Dive Brief:
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Nearly all — 94% — of Amazon Prime customers told UBS financial consulting company in a survey that they “definitely will renew” or “probably will renew” at the current $79 annual fee.
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At higher prices, the likelihood of Prime membership renewal fell significantly. During its most recent earnings call, Amazon had floated Prime price hikes of $20 to $40. Under those scenarios, respectively, the percentage of Prime members saying they’d renew fell to 58% and 24%.
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UBS suggested a price hike would have to be accompanied by meaningful added perks, as Prime may also be facing fresh pressure from competitors like Newegg, shoprunner.com, and others who are getting in the game of offering free shipping and other shopping perks for an annual fee.
Dive Insight:
When Amazon first floated the idea of raising its Prime membership annual fee by $20 or $40, reactions were mixed. Some observers were shocked at the upper number for sure. But others thought it made sense. After all, the fee for Amazon Prime has stayed the same since its launch in 2004. And it includes the company’s Netflix-like streaming-entertainment service as well as free two-day shipping on many items, and even Sunday delivery for certain locations.
George Anders at Forbes has wryly speculated that Jeff Bezos has a thing for prime numbers and would be under pressure from his obsessive self to keep the membership fee prime in all ways. But now Bezos is under other pressure from other sources, too. Electronics e-retailer Newegg has just launched a membership-based free shipping program, shoprunner.com has a very Prime-like annual fee of $79 and lots of ambitions, and China’s Alibaba may be hitting Amazon where it lives with its upcoming launch of 11Main.com. ”We see little ability based on our survey work for Amazon to raise Prime fees above $99 annually in the medium term,” writes UBS analyst Eric Sheridan.
