Seeking Alpha

Consumers noticed the Amazon Prime price hike

  • A measure of Amazon's (AMZN +0.8%) brand loyalty with consumers fell sharply after the company hiked the annual price of an Amazon Prime membership.
  • A Brand Keys survey saw Amazon drop to a 83 rating after sitting at an industry-high 93 just a few weeks ago.
  • Some retail watchers think Amazon may have under-estimated what the reaction would be to the new $99 price for Prime.
Comments (25)
  • SoldHigh
    , contributor
    Comments (1013) | Send Message
     
    Remember the damage NFLX self-inflicted during the messy split between its streaming and rental plans? The magnitude here is nowhere near that severe.

     

    Amazon will be fine.
    17 Mar 2014, 02:16 PM Reply Like
  • Andrei Volgin
    , contributor
    Comments (599) | Send Message
     
    When a Netflix user cancels, Netflix loses $100 in revenue. When an Amazon's customer cancels, Amazon is losing not only $79 fee, but also hundreds of dollars in orders. This hike may help Amazon's bottom line, but it will hit their revenues.
    17 Mar 2014, 02:22 PM Reply Like
  • Esekla
    , contributor
    Comments (3616) | Send Message
     
    Yeah, but consumer surveys always exaggerate the reaction, and despite the spin this actually shows that Amazon did a fantastic job estimating what the reaction would be and just how much of a bump they could get away with. Yes there will be a little trade off, but it's probably well worth it. See

     

    http://bit.ly/1qMp1MD

     

    I anticipate that the reversion to mean in AMZN will continue and be complete by the next earnings report, which should show the benefits of this move.
    17 Mar 2014, 02:53 PM Reply Like
  • Arnold Layne
    , contributor
    Comments (55) | Send Message
     
    My thoughts exactly - what a buying opp that was! The message boards are full of whiners just like then. LOL
    17 Mar 2014, 02:54 PM Reply Like
  • Andrei Volgin
    , contributor
    Comments (599) | Send Message
     
    @Esekla

     

    You need to read the announcements more carefully. The price hike will not be in effect by the next earnings report, and then it will gradually kick in during a 12 months period as existing subscriptions expire. You may see the first results in July, at best.
    17 Mar 2014, 02:58 PM Reply Like
  • Esekla
    , contributor
    Comments (3616) | Send Message
     
    @Andrei I read quite carefully. The price hike takes effect April 17, 2014, which means it is just before the next anticipated earnings date. See the string of comments I linked to above. The price hike is not meant to affect revenue, but it will produce a bump in subscribers for the next earnings report and a reduction in churn.
    17 Mar 2014, 03:13 PM Reply Like
  • Topcat
    , contributor
    Comments (488) | Send Message
     
    They won't stop shopping amazon, they might just not pay for Prime expedited/free shipping, that is all. Amazon needs profits. They quietly moved the threshold for free shipping from $25 to $35 a few months ago.
    17 Mar 2014, 03:17 PM Reply Like
  • User 23878933
    , contributor
    Comment (1) | Send Message
     
    For those who make many Amazon purchases/year, this is too minimal to consider getting upset over. I have averaged well over 100 purchases/yr through prime the last several years (fewer than 100 for a few yrs before that w/prime.) The cost of time and gas to hit brick & mortar (which typically don't have what you want anyway) is far more than a measly $20 addition. And I have utilized almost none of the "newer" prime features, like the tv shows, etc- the new membership $ is still well worth it to me.
    17 Mar 2014, 03:20 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (24417) | Send Message
     
    User, but what if you're paying Prime to get free shipping, and then paying the shipping as well, included in the sales price?
    17 Mar 2014, 03:25 PM Reply Like
  • Andrei Volgin
    , contributor
    Comments (599) | Send Message
     
    @Esekla

     

    In other words, you prefer to focus on the positives (a temporary bump in subscribers prior to the price increase), but ignore the negatives (customer defections after the increase)? We will only know the full impact of this decision by the end of the year, with the first glimpse in July.
    17 Mar 2014, 03:35 PM Reply Like
  • SoldHigh
    , contributor
    Comments (1013) | Send Message
     
    That is true. But the customers will come back, much like Netflix's did. When the customers shop around, they'll see the service is still a good value.

     

    Amazon will be fine.
    17 Mar 2014, 05:37 PM Reply Like
  • mjb123@earthlink.net
    , contributor
    Comments (2) | Send Message
     
    Considering the value of Amazon Prime (free shipping included) this will not gave a great
    Effect. Does anyone think they will stop shopping onAmazon and not want free shipping
    17 Mar 2014, 02:31 PM Reply Like
  • MarketLost
    , contributor
    Comments (2917) | Send Message
     
    I think you're editing window might need some help.
    17 Mar 2014, 03:10 PM Reply Like
  • smfc
    , contributor
    Comment (1) | Send Message
     
    I have had nothing but positive experiences with Amazon Prime over the years, which is more than I can say about the vast majority of retail/service providers. Do I wish they didn't have to raise prices? Yeah, but they won't lose me as a customer. Also, as a shareholder of Amazon and previously of Netflix, I have to give Amazon credit for announcing their price hike in advance, unlike Netflix, who just sprung it.
    17 Mar 2014, 02:40 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (24417) | Send Message
     
    Be careful when you're buying something. Check in a different computer to see if AMZN is not adding the cost of shipping to your Prime purchase...
    17 Mar 2014, 02:44 PM Reply Like
  • saguni60
    , contributor
    Comments (59) | Send Message
     
    This is very true. For many products, shipping is added to the product cost if its marked as prime. Also, all 3rd party stuff is not prime; so, why bother with PRIME membership? They should have a tiered pricing - 59 for shipping Prime and 59 for Videos/Kindle Prime and 99 for the bundle. I hardly watch videos on their site; why should I pay for it?
    17 Mar 2014, 03:12 PM Reply Like
  • $vix
    , contributor
    Comments (519) | Send Message
     
    Personally, I dont think the price hike is an issue for amazon fans as they will pay it gladly to their God, Bezos. At present, it has only affected the stock positively as wall street loves the price increase. Ironically, all of a sudden, profits seem to matter to JB.

     

    Positive momentum could carry the stock to $396.42, however, during the latest rally as a result of the Prime increase, as the stock price goes higher, my money flow indicator shows smart money coming out of amzn. As a trader, this makes me nervous and I have booked my profits on my long trade. Waiting a bit for the stock to settle in before initiating another long or short trade.

     

    As a consumer, the hike does not affect me as I have not shopped at amazon for quite a while. The competiton has caught up and better pricing and free shipping await those who care to shop around.

     

    Yesterday (Sunday), I bought clear, globe shaped 100w G25 light bulbs. My local stores did not carry them as they are discontinued due to energy regulations.

     

    Amazon sells a pack of 6 bulbs for $56.16 plus sales tax. Price per bulb is $9.36

     

    I bought Five packs of six bulbs (total of 30 bulbs ) on eBay for $32.50 plus $3.99 shipping, no tax. Price per bulb is $1.08333..

     

    Total delivered amazon price for 6 bulbs = $60.30 with Tax included

     

    Total delivered eBay price for 30 bulbs = $36.49 with shipping included, no sales tax charged. They'll be here Wednesday.
    17 Mar 2014, 02:40 PM Reply Like
  • MarketLost
    , contributor
    Comments (2917) | Send Message
     
    $Vix, I almost get the idea that there is a bit of panic in the C-Suite to maintain revenue growth. We keep getting these rumours about what Amazon is going to do, everything from a phone, set-top box, and pushing traffic to other retailers for a cut of the sales. However, we just don't see anything solid, except for this.
    17 Mar 2014, 03:19 PM Reply Like
  • zigazaga
    , contributor
    Comments (147) | Send Message
     
    Someone explain - why would I commit to Amazon Prime if I can watch the same 3rd rate films + "House of Cards" cheaper on Netflix and buy cheaper stuff on Ebay with no subscription... i don't need things to be delivered same day by drones or anything fanciful - why would I? Am I missing something with this Prime subscription?
    17 Mar 2014, 03:18 PM Reply Like
  • Mark Krieger
    , contributor
    Comments (4404) | Send Message
     
    Rule number one:you never screw with your customers-they are your life blood!

     

    Rule #2: refer to rule #1
    17 Mar 2014, 03:30 PM Reply Like
  • Gary J
    , contributor
    Comments (5867) | Send Message
     
    Unfortunately much of the price comparison stuff you see in these articles is just bogus or made up - RussellL is just one example -

     

    http://seekingalpha.co...
    17 Mar 2014, 04:41 PM Reply Like
  • phxcrane
    , contributor
    Comments (482) | Send Message
     
    The big hit to Amazon will come when they start including tax. I will no longer buy on line. The price of shipping is already added to the price.
    17 Mar 2014, 05:58 PM Reply Like
  • ScottStoney
    , contributor
    Comments (42) | Send Message
     
    This baby better go back to 400 this year. Thats all i have to say.
    18 Mar 2014, 02:49 AM Reply Like
  • Sakelaris
    , contributor
    Comments (1698) | Send Message
     
    I can only speak for myself. As a household with family scattered all over the country, it was good to get the Prime service back in December. We also like the Amazon Prime videos as a companion to our Netflix videos.

     

    We will pay the extra $20 when the time comes.
    18 Mar 2014, 04:56 PM Reply Like
  • NYer1
    , contributor
    Comments (1428) | Send Message
     
    Sounds like a good fit for your family Sakelaris.
    How many times a year does your family take advantage of Prime "free shipping"?
    18 Mar 2014, 05:46 PM Reply Like
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