Amazon released its Q4 2021 financial report in early February, revealing a record $600 billion in retail sales last year. The report included many impressive accomplishments, but the most important detail was the announcement that Amazon Prime membership fees are increasing.
The price of an annual Prime membership will rise from $119 to $139, while the monthly fee will increase from $12.99 to $14.99. For new members, the price change will go into effect on February 18, 2022. For current Prime members, the new price will apply after March 25 on the date of their next renewal.
Naturally, nobody likes when prices go up. You probably remember the public outcry when Amazon last raised Prime membership fees back in 2018. Customers complained, but they didn’t cancel their subscription. The number of Prime members actually increased 25% that year.
Most coverage about the change in membership costs has focused on inflation. But there is a silver lining to this news: the fee increase will likely benefit Amazon sellers.
Amazon’s Q4 Earnings Report Foreshadows an Increase in Prime Member Shopping
In the short term, the Prime Membership price hike will frustrate subscribers. However, in the long term, it will increase customer loyalty. This is due to two reasons. First, Amazon Prime continues to expand its benefits. In other words, you get more bang for your buck. Below are just a few examples of how Prime has improved value for members over the last few years:
- Since 2018, Prime Video has tripled the number of Amazon Originals, rolling out new series and movies like The Boys, The Wheel of Time, Tom Clancy’s Jack Ryan, The Underground Railroad, Sound of Metal, Coming 2 America, The Tomorrow War, and Being the Ricardos. This September, Prime Video will release the highly anticipated The Lord of the Rings: The Rings of Power. It will also become the exclusive home of Thursday Night Football as part of a historic 11-year agreement with the National Football League.
- Free Same-Day Delivery for Prime Members is now available in more than 90 metro areas in the U.S. and 58 metro areas in Europe. Faster Same-Day Delivery is now available in 24 metro areas in the U.S., with Q4 launches in Austin, Cincinnati, Cleveland, Denver, Indianapolis, Las Vegas, Salt Lake City, San Antonio, and San Diego.
- Prime Day has become the most anticipated ecommerce sales event of the year, saving customers over $1.6 billion in 2021
- In 2020, Amazon launched an online and mobile prescription medication ordering and fulfillment service. Prime members receive free two-day delivery and access to prescription savings at no additional cost.
The second reason why the fee increase will improve customer loyalty is simple: the more Amazon adds to the value of a Prime membership, the more customers will utilize the program. This momentum has a way of accelerating itself because usage builds trust, the most valuable asset of a brand. Seven out of ten customers will buy more from a company they trust, according to a study by Adobe.
This concept has already proven to be a successful strategy for Amazon. Four years ago, Prime members spent an average of $1,400 each year. Bank of America reports this number jumped to $1,968 in 2021 (roughly four times as much as non-Prime shoppers). Since 3rd-party sellers account for over 80% of Amazon’s incremental GMV, stronger trust among Prime members means more sales for brands.
At the end of the day, customers like Prime – a lot. A $20 price increase won’t cause members to ditch the program; it will only encourage them to use it more.
