> “They don’t think they will lose customers,” Mr. Munster said. “They are doing this from a position of strength.”
I don't see how they think going from $80 to $120 per year for Prime will not cost them customers. We just subscribed last year (after being customers for several years), and I was still hesitant to do it then, because we only take advantage of it when we spend < $25 (we rarely use Prime video).
I'm thinking there are many in the same boat, and those are the customers they will lose.
I think amazon knows perfectly well that they will lose customers by this. They're doing it so that at the next shareholder meeting, they can point at their declining revenues from prime and say "hey, look you idiots. We know what we're doing. leave us alone".
Amazon has always been very careful to make exactly as much profit as they choose to. Their sales volume is huge enough that they could probably raise an extra $500mm by tweaking their pricing algorithm without anybody even noticing, instead they have increased prices in the most visible way possible. This has to be about sending a message, not about making money.
Do you really think that Amazon is doing something that they believe will lose customers so that they can make a point to about how they are smarter than stock analysts?
I have a very, very hard time believing that the people running Amazon would do that.
Amazon's advantage in this space is not what is once was: You have to factor in that we now get charged sales tax in California. Also, no-hassle and no time limit return policies at Lowes, Costco, Bed bath and Beyond, etc, and internet price matching, Amazon purchases are not as appealing to me as they once were.
Example: I can buy Nest Protect on Amazon for exactly the same price as it is from my local Lowes. However, with Lowes I get the ability to return it at any time for any reason, in person, without the return shipping price or hassle. I'm going to buy it from Lowes, where in the past I would have just used my Prime account to buy it from Amazon.
I've had prime for many years now -- seven or eight. We order enough that it is well worth it, plus we actually take advantage of Amazon Prime Videos. So, for me, an increase for the first time after so many years isn't really a concern.
It reminds me of a deli that was quite popular in Mountain View years ago. Incredible food, great employees, very loyal following. Around the time he was finally considering retirement, the prices went up from at or below Togos/Subway prices to what you would see these days at any of the popular New York Jewish delis. He justified it in -- "I can and it was about time." People still kept coming, it was a much loved institution.
Like the deli, there are many Amazon Prime users that love the convenience and will probably not really bat an eye at the increase. Those who joined more recently or do not use things like Prime Video, may feel otherwise.
I'm not sure if I've ever actually paid $80 for prime.
I got it originally for free as a college student, then they kept giving me half off discounts when it was time to renew. I don't know what I paid last time I renewed.
Even at $120 I'll still pay for it. It's an awesome service and I get way more than $120 value out of it. I never watched their videos either, but Betas and Alpha House are actually pretty good.
I've been doing the same thing (Student discount for prime). If it went to $80 bucks for me I am not sure if I would renew. If it was $120 I highly doubt I would.
Now that Amazon is branching into original content production (loved Betas!) it makes me think that Netflix is doomed. Amazon Prime has a large % of the Netflix library, plus Amazon will sell you digital copies of most of what Netflix is missing. They capture far more revenue per customer because of this. I will still subscribe to both but if Netflix doesn't keep up with the original programming Amazon will eat them alive IMO.
Anecdotally, my experience is the exact opposite. Since Netflix does not attempt to sell devices (like Kindles, for instance) itself, their streaming app is on literally every device I own that is capable of running it.
Lots of Amazon streaming apps (off the top of my head, the TiVo app) only support normally purchased content, not the free Prime streaming; and other platforms (say, Chromecast) don't have apps because (I'd assume) they likely don't fit into the ecosystem that Amazon wants you to exist in - namely, Kindle-based devices.
In other words, I'm actually considering dropping Prime because (among other reasons) Amazon's attempts to push related products and systems reduces the utility I can get out of Prime Instant Video.
They boasted that they signed up 1 million new Prime members in the 3rd week of December. I wonder how many of those people signed up for the free trial with the intention of cancelling before the end of the free month? I know that's exactly what I did last year when I still needed to buy a few more presents a couple of weeks before Christmas.
I'd actually be okay with this if they also stopped using LaserShip. They're part of the reason packages take "significantly longer than the advertised two days" to arrive.
If youre a Prime member and a package misses it's promised delivery date you should contact customer support. SOP is to increase your prime subscription by one month.
Build more warehouses, partner directly with USPS. USPS delivers every day, to almost everyone. Just get your shipments to those sorting centers by 2-4am, and next day delivery for vast swaths of the US becomes easier.
They really should have started more modest price increases a couple years ago.
However, I'm not sure you're the target audience for Prime. I place a very high value on fast shipping. Before Prime, I frequently paid for 2-day shipping anyway, and occasionally full-price overnight shipping. Their free shipping over $25 is way too slow for me, it's not a viable alternative.
Yup, I debate renewing at $80, at $120 I would likely be pushed over the edge to canceling.
But I wonder if this is intentional beyond increasing fees. Maybe Amazon is trying to reduce their growth rate a little bit to help ease the rate you need to scale support infrastructure. e.g. something with slow real-world constraints like acquiring leases or real estate for warehouse space.
Then you aren't their target market. They don't make their money off of people that are high-usage customers. They make it off of people who buy it and use lower then the predicted average.
You are assuming that their Business model is to profit from the difference in cost of shipping and prime subscription revenue. Rather than profit from a higher purchase volume if one has prime shipping than not.
I for one have observed that I have bought more things since I have had prime shipping. There is something to be
said for the quick response to your order in the form of 2 day delivery.
I don't see how they think going from $80 to $120 per year for Prime will not cost them customers. We just subscribed last year (after being customers for several years), and I was still hesitant to do it then, because we only take advantage of it when we spend < $25 (we rarely use Prime video).
I'm thinking there are many in the same boat, and those are the customers they will lose.