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Amazon to Raise Fees as Revenue Disappoints
- CompleteMoron2 13y agoAww. Just as I started watching their expensive TV shows! Alpha House season one was really good. I also liked the shipping - but now that I have seen Paris at $75 will I want it at $110?
- acmiller 13y agoAlpha House was really, really good. Even so, I wouldn't sign up for Prime just for Alpha House. If Amazon is serious about it's own content, bundling it with a free 2-day shipping subscription probably doesn't make sense.
- jader201 13y ago> “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.
- notatoad 13y agoI 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.
- toomuchtodo 13y agoThey should call it, "Demonstrating The Stupidity Of Analysts" maneuver.
- weichi 13y agoDo 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.
- eyeareque 13y agoAmazon'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.
- ac29 13y ago>You have to factor in that we now get charged sales tax in California. You have always been obligated to pay sales tax on purchases in California, its just that seemingly most people lie on their taxes and dont pay it. see: http://www.boe.ca.gov/pdf/pub217.pdf http://www.boe.ca.gov/pdf/pub217.pdf
- eyeareque 13y agoYeah, but how many people actually do that? I bet it is a fraction of a percentage of the population.
- jmspring 13y agoI'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.
- digikata 13y agoYup, 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.
- canweriotnow 13y agoI'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.
- toomuchtodo 13y agoBuild 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.
- secabeen 13y agoThey've been doing that. In Southern California, I get deliveries 7 days a week now, with USPS handling the Saturday and Sunday deliveries.
- toomuchtodo 13y agoThis is brilliant. I can't wait for it to make it to Chicago. I'd buy EVERYTHING from Amazon.
- donavanm 13y agoIf 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.
- nknighthb 13y agoThey 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.
- RandallBrown 13y agoI'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.
- eyeareque 13y agoI'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.
- CWuestefeld 13y agoTheir reversal of position on Internet sales tax was a big mistake, imho. They believe that having a product in-hand tomorrow is worth the 8.5% extra charge for tax, but that's rarely the case for me.
- canvia 13y agoNow 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.
- sjm-lbm 13y agoAnecdotally, 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.
- l0c0b0x 13y agoDito... I already have hesitation about the $80/year. I don't care about the 'free online movies' piece at all.
- deleted 13y ago[deleted]
- lighthazard 13y agoYou're not their target market. I'm a Prime user with over $20,000 in yearly purchases, certainly, I enjoy the benefits of Prime a lot more than you.
- d23 13y agoThen 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.
- ashr 13y agoYou 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.
- encoderer 13y agoWell, even when you spend over $25, you're getting Prime benefit of 2 day shipping instead of super saver. For me it's worth it.
- deleted 13y ago[deleted]
- jawns 13y agoI am not a Prime subscriber, but do buy from Amazon a lot (usually orders are over $35 so qualify for free shipping anyway). One thing I'd like to say about Amazon's position of strength is that if you look at a competing service like ShopRunner -- to which I was given a complimentary one-year membership, which just ended -- Amazon is a beast in comparison. I mean, even with the free ShopRunner subscription, I was still buying from Amazon more than from ShopRunner merchants, simply because Amazon is a huge department store with practically every retail category well represented, whereas ShopRunner is largely a collection of specialty stores. Is this necessarily a good thing, though? I mean, the more power Amazon has, the less competitive it needs to be, right? That's why I have mixed feelings about using Amazon for most of my online shopping needs; I don't want to be contributing to a situation where all of the "little guys" are edged out.
- leobelle 13y agoShoprunner is not even remotely the same kind of site as Amazon. Comparing the too seems like comparing Walmart with a tiny boutique.
- smackfu 13y agoWell, Shoprunner is trying to be "Amazon Prime for the rest of the internet". It's even priced the same, $79. It's a natural comparison.
- encoderer 13y agoAll Amex card holders get free ShopRunner now. I've tried using it a couple times -- most recently at Tiger Direct. It's awful. There are so few items that qualify for the free shipping that it was an exercise in futility and frustration.
- naner 13y agoI signed up for the free prime trial during the Christmas season this year and let it lapse (didn't cancel it) out of apathy. Granted, I use Amazon enough where it probably makes sense. Without prime I would often purchase additional items to qualify for "free" shipping. With prime, however, I make more impulse buys. I don't use any of the other prime benefits besides shipping. Anyways, I probably can't justify $120 a year even though it is not really much more than the $80 I am paying now. I believe when prime first came out it was $50.
- greyfade 13y agoWhen I signed up for Prime 6+ years ago, I felt the same way. I was hesitant to do it, and I expected to cancel it after my free trial. I still have it, and I've never let the service lapse, because I now do the majority of my shopping on Amazon. I buy everything from cat food to toilet paper, and I buy a lot of things (like DVD/Blu-ray) that I never previously had the motivation to go to a store to buy or that I don't have the ability to transport (like shelving units and chairs). It's supercharged my hobbies (electronics and 3d printing), and saved me days in back-and-forth to stores. So I suppose I'm one of those customers that can easily justify the $120, and would be more than happy to pay more, especially if it means that Amazon will put a little more effort into faster delivery.
- Pxtl 13y agoHonestly, they so thoroughly trounce their competition in so many ways I can't imagine this will hurt them too much. The "Prime" price-cut will cost them new subscribers, but I think most of its existing users are married to the service now. Jumping the minimum-free-shipping to $35 is unsurprising - it used to be that value here in Canada.
- falcolas 13y ago$6.67 to $10 a month... I think this will still be worthwhile to me. The video access alone is worth that to me, and the free 2 day shipping is just a bonus. I can completely understand why some people might not feel it's worth it, but IMHO $10 a month for a sizeable video library isn't out of whack with the rest of the industry.
- jawns 13y agoIt seems like most of the people I know who use Prime fall into two categories: 1) Those who use it for the free shipping 2) Those who use it for the non-shipping services, like the video offerings and the Kindle lending library. There is probably a healthy percentage that use it for both, but I wouldn't be surprised if it's below the majority. I think the people in Category 2 are more likely to be willing to accept the higher fees than those in Category 1, for the reason you mention. Compared to, say, Netflix, this is still a decent deal.
- xur17 13y agoI'm in category 1, and separately pay for a Netflix subscription. I'd be a lot more likely to try their video offerings if it actually worked on my devices (Android and Chromecast). They've been purposefully NOT releasing an android app to promote their Kindle devices, which seems like a bad long term move to me...
- xzel 13y agoI would say shipping on most items is about 5 to 10 dollars. So averaging a little less than two packages a month and you break even. Not too bad. For me, the holidays shipping season will easily cover any month I didn't average 1 package from amazon.
- Consultant32452 13y agoI subscribe to Netflix, Hulu+, and Amazon Prime. I find I rarely ever watch video on Amazon. I value it primarily for the free shipping and the video service is a bonus. $120/yr is a LOT of shipping. Especially when you actually look at how Amazon Prime products are clearly priced to include the shipping fees compared to the non-Prime versions of the same product.
- aresant 13y agoPrime to me means "Free 2-day shipping" I am a heavy Prime user. I understand and accept the price raise, but as the article quotes "The more expensive Prime is, the more they are going to have to live up to their promises." One promise that I feel is broken every day is on display with the "Add-On Items" These are just annoying. They show up in "Prime Only" searches and are typically <$5. Which I understand Amazon really can't ship for free. But there is literally no way to check out with just that item until you add up to $25, and it's typically stuff I actually need quickly. Take thumb tacks. They show the first result as $2.48 "add-on" for 100 of them. Or you can select another package of 100 for $6.05 that IS actual Prime and shipped in 2-days. The "add-on item" is just a confusing concept, that makes me - as a consumer - feel like Amazon's "2-day free shipping" promise is broken on a daily basis when I see these results. Hide the results from me, show me how to hide the results, or charge me $2.00 extra to ship "Add-On Items" and problem solved. But otherwise it's a constant reminder that Amazon hasn't kept their promise that I originally signed up for, even though I believe their intent is to offer more selection to consumers.
- toomuchtodo 13y agoThis 100%. Every time I see an add on item I need and can't pay extra to have shipped separately, its a time I have to go to a store, and makes me consider keeping Prime a little less.
- res0nat0r 13y agoAdd on items wouldn't even exist if it were not in fact for the add-on program, so having them listed is actually giving you more selection than you would get without it.
- smokey_the_bear 13y agoI've shared my Amazon Prime membership with three other people for years, it is an amazing deal even at 120 for us. If they cracked down on how the family sharing works it would be more of a hit for us.
- redorb 13y agoThey should offer(3) packages ... Free shipping prime, video only prime and a package with both
- rock8y 13y agoI cancelled my Prime membership early this month after being 4 years as a prime member. I took advantage of the 4 year($39/year) offer for Students. Am not eligible any more now. I looked through my orders over last 4 years and its only in the last year, I have really used the Prime to its best. I was still thinking about getting back Prime for $79 as I enjoyed Alpha house and as a member of Amazon Preview, I have a bit of knowledge about their future productions. But a $40 increase would be too much for me at least. Might consider in Summer again based on how my 6 months without prime will go.
- dangrossman 13y agoQuick tangent for those saying they pay for Prime but have never used the Prime Instant Video part -- Seeing as you're here on HN, you might be interested in one of Amazon's two original TV series, "Betas". It's a comedy about a social mobile app startup going through a YC-like incubator, followed by a demo day, attempting to raise funds from VCs and angels, while spurning buyout attempts from a caricature of Zuckerberg and avoiding hit-pieces in Valleyswag.
- smackfu 13y agoThey have done a decent job of making the add-ons good enough that I would stick with it if they raised it to $10 a month. When it was originally just $79 for 2-day shipping, and the free shipping threshold was $25 otherwise, it felt like much more of a splurge.
- ChikkaChiChi 13y agoAmazon needs to offer Prime for businesses. Amazon slaughters the competition when you need something overnighted, and it was one of the primary reasons we abandoned NewEgg.
- jmathai 13y agoIn my experience, a significant portion of the deliveries take more than the advertised two days. My experience is exactly the opposite. Rarely late, sometimes early.
- CWuestefeld 13y agoIt seems to vary based on geography. I moved last fall from NJ (close to two Amazon warehouses), where I almost always got deliveries the very next day, even for orders placed late in the evening. In my new home near Austin, TX, it's always two days or even longer.
- chestnut-tree 13y agoFrom the article: "Amazon has 237 million active customers but as a general rule makes almost no profit." Does Amazon really make no profit? Or do they just have some creative accounting techniques that means they never declare their profits to avoid possible taxes? Consider the case of the bookdepository.co.uk, purchased by Amazon in 2011. Not only does the bookdepository match most of Amazon's book prices, they offer free worldwide delivery too. Yet, unlike Amazon, they are profitable.
- jlgaddis 13y agoThey don't make profit because they spend most of it.
- jakewalker 13y agoLately, my Prime deliveries have been sent via UPS Mail Innovations, which relies on the USPS for last mile delivery. This inevitably turns 2-day delivery into 1 week plus delivery, due to the USPS's incompetence where I live. Complaints to Amazon result in a free one month extension of Prime benefits, but they can't stop the service from being chosen on future orders. Unless this changes soon, I am likely to let my Prime membership expire, as it has become useless to me because it is no longer reliable. Any attempt to raise the fee while still using USPS for last mile delivery will be met absolutely with cancellation. That said, if they raised the fee and promised to use only reliable (e.g., UPS, FedEx, hell, even Lasership/OnTrac), I'd take the deal.
- ck2 13y agoprime? or subscriptions subscription use that damn innovations to save them 25 cents or whatever from ups coming to your door (which actually I am okay with but it adds a day) I've never seen a regular prime delivery use innovations.
- jakewalker 13y agoPrime! (Albiet for low priced, but not add-on, items - in the range of $12-$18).
- sxcurry 13y agoNo kidding - this is happening increasingly to me and I've also complained to Amazon. I live rurally, and USPS takes at least 2 extra days, and up to a week. Also, large items won't fit in my mailbox and I have to drive to the Post Office, vs UPS bringing the item to the door. Plus, the UPS driver always has a biscuit for my dog!
- ck2 13y agoNotice how on amazon you cannot search for 3rd party vendors with free shipping. I have to assume this is so people only use the "prime" checkbox to try to find free shipping.
- buckbova 13y agoClassic bait and switch. Get multitudes to sign up for Prime over the holidays and then bump the cost.
- rsanders 13y agoThat doesn't make any sense. They aren't changing the price on subscriptions you already paid for.
- mikestew 13y agoNo, classic bait and switch would be "hey, how about some Prime for $10/year?" <user click "buy"> "oh, sorry, we're out of those. Would you like Super Supreme Prime instead for $120/year?" I would think bait-and-switch would really only be effective in a B&M store, though. What you're looking for is "they raised the price for when you renew next year."
- at-fates-hands 13y agoDidn't we just see an article with a ton of comments about how brick and mortar companies should be more like Amazon? Considering this about face on some of their more beloved policies, I'm wondering why people are saying this is the way of the future.
- bedhead 13y agoPrice is a demand indicator. I doubt the price hike will have any impact at all to the number of Prime members or its growth rate. Btw, keep in mind that Prime also gets the rough equivalent of a FREE Netflix streaming account.
- gcb0 13y agoI had student free prime and decided to pay the $79 or so for prime instant video thinking it would be netflix plus 2-day shipping. Boy I was wrong. Let's be honest here, Netflix has some series and NO movies. yeah, it has a few, but mostly crap or things i've already seen. amazon instant prime is 10x worse. and netflix was bad enough already. And besides no content, the Wii client i use, i take roughly 5min to start to watch something in my playlist! the loading times are Horrible! and the constant interruptions in streaming convinced me to not even look into their cloud services.
- HelloMcFly 13y agoIf you think Netflix has mostly crap or movies you've already seen then either 1) you've seen a ridiculous amount of movies, 2) you're really not putting much effort into discovering good content or 3) your real problem is with Netflix's content discovery. Probably a combination of #2 and #3.
- gcb0 13y agoI tried searching for good movies there. All were dvd only, which defeats the purpose of paying for streaming (i.e. Being more convenient than torrents)
- ac29 13y agoNetflix has 6748 movies: http://instantwatcher.com/titles/all?tv_filter=movies+only http://instantwatcher.com/titles/all?tv_filter=movies+only I will agree its mostly crap though. I cancelled my subscription a while back, but I think I'd pay $15/month or so easily if they could increase their catalog.
- 3apo 13y agoI wonder how the drone program is coming along? Or was it just a last minute PR blitz to increase revenues?
- jonknee 13y ago> The stock immediately fell as much as 10 percent, or $40. Then came word of the potential Prime increase, the first in the program’s nine years.The stock quickly shaved about half its losses, dropping only 4 percent in after-hours trading. Amazon shares were up sharply in regular trading on Thursday. They rose $18.81, to $403.01, just short of the stock’s record high. A day later and it's back to being down 10%. Wall Street has had some nutty volatility lately: https://www.google.com/finance?q=amzn https://www.google.com/finance?q=amzn
- old5chool 13y agoGood, let them raise it; got no problem with that. Opens up room for competitors, maybe even for you and me to make some online business a go. Nice.