Well played, Amazon. Those “phews” you heard from neighboring cubicles yesterday morning were from colleagues who had been primed to expect an annual increase of as high as $40 on their Amazon Prime fee. It is holding to a lower $20 increase, it announced in an email to current members yesterday morning.
And those “dangs” in the air were competitors who were hoping that it would do a Netflix and totally alienate loyal customers with a whopping increase after holding the line at $79 for the nine years of the “free two-day shipping” program’s existence. (Since its debut, it has also tacked on amenities like free streaming videos and a free book a month for Kindle owners).
To be sure, not everyone took the news positively, particularly if they were unaware of the price range that Amazon had announced it was considering.
“After the fee increase was announced, the notion of a benevolent Amazon took a beating on the retailer’s discussion forums,” David Streitfeld reports in the New York Times.
The story links to “Who else won't renew Amazon Prime at $99?,” which contained 38 posts as of early this morning, including this gem cited by Streitfeld from “one overwrought fellow”: “REALLY!?!?! This is BS! I have been a Prime member for many years and will not be bullied into paying more!!! This is RIDICULOUS!!!!!”
But there were a few defenders even on that negatively named forum.
Bloomberg Businessweek’s Brad Stone and Joshua Brustein point out that the “announcement must come as something of a defeat inside the walls of the Seattle-based Internet giant.” That’s because, “‘There are two kinds of companies,’ Amazon Chief Executive Officer Jeff Bezos is fond of saying, in one of his earnest, oft-repeated Jeffisms. ‘Those that work hard to lower prices, and those that work hard to raise prices.’”
MarketWatch reporter and Prime member Catey Hill has no problem with the increase personally, she says on WSJ’s “MoneyBeat,” although it came as a surprise to her husband. And looking at the service analytically, it adds up to savings for frequent users.
“There’s a whole matrix of what they charge for what. Books and clothing and DVDs — all these things, the shipping is different on them,” she says, and suggests Googling “Amazon shipping” to get an idea of what costs what without the service.
Based on one analyst’s estimate that there are currently 18.7 million members in the U.S., and assuming that the number stays the same, Hill says the company would take in an additional $374 million a year.
That’s a “significant” sum but probably not enough to substantially expand the “thin profit margins.” But investors must have liked what they saw when they did similar back-of-the-shipping-container calculations because “Amazon shares eked out a small gain on a day when stock indexes fell,” as Greg Bensinger and Michael Calia report in the Wall Street Journal.
“Prime is valuable for Amazon not just because of the annual fees but because members tend to spend significantly more on the site,” Bensinger writes after determining that analysts do not expect “meaningful churn” from the price increase. “Market-research firm Consumer Intelligence Research Partners last year estimated Prime members spend more than twice as much — $1,340 per year — than non-Prime members using Amazon.”
A way to beat the system has quickly made its viral way from an obscure blog post to, well, this report and beyond.
“As our own Tim Stevens pointed out on Twitter this morning, Slickdeals user Orick has posted a smart method to save you $20 when it comes time for your next renewal,” Jason Cipriani posted on CNET at 10:20 PDT yesterday morning. The “clever workaround” boils down to disabling the auto renew feature on your account and giving yourself a gift subscription.
Amazon is itself offering new Prime members the $79 price if they sign up before March 20.
ShopRunner, which partners with 85 traditional retailers to offer free two-day shipping, “smells an opportunity and is currently running a program to give its service for free to Amazon Prime subscribers upset with the price increase,” reports Matt Burns on TechCrunch.
But Burns’ lede, which answers a question posed by his headline — “What’s The Best Amazon Prime Alternative?” — may say it all for moderate-to-heavy online shoppers: “There isn’t one. Sorry, Charlie. Amazon Prime stands alone as the best deal online.”