Amazon Raises Prime Membership Fees in the U.S.

Amazon Raises Prime Membership Fees in the U.S.

In its Q4 2021 earnings report, Amazon announced they are raising Prime membership fees in the U.S. to cover rising costs.

As part of its fourth-quarter earnings report for 2021, Amazon announced it would increase its annual Prime membership fee by $20, so Prime members will now pay $139 per year instead of $119. Monthly payers will see a $2 increase per month, going from $12.99 to $14.99 a month, equating to a $24 increase each year. The price changes will go into effect for new Prime members on February 18. Current Prime members will see the price increase after March 25 on their next renewal date. Prime Video-only subscriptions will remain at $8.99 a month.

“With the continued expansion of Prime member benefits as well as the rise in wages and transportation costs, Amazon will increase the price of a Prime membership in the U.S…,” Amazon said in a February 3, 2022 earnings release. “This is the first time Amazon has raised the price of Prime since 2018.”

Image courtesy of Amazon

Quarterly and full year financial highlights

Amazon provided the following highlights in their latest earnings report:

  • Net sales for the quarter were $137.4 billion, a 9% increase year-over-year, compared to $125.6 billion the fourth quarter of 2020.
  • Net sales for the full year 2021 grew 22% to $469.8 million, compared to $386.1 billion in 2020.
  • Operating income for the fourth quarter decreased $3.5 billion, compared to $6.9 billion in the fourth quarter of 2020.
  • Operating income for 2021 increased to $24.9 billion, compared to $22.9 billion in 2020.
  • Net income for the quarter increased to $14.3 billion, or $27.75 per diluted share, compared to $7.2 billion, or $14.09 per diluted share for the fourth quarter of 2020.
  • Net income for the full year 2021 grew $33.4 billion, or $64.81 per diluted share, compared to net income of $21.3 billion, or $41.83 per diluted share, in 2020.

CEO comments

Amazon CEO Andy Jassy thanked Amazon employees and expressed his appreciation for their continuing to work in “peak mode” for nearly two years.

“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. Despite these short-term challenges, we continue to feel optimistic and excited about the business as we emerge from the pandemic,” Jassy said.

“When you combine how we’re staffing and scaling our fulfillment network to bring even faster delivery to more customers, the extraordinary growth of AWS with 40% year-over-year growth (and now a $71 billion revenue run rate), the addition of marquee new entertainment like The Lord of the Rings: The Rings of Power and Thursday Night Football, and a plethora of new capabilities that we’re building in areas like Alexa, Ring, Grocery, Pharmacy, Amazon Care, Kuiper, and Zoox, there’s a lot to look forward to in the months and years ahead.”

Image courtesy of Amazon

Operational highlights

In their earnings report, Amazon shared the following operational highlights:

  • Amazon had its biggest-ever Black Friday to Cyber Monday holiday shopping weekend in 2021 with more than 100,000 third-party sellers surpassing $100,000 in sales on Amazon during that weekend alone.
  • In 2021, Prime members in the U.S. received over 6 billion free deliveries and over 200 million Prime members globally streamed shows and movies.
  • Amazon partnered with Affirm to offer buy-now-pay-later on eligible purchases of $50 or more.
  • Later this year, more than 80 million Venmo users in the U.S. can use their Venmo accounts in Amazon’s online stores to pay using their Venmo balance or linked bank account. Venmo is owned by PayPal.
  • Amazon has expanded its faster same-day delivery program to 24 metro areas in the U.S.
  • The fourth quarter of 2021 was Amazon Prime Video’s strongest viewership for live sports.
  • Amazon has now sold more than 150 million Fire TV devices.
  • Amazon has launched new features so that Alexa is “more proactive, conversational and personal,” allowing her to learn user preferences.
  • Ring launched a Ring Alarm Glass Break Sensor powered by AI technology.
  • Meta chose AWS as its long-term cloud services provider for AI research and development.
  • The 10th annual AWS re:Invent conference had more than 26,000 attendees in person and hundreds of thousands of virtual attendees.
  • Amazon has more than 1.6 million employees worldwide.
  • Amazon has added 16 new companies to The Climate Pledge. Now 217 companies have pledged to have net-zero carbon emissions by 2040.

First quarter 2022 guidance

Amazon provided the following guidance for the first quarter of 2022.

  • Net sales are estimated to be between $112.0 billion and $117.0 billion, for growth of 3% to 8%.
  • Operating income is estimated to be between $3.0 billion and $6.0 billion, compared to $8.9 billion in the first quarter of 2021.
  • The guidance assumes no new business acquisitions, restructurings, or legal settlements.

Insider Take

Though Amazon has not released updated Prime membership numbers, a $20 to $24 increase per year per member will yield a pretty penny for the ecommerce giant. They are not likely to see a mass exodus of members from the price increase, especially as the pandemic marches on and Amazon’s services continue to bring convenience and entertainment into the lives of millions (billions maybe) of people around the world. Despite the price increase, a Prime membership includes free one-day, two-day and same-day delivery; prescription program; free no-rush shipping; Amazon Day; Prime Video; Amazon Music Prime; Amazon Photos; and access to a host of other services, including subscriptions (e.g., Kindle, Audible, Amazon Kids+, Twitch). That is a lot of value for $139 a year.

Love them or hate them, Amazon has been a lifeline to many families and businesses during the pandemic, bringing food and essentials to their doors. Along with the rest of us, Amazon has been impacted by supply chain issues and transportation costs, and it makes sense to pass some of those costs onto consumers.

However, Amazon needs to be careful that it is not overpromising and underdelivering if it wants to raise prices. Free same-day, one-day and two-day shipping used to be a reality, but we’ve found that rarely do ordered items arrive the day they are promised, and members don’t always receive notice of delays. Amazon might be “too big to fail,” but there are competitors that Prime members (e.g., Walmart, Instacart, Shipt) can turn to if Amazon fails to deliver on its promises.  

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