Amazon raised their Prime membership fee. In response, people are cancelling their membership fee and turning to other retail sources to shop for less. Amazon admits in its listings that there are other sources that are cheaper, but it may take longer to deliver.
Prime membership fees started at $79 in 2005, and the promise was that your purchase would be in your home the next day. Well, as Amazon grew, “tomorrow” sometimes stretched into a few days because the supply chain broke down, or the warehouse was overloaded with orders. Then in 2014, the cost of membership jumped to $99. A few years later, in 2018, it went to $119. And, in April 2022, the membership fee was converted to a monthly charge of $14.99 – that adds up to $179.80 annually. But if you pay in advance, the annual charge drops to $139. Bottom line, Prime membership costs have doubled since 2005 (more unless you pay in advance).The increase may be too sharp an increase in a short period, especially as competition has grown over that same time. Of course, there are discounts for students, and that can entice them to start a membership at a young age and hopefully keep them as users into the future.
There are competitive alternatives out there trying to lure customers away from Amazon. Notable among them are Walmart+ at $99, My Best Buy Total, and Capital One Bank Shopping. Walmart+ shopping is a similar plan to Prime that promises fast delivery and other privileges. Bank One offers a free plan that promises lower prices for identical products; the idea behind it is that the bank hopes to extend loans to customers if they make major purchases.
Nonetheless, Amazon’s Prime Big Deal Days event earlier this month was a big success. On the first day of the 48-hour Prime Day, Prime members in the U.S. bought more than 25 million items eligible for same day or next day shipping. According to Doug Herrington, CEO of Worldwide Amazon Stores, “hundreds of thousands of which arrived at their customer destination in less than four hours”. Among the best- selling classifications were cosmetics and fragrances, apparel, and home goods.
Clearly, Amazon is a fierce competitor. It takes full advantage of its operational expertise to provide a broad merchandise assortment and offer speedy delivery. Those strengths enabled it to deliver strong results even as other retailers were aggressively offering their own deals everywhere a customer looked.
Looking ahead, what will business be like this holiday season? How will Amazon fare? Bain just released a report that predicts just 3% growth in November and December. That’s below expectation. The National Retail Federation is expected to release its own estimate in mid-November.
Speed is important, especially when it comes to meeting the all-important holiday delivery deadlines. Amazon, the technology company, wants to assure customers that their holiday purchases will arrive in time for gift giving. It also believes that it can meet customer demands for speedy shipping and be environmentally friendly at the same time. Amazon intends to deploy 5,000 electric vehicles that will deliver merchandise in one day this year (without carbon emission).
POSTSCRIPT: But if Bain is correct, then my forecast of an increase of +4.3% is too optimistic and many retailers will not see the customer shopping traffic they expect. A softer sales trend certainly will affect Amazon’s Cyber Monday, which is another key selling day for the company right after Thanksgiving. Lower sales forecasts could present challenges for Amazon it does not talk about a fashion trend nor create exciting displays to move product; it sells merchandise like it sold books. But in a competitive marketplace with low growth projections, there is a need to make fashion sing, to have fashion trends expand a look. Customers react well to passionate salespeople who show a love for the latest trends. When you look at an Amazon fashion page you do not get an engaging message, you just get plain facts. Even with quick delivery, that may not be enough for this holiday season.
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