Amazon is making Prime more expensive for the people who can least afford it

Not everyone can afford the best deal.
Not everyone can afford the best deal.
Image: Reuters/Neil Hall
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Amazon hasn’t touched the price of an annual Prime membership in the US since raising it to $99 from $79 in March 2014. That $99 fee has stayed steady even as Prime’s offerings have expanded to include one-hour delivery with Prime Now, photo storage on Prime photos, and plenty more streaming content on Prime music and Prime video.

But monthly subscribers are a different matter. Since introducing a month-to-month Prime subscription in April 2016, Amazon has asked those customers to pay a little more for the flexibility: $10.99 a month, or $131.88 a year, a 33% premium over the annual fee. Today (Jan. 19), Amazon said that price is going up. A monthly Prime membership will increase to $12.99, or $155.88 a year, 57% more than the cost of a yearly subscription.

The monthly Prime plan is seen as a way for Amazon to appeal to lower income customers, who might not be able to pay $99 at once. (Amazon also offers a $5.99 a month plan to US residents receiving government assistance.) After Amazon introduced the monthly payment option, Prime subscriptions reportedly grew fastest among households earning less than $50,000 a year, according to a study from investment firm R.W. Baird. That means the $2-a-month price increase is likely to hit those subscribers even harder.

According to data provided to Quartz by Consumer Intelligence Research Partners (CIRP), a firm that closely tracks Amazon, 31% of US Prime members were paying monthly as of December 2017. That was up from closer to 25% in the three previous quarters.

“The problem for Amazon is, at least in the US, Amazon has captured most of the customers that would pay $99 for the annual membership,” Michael Levin, co-founder of CIRP, said in an email. “Most (61%) of the consumers that joined Amazon Prime in 2017 pay monthly, so are at greater risk of leaving.”

Amazon doesn’t disclose much useful information about Prime, but third-party analysis has found that the typical Prime customer spends $1,300 a year on Amazon, compared to about $700 a year for non-Prime members. CIRP estimates that the annual Prime fee covers the cost of shipping but that Amazon bears the cost of other Prime extras, like music and video licensing, and relies on greater spending from Prime customers to make the investment pay off.

As of the third quarter of 2017, CIRP estimated that 90 million people in the US were Amazon Prime members.