Amazon Prime Is A Luxury Good
A few days ago, Amazon Prime formally announced a change that we knew was coming:
On Friday, for the first time in four years, Amazon has raised the price of its Prime benefits program. What once cost $99 annually now costs $119 for new members; existing Prime subscriptions will get bumped whenever they renew, starting June 16. But while nobody likes a 20 percent hike, it’s a good reminder that Amazon Prime is as worth it as you want it to be.
If past is prologue, the price change won’t inspire many people to cancel their Prime accounts. When Prime jumped from $79 to $99 in 2014, a Consumer Intelligence Research Partners survey showed that over 90 percent of subscribers intended pay up. For most of Amazon’s 100 million Prime members, the benefits should be well worth the price. Even at $120, Prime remains one of the best deals in tech. If anything, you’ll just end up using it more.
A lot of people have taken it for granted that they won’t lose customers over this. I’m sure that they’ve done due diligence and have come to the conclusion that the increased revenue from remaining customers will offset the loss of customers over the price raise. They know what they’re doing. Others have suggested that people will have to keep subscribing, and that Amazon’s corner on the market gives them a blank check as far as all of this goes.
Amazon: “The price of the annual Prime membership increased from $99 to $119 on May 11, 2018.”
Me: That’s like $2 billion for you just cuz you want it
Amazon: If you don’t like it, try … wait there’s no alternative
— Philip N Cohen (@familyunequal) May 13, 2018
The thing is, it’s not so much that there’s no alternative than that nothing is the alternative. And it’s not a bad one. There are various competitive advantages that Amazon has, but Prime is relatively weak as far as that goes. It pays for itself for some people, but for a lot of people it is a luxury that simply allows for faster shipping than they would otherwise get. Along those lines, it’s pretty easy to get rid of. With the exception of a handful of TV shows, it offers you nothing you can’t get somewhere else.
We’ve been an Amazon Prime customer since 2010, when we moved to the rural Mountain West. The nearest Walmart was an hour away, the nearest Target two. It was worth a lot to us then, and was still such a good deal that when we moved a little closer in to civilization we kept the membership. Two day shipping is nice. For most people, though, it’s just not a necessity. If we need something we will go out and get it, or we will wait a week for it to arrive. We’ve fallen on some hard times financially, and the conversation about whether or not we should renew – spurred by this pricing decision – took less than ten minutes.
Shipping from Amazon will still be free for orders over $25, so it’s mostly a matter of bundling purchases. That’s not an infinite amount of leverage, when you think about it. Further, if we are in a hurry, Walmart has announced free two day shipping on orders of $35 or more. Or we can actually go to a Walmart – or somewhere else – and get something the old-fashioned way.
As I went over the costs of getting rid of Amazon Prime in my head, the only thing that was troublesome is that I’ve gotten used to Prime Video. Our financial situation has forced us to shed Netflix and Hulu, and losing Prime too will hurt. Prime Video’s selection isn’t great, though. It’s enough that I may fire up a monthly subscription in the future to catch up on the shows it offers, but most of the time if I want to pay for video I will go with Netflix or Hulu. In other words, the biggest thing is has to offer is something for which there is quite a bit of competition. So going forward, there is a good chance I will simply treat it like a video streaming service and put it in that rotation.
Amazon succeeds largely by being inexpensive and convenient. They are these things due in part to their market leverage and distribution networks, but those are their big competitive advantages. I would have a hard time boycotting Google or Microsoft because they are the backbones to my technological experience and the only alternative to them is an unpalatable Apple, and they both offer other services that others would have a hard time matching. Amazon? If they stop being cheap, or stop being convenient, I’ll just go elsewhere. They raise the price of Amazon Prime, we can stop getting it. If their prices go up, I can resort to increased reliance on Walmart, eBay, and Newegg.
I am not chiding those that use Amazon Prime and plan to continue to use it. Hopefully, we will at some point in the future be in a financial place where we can sign up for it again without thinking about it. It’s a luxury and the thing about luxuries is that they are nice even if not necessary.