Amazon’s UK revenue jumped over 20 per cent last year. That won’t halt a rise of at least 17 per cent in the cost of Prime membership, if it follows the lead of Amazon US.
Even though Amazon has just announced record sales of £23.6bn here in the UK, it’s unlikely that will stop a steep rise in Prime membership fees by nearly a fifth, an industry insider has told City A.M.
Amazon had a bumper year in the UK, with sales jumping from £19.6bn in 2020 to £23.6bn in 2021.
During the pandemic, some online retailers saw their income fall as non-essential store closures ended last spring and shoppers returned to the High Street, but Amazon has more than held its own.
In its Christmas quarter, Amazon also posted a 9 per cent rise in global net sales of $137.4bn, or just over £101.1bn.
However, that hasn’t stopped it from bumping up its subscription fee for American customers by 17 per cent, taking it from $119, or £88, to £139, close to £103.
“Although not imminent, we’d be surprised if Amazon didn’t follow suit here in the UK, given the current increase in fuel and energy costs,” said ParcelHero’s head of consumer research, David Jinks.
A similar 17 per cent rise in its UK membership fee would take it from £79 to £92. Amazon UK currently has around 15m subscribers.
“That’s quite a jump, but probably not enough to result in mass cancellations,” Jinks told City A.M.
“Of course, Amazon likes the psychology of rounding off its fees with a number 9, hence the US rise from $119 to $139,” he pointed out.
Retailers call this strategy ‘charm pricing’. Researchers at MIT have found that prices ending in 9 create increased customer demand for products.
“This psychological phenomenon is driven by the fact that we read from left to right, so when we encounter a new price at £1.99, we see the 1 first and perceive the price to be closer to £1 than it is to £2,” Jinks explained.
“With that in mind, Amazon might just settle for a 12.6 per cent rise to £89, or go for a hefty 25 per cent rise to £99. That might have a few previously loyal customers thinking twice,” he added.
An amazon spokesperson said: “The price change only applies to the US. We keep this under constant review, but have nothing to announce at this time.”
“Our top tip for anyone thinking of joining the 53 per cent of UK households who are already Prime members, is to sign up within the next few months to beat any potential rise,” the spokesperson added.
Jinks is convinced that “the phrase ‘at this time’ signifies a 17 per cent to 25 per cent membership hike is on the cards.”
For the current £79 fee UK subscribers get free deliveries on most items and Unlimited One-Day Delivery, Same-Day Delivery, and 2-Hour Delivery, Prime video, the streaming channel, same-day grocery delivery in many urban areas, via Amazon Fresh and Morrisons, Amazon Music – a music streaming service like Spotify – and some other perks, including access to Amazon Prime Day deals.