Amazon is upping the price of Prime, increasing the annual fee of its membership from $119/year to $139/year.
The company made the announcement as part of its fourth quarter earnings report.
The monthly fee for U.S. members will go from $12.99 to $14.99. Price changes will go into effect Feb 18., and for current Prime members the price will apply after March 25, on the date of their next renewal. Video-only subscriptions ($8.99/month) will not change.
The price increase will help offset some of Amazon’s costs that have gone up over the past several quarters due to labor supply shortages, higher wages, supply chain issues, and additional shipping expense.
“As expected over the holidays, we saw higher costs driven by labor supply shortages and inflationary pressures, and these issues persisted into the first quarter due to Omicron,” Amazon CEO Andy Jassy said in the company’s earnings release.
Amazon’s last Prime membership increase came in 2018 when it upped the price from $99/year to $119. It also increased the price from $79 to $99 in 2014.
The membership program is a crucial part of Amazon’s business. A key Prime benefit is free shipping, among other perks such as streaming video and music; cloud storage; discounts at Whole Foods; and more.
Brian Olsavsky, Amazon’s chief financial officer, told reporters on a conference call that it was difficult to use the past increases as a gauge for how the latest boost will impact Prime membership growth, due to the differences in the number of benefits and subscribers at each point.
“When we look to do price increases, we take it very seriously. And we’re always balancing the value to customers versus the cost of supplying benefits,” Olsavsky said. “There will be always be some potential loss, but it hasn’t been large in the past, and we feel pretty confident in the value proposition of our Prime offering.”
Longtime Amazon analyst Mark Mahaney said the company will add around $2 billion in operating income with the $20 price hike, as reported by Business Insider.
Amazon has invested heavily in its logistics network to make one-day delivery the standard for free Prime delivery. Since 2018, availability of same-day shipping has expanded from 48 metros to more than 90, while items available for Prime free shipping have more than doubled.
During Q4, Amazon spent $23.6 billion on shipping, up 10% year-over-year.
There are more than 200 million Prime members around the world as of April 2021.
Other companies including Netflix and Hulu have recently announced membership price hikes.
Amazon competitor Walmart offers its own membership program, Walmart+, which costs $12.95/month and $98/year.