November and December, beating its previous forecast.
The Omicron variant of COVID-19 has also surged, albeit only towards the end of Amazon's US holiday season.
"You have to think Amazon was hit hard," Pachter said, agreeing that the company's delivery uncertainties made a Prime hike difficult.
"A price increase when I literally ordered (some) hot sauce and it took nine days to get here would be a slap in the face.





