The price of Amazon Prime in the United States is expected to increase in the next few years. The company has decided to start by increasing the price of the monthly subscription from $10.99 to $12.99. Over 30% of prime members pay monthly, so the increase in price is expected to raise revenues by a hefty 300 million dollars. The price of the annual subscription is also expected to increase, but the change will gradually take place over the next four years. Amazon Prime is an extremely popular service offered by Amazon. Prime revenue has increased 49% in the last year. As the Forbes article states,“ some of the perks of the Amazon Prime subscription include free 2-day shipping on more than 100 million items, unlimited streaming of music (Prime Music), movies and television shows (Prime Video) and cloud storage for photos.”
To its over 80 million members, Amazon Prime is definitely worth purchasing, whether the service is bought monthly or annually does not matter. Some of the order qualifiers are the express two-day shipping, unlimited music streaming, Prime Video, the price (annual value and monthly value), and unlimited storage. The order winner is the two-day shipping. Amazon markets heavily on this perk of the membership. Quick shipping means you can avoid the hassle of waiting in lines, traffic congestion, parking lot congestion, and you completely eliminate the risk of going to the store only to find out that they ran out of what you were looking for. Similarly, Amazon executives know their Prime service will be profitable. As the Forbes article mentioned, Amazon is raising its prices because it knows it can. Even with the price spike, the value of Amazon is evidently higher than the actual price to many of its subscribers.
Lastly, all companies face the law of demand. If Amazon raises it price it runs the risk of losing customers. Some customer may not value it enough to keep the membership after the 20% price increase. Nonetheless, the price increase for the monthly subscription may encourage people to upgrade to the annual membership. This switch would save month to month members $78-$160 a year. Amazon must have made a decision and decided that the price change was its best option. My only concern with this is that Amazon has a large market share of the E-commerce industry. Raising the prices solely because it can be done makes me uneasy about the future. The increase in revenue from the price change allows Amazon to continually buy out its competitors; such action can lead to oligopoly or monopoly, two market structures that lead to overpricing and under-producing. Amazon gives their members a lot of value for their money, but as the price continues to go up the value absorbed by consumers will decline. To conclude, the price is only increasing for U.S customers. This seems weird to me. I would think that if an international company, such as Amazon, planned to raise its price it would raise it everywhere. This is not the case for Amazon, most counties actually pay less than America for their prime memberships.