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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.

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.


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Will Truman is a former para-IT professional who is presently a stay-at-home father in the Mountain East. He has moved around frequently, having lived in six places since 2003, ranging from rural outposts to major metropolitan areas. He is also on Twitter. ...more →

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66 thoughts on “Amazon Prime Is A Luxury Good

  1. “Or we can actually go to a Walmart – or somewhere else – and get something the old-fashioned way.”

    If the Walmart carries it. My local Walmart is kind of crap for having non-food items that I want. (And I don’t have a local bookstore). Even some food items, you have limited choice. They don’t carry many reduced-sodium canned goods, for example.

    I dunno. I feel like $119 is the breakpoint for me – my subscription renewed last month so I’ll keep it this year but I think once it gets close to the first renewal at $119, I’ll cancel, and just rely on the “$25 of purchases gets free shipping” (but I bet they gradually creep that up, or drop it altogether).

    I have to budget more tightly now – no more summer teaching and there have been no pay raises for several years, so I see inflation taking a bigger and bigger bite of my paycheck, and I have much less money left at the end of the month than I once did. So something’s gotta give. I think Amazon Prime will give first, then if I have to, Sirius XM subscription (again: no radio stations I like in the local area, we don’t even get NPR), then landline phone, then cable, then….I don’t know.

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    • …and just rely on the “$25 of purchases gets free shipping” (but I bet they gradually creep that up, or drop it altogether).

      It has varied over time, and been higher than $25 in the past. I can definitely remember $35; I think at one point it was $50, briefly. I would not be surprised if it has varied by geography as well as time.

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  2. My guess is that the price increase has more to do with video content than anything else. There is major competition between Hulu, Netflix, and Amazon in developing original content and/or getting major content. This is only going to get worse as Disney and others develop their own streaming services.

    Where do most Amazon Price members live? Maybe it is bias but I see their core demographic as being well to do professionals in or near major urban centers. Amazon Prime also gives free delivery of food from Whole Foods within two hours.

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    • Maybe they could unbundle the shipping and streaming? I use the streaming only very rarely, but the fast free shipping is a nice thing. Then again – maybe the shipping is actually subsidizing the streaming, I don’t know.

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      • My guess is that the shipping is indeed subsidizing the video. For now, at least. Netflix and Hulu are losing money and I suspect Prime isn’t doing a whole lot better. So I wouldn’t count on unbundling any time soon. You could be insulated from future price increases, though. I think they might do with video what they do with music, where they have a free-for-Prime-customers option and a discounted Prime Unlimited for the enthusiasts.

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        • I have completely switched over to Prime Music Unlimited. Sold the CDs. Sold the iPod. The catalog is extremely deep. I know it’s not required, but having Prime also allows my Amazon devices (Firestick and Echos) to give us a more full experience. There’s also their growing catalog of TV shows and we use them for a LOT of our shopping. All-in-all we still feel like we’re getting our money’s worth.

          I will also say for cable-cutters, YouTube TV has been an amazing option. We now save $70/month over Uverse.

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        • My guess is that the shipping is indeed subsidizing the video.

          From what I understand, here is what is going on: Amazon has always liked free shipping, which gets people to buy more.

          But Amazon realized that people buy _even more_ if they have to ‘pay for free shipping’, because now people feel they have to use it.

          It’s basically like how Barnes and Noble charges $25 for a membership (Or did when bookstores were a thing?)…B&N isn’t really making any money from that, and plenty of stores give discount cards for free. (B&N gives basically the same discount card to teachers, BTW. For free.) It would all work out basically the same if B&N gave out free memberships and slightly less of a discount. But the premise is that once it cost something, you feel obligated to use it or you have ‘wasted it’ and feel guilty. You paid $25 for a year of membership, you should buy all the books you can because every book increases your RoI.

          It seems stupid that ‘paid discounts’ do better than ‘free discounts’, but that’s how it is. I get a bunch of coupons in the mail, or I get a free Kroger Plus card, and I don’t use them…well, I don’t ‘lose’ anything by that. But if I have a B&N membership, I spent $25 for that, and I should at least spend enough over the year that I ‘get back’ my $25 in savings, and everything I spend over that is ‘pure profit’ for me. (This is a dumb way to think about it, but is basically how everyone does.)

          But then Amazon, geniuses that they are, figured out how to take things a step farther, and sold people that sort of ‘membership discount’ _for some other reason_. They already had a ton of content that they were selling, so setting up a system to compete with Hulu and Netflix was pretty easy.

          Basically, the entire concept of Prime exists so that people go ‘Hey, I only wanted the video, but since I’m ‘paying for’ free two-day shipping _anyway_, I should get my money’s worth by using it instead of driving to the store’.

          I mean, Amazon didn’t invent that, but I think this might be the largest scale it’s been done at.

          Edit: BTW, it’s rather odd that video startted out as something as subsdized by ads, and, with Amazon Prme, it’s _still_ subsidized by almost the same thing. It’s not ‘free’ anymore, but there are still people who are watching videos at under cost because someone is hoping to sell them something. Weird coincidence.

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          • To this overall point of what inside the world of Amazon pays for what. By Bezo’s own words, Amazon is first and foremost a logistics company, before everything else. So when discussing them and how they lay out their profits view it as they do: Logistics is their business, profit is in the margins, and everything slots into place below that. Video keeps you “in-house” for literally hours at a time. Think of it in the same mode as putting sit down restaurants, movie theaters, and spa’s inside a large casino. Its not “on brand” (gambling) but its part of the overall strategy. You are integrated into the Amazon eco-system, so those margins are going to make out eventually either in direct purchase, advertising, or residual revenue such as the subscription.

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    • I’m sure that more of their customers are in major metropolitan areas than not simply because that’s where most people live, but I would expect ruralians to be overrepresented in their customer base with regard to their percentage of the population and likely to be an important part of their customer base. I linked to something a while back about how critical rural Alaskans considered Prime service, for example. I wouldn’t be surprised if urban cores were overrepresented to, though, with suburbs being the underrepresented part.

      I think you’re right about the video content being the driver. Their video service is inferior to the competition, though, and in a way that I don’t expect will change any time soon. People who want video will go with one of the alternatives, so I hope that they aren’t banking too much on that. Netflix and Hulu are losing money, though, and so it’s possible that when they crash Prime Video will look like a better deal.

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  3. I will have to review and see what I saved on shipping these last few years. I know one year it paid for itself just in my Christmas shopping shipping costs (I do not step foot in any retail establishments, save grocery stores, from Thanksgiving until New Years), but then for the last few years I have found myself shopping other sites and finding things Amazon didn’t have or that were cheaper. I also need to poll the household and see how much streaming they do from Prime. I feel like they use Netflix and YouTube more often.

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    • I’m in the free shipping pays for it club. Most of my family live halfway to all the way across the country, so prime is very much worth it for birthday and holiday shopping for them, and often even for immediate family (I’m am 100% with you on avoiding retail anywhere in the vicinity of Christmas shopping season).

      I also enjoy a lot of their original content video and am really hoping they pick up The Expanse (still can’t believe Syfy cancelled it).

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  4. I wish people would stop treating obvious luxury goods and services as essential. Yes, sometimes a thing considered a luxury moves closer to being a necessity (see: internet and cellular service), but those are exceptions, not norms. But everytime a luxury has a price hike (cable TV, a streaming service), there is a chorus of gibbering about how this is terrible, and blatant corporate greed, etc.

    Prime is a luxury. Says so in the name.

    PS this isn’t aimed at Will or anyone commenting so far.

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    • I think it’s more of a “luxury” for some people in some places. I can see how for someone who was essentially a shut-in, it could be a very important thing, especially in urban areas where groceries could be delivered. (Though I guess in urban or at least suburban areas, some supermarkets will deliver? I don’t know, where I live none of the places will; they don’t even have “order online and drive up to pick up” at the local Walmart).

      I think people would be less irritated – I know I would – if there was a clear reason given for the increase. (Also I think all of the stories about Jeff Bezos and his money and how he allegedly commented he “didn’t know how to spend it” have fueled some of the anger).

      Yes, it’s a luxury for me, but I’m getting kind of sick of having to cut back on the luxuries of life. I know I’m a catastrophist, but I can foresee a time when all the nice little things, like cable and Sirius XM and buying books and anything beyond paying my utilities and for groceries are gone.

      Hell, having home internet is even a luxury for me, when I look at it: I don’t NEED to work at home, and if I needed to save that $50 a month, it would be gone. It would be the last luxury I dropped, though, I think.

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      • I think people would be less irritated – I know I would – if there was a clear reason given for the increase. (Also I think all of the stories about Jeff Bezos and his money and how he allegedly commented he “didn’t know how to spend it” have fueled some of the anger).

        The clear reason is that Amazon’s retail business hardly makes a profit and, depending on which metrics you use, is actually loss-making. Amazon as a whole company is profitable, but almost all of that profit comes from its cloud services.

        Jeff Bezos personal wealth isn’t directly related to how much you or I pay for Prime. His wealth is in the stock market’s valuation of the company. Investors believe that Amazon has the potential to be very profitable (or at least they believe that other will believe that whenever they want to sell their stock), which essentially means that Amazon retail customers have been on the receiving end of a pretty sizable subsidy from stockholders.

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        • The clear reason is that Amazon’s retail business hardly makes a profit and, depending on which metrics you use, is actually loss-making. Amazon as a whole company is profitable, but almost all of that profit comes from its cloud services.

          Explaining to people that the retail business of Amazon hardly makes a profit will just result in them asking ‘Well, why doesn’t Amazon raise prices on those things and make more of a profit on that stuff? Why raise the cost of Prime instead?’.

          I think part of the problem is that people basically assumed that the cost of Prime was covering the cost of the faster shipping and the videos. Not specifically, but, like, on average-ish. With a bit of profit.

          And thus, without some obvious visible reason for an increase in the cost of the shipping or the videos, increasing the cost of Prime doesn’t sit right with them.

          This is, of course, totally ignoring how Amazon works and why Prime exists. But most people haven’t ever thought about that.

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    • Oscar Gordon: But everytime a luxury has a price hike (cable TV, a streaming service), there is a chorus of gibbering about how this is terrible, and blatant corporate greed, etc.

      The sole veto that got overridden during Bush Sr’s term was the one re-regulating cable TV pricing.

      I wonder if times have changed since then, and that’s no longer the political center of gravity in the country.

      (which is a different assessment as saying that those who favor deregulation in this or that thing are currently fighting above their weight in federal and state legislatures, which I believe is case right now)

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      • Nope, folks there managed before Prime. You want to argue that it’s now a necessity, you have to show that it’s driven all the local stores away or that it is impossible to get things with normal ground shipping.

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        • Folks managed before malls and cars, but there were local shops. When cars became a thing here, people tell me (that would have been the 1950s – we are a historically poor area), that’s when the local shops started dying. Now the malls in the next city over are dying. I’m not sure what’s next. And yeah, yeah, mail order – but I dislike mail ordering things like shoes where it might be a month-long carousel of trying sizes and sending ’em back.

          I think the problem is some “innovations” may leave some people behind (because they can’t afford it) but the “older” options then go away.

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          • This is pretty much what I am thinking. Due to time marching ever on, what was once an easy task is now compounded by the loss of other, ancillary supporting mechanisms.

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        • Doesn’t make it an essential. If it’s not a luxury, then you are suggesting that Amazon should be subsidizing people’s decisions to live in places that are experiencing economic shifts or that have consistently been isolated from the bulk of economic activity (read: the boonies). Demanding that of Amazon alone would require showing that Amazon is solely responsible for the shifts, rather than just a leading figure in the shift.

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            • I tend to agree with “within two days rather than a week, and need to plan ahead to meet shipping minimums” puts it in the luxury zone.

              But I order so many things through Amazon – including a lot of medical-related stuff (non-prescription), that is much more difficult to find, if available at all, and far more expensive locally – that even at 120 bucks a year, and even before considering the toll of physical shopping with a mobility-and-fatigue disability, it’s a very *pleasing* luxury for me.

              Far more so than any number of other things that might seem like essentials to someone else.

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              • This. So much this.

                When you’re chronically ill, even shopping online feels daunting sometimes. Going to 5 different sites and filling out all their forms and keeping it all straight in your head what you need – it’s a lot sometimes. With Prime I can get medical stuff but then I remember that the kids need school supplies and my husband needs some obscure thing and the dog gets some treats and I replace the empty bottle of hot sauce at the same time. It takes me 2 minutes as opposed to 2 hours to track it all down on other sites (or to forget totally that I need it and have to live without it – no biggie if it’s hot sauce, a biggie if your kid needs a pen). It’s just better for me. I’ve paid a lot more for fleeting luxuries that have pleased me way less than Prime does, that’s for sure.

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          • I think whether something is a luxury or not isn’t an either/or question, but a “where does it fall on the spectrum” question. As fillyjonk said, Prime is a more a luxury for some than for others. Maybe Prime, overall, is still so close to a “luxury” that for most intents and purposes, that’s what we should call it. But I still think fillyjonk has a good point here.

            Oscar mentions things like internet and cellular service, which have migrated from the luxury end of the spectrum toward the necessity end. I think that rings true to me.

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        • As someone who is about as rural as you can get in the lower 48, it does make enough of a difference to my life that we’ll be keeping it even with the price increase. The thing is, when people managed, there were other options. 10 years ago there were several video stores and a book store and 3 pharmacies within an hour of us. Now there are zero video stores and zero book stores and only 1 pharmacy (which is horrifically overpriced). Prime has helped to do away with at least some of those options – not singlehandedly but as a part of the growth of the Internet. It’s kinda like saying “well people got along just fine before there were cell phones” but there were pay phones everywhere then.

          Luxury? Maybe, but it just makes sense economically to keep it for us. Gas is also not cheap – it costs me more for ONE tank of gas to get to the hell that is WalMart (if they even have the thing that I want, which they often don’t) than the difference between $99 and $119. One item justifies the entire price raise by saving me a trip.

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            • Not sure about the intent underlying this question, but yep. In fact I do since as a Washington resident I have to pay sales tax for the things I buy on Amazon and I’m sure it amounts to a $20 yearly surcharge if not more.

              If I didn’t buy things because they had a tax I dislike imposed upon them, I would not be able to buy very many things at all. Including beer. And what are we, animals here?

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                • I think “it sucks but I do what I have to do (and am fortunately able to do) to cope with my chronic illness, which changes relative values of things for me” is a pretty consistent position? And possibly not the best folks and context (at least speaking for myself) to explore this purported dichotomy with?

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                    • If it was aimed at the rest of you, why’d you ask Kristin?

                      (And sorry to be chippy (no pun intended!) but anybody with a chronic illness is being pretty up-front to just mention it in public as a factor, I get a bit defensive on behalf of my fellow chronic-illness folks.)

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                    • Well, it depends.

                      Is there a new special Amazon Prime Tax? Yeah, the government singling out one specific company’s service would be a problem. If it also applies to similar services elsewhere like Newegg, is there a particular reason we want to tax that in particular? Some reason we want to push people away from that and towards… something else?

                      I recall there being talk of a Netflix Tax a while back somewhere (Canada, maybe?). Which seemed dumb, but then it was explained that basically evening up the playing field with other movie rentals with an equivalent tax. That’s quite reasonable.

                      Along these lines, applying a sales tax to online vendors always made sense for similar reasons. Main concerns I had were logistical, but nothing that couldn’t be overcome.

                      But I do struggle to come up with a good rationale for an Amazon Prime tax.

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                      • Are these questions of justice, or concerns of efficacy?

                        What I’m probing here is our attitude.

                        Is the Seattle tax an injustice or merely money not well spent?

                        Is a tax on Amazon-type businesses coercive and unjust while a price increase is not?
                        Even though the alternative to both is the same (stop shopping at Amazon)?

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                        • A tax that targeted Amazon specifically (but not Newegg’s similar service) would be a fairness issue.

                          A tax tailored to annual subscriptions for online purchasing covering both Amazon and Newegg… I’d need an argument for why this specifically should be taxed (compared to, say, Sam’s Club membership). There are potential fairness issues there.

                          The Seattle tax strikes me mostly as being an incentives problem, though from what I understand the city is constrained by the state in its ability to raise funds in different (and better) ways.

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                    • If I were convinced the tax increase benefited people who needed it (or parks, libraries, whatever) instead of winding up in an exec’s or politician’s pocket, I might be less annoyed, I don’t know. If they could clearly show me where it was going.

                      Then again, I was pretty hard against the 1 cent additional sales tax here for a sports complex (apparently it’s a forever tax). Almost no one uses the sports complex as it is in an inconvenient location for most people, especially schoolkids without transportation.

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                  • I took it as a “would the libertarian support this concept if it was a tax” and yes, this libertarian would – since I have to live in the world as it is which involves lots of taxes on lots of things that I’d prefer weren’t taxed. I think it’s far more intellectually honest for there to be a straight up “Amazon tax” than to have a price raise to pay for the tax imposed upon Amazon.

                    I wasn’t offended, just not sure if it was a political jab or just a turn of phrase. :)

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                    • I am at a disadvantage here of conversing with people who are generally reasonable and level headed.

                      I am thinking about how people of all political persuasions have hidden motivated reasoning. Like how things which really have very little discernible impact still offend our sense of the justness of the world.

                      Like for me, seeing cities throw millions at a stadium which is constructed by and for people who have no conceivable need for a subsidy.
                      Doesn’t really cost me anything, and doesn’t really have a discernible impact on finances- its not like the city is closing homeless shelters to do it.
                      But it just seems wrong, giving money to well off people while we cry poverty elsewhere.

                      Or conservative working class people who get livid over the estate tax; It can’t possibly be on utility grounds, it just somehow offends their sense of justice, of how the world ought to work.

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          • Given the recent creep-up in gas, yes, it is probably in the long run cheaper for me to have Prime, even if I only use it 5-6 times a year, than it is to run to the next larger city (which has things that cannot be obtained locally). It’s about a 70 mile round-trip, that doesn’t even include driving around in the city to get stuff. And my time counts for something – there have been times I could get something faster by ordering it than I could by trying to find the time in my schedule (and the energy) to drive down there.

            Then again: if I’m careful, and if they keep the “$25 and it ships free” (or even “$35” – I could always add something else on, even boxes of tissues) that’s probably the cheapest way to go in the long run.

            I’m just annoyed that as I gain experience and seniority in my career, the creep of inflation means I have to start cutting back on luxuries (We have been told annual years-of-experience raises are dead, and that COLA even is likely dead.)

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          • While I applaud the audacity of your comparison, I’m not sure “were often disabled for life, and sometimes suffered total paralysis or death” is something most people would label “managed without”. I mean, I assumed (perhaps incorrectly) that was using “managed” to describe something more than bare survival of most people in the group.

            Are you in part pointing out that we’re talking about a spectrum rather than a binary switch? I’d agree with that, as well as with @damon’s mention of the third “convenience” category, below. (Er, not that polio vaccine is best described as a convenience, I just figured I’d bring up my agreement with Damon since I’m opining about my agreements anyway.)

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          • What I don’t like about that is that it implies that there are necessities that do not yet exist that mankind has never lived with in the first place.

            And while it seems absurd to say that the polio vaccine isn’t a necessity, it also seems absurd to say that the (thing that won’t be invented until 2093) is something that civilized people cannot live without.

            What would we call that? Presentism?

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            • What I don’t like about that is that it implies that there are necessities that do not yet exist that mankind has never lived with in the first place.

              Historically, that _has_ to be true, or there is basically no such thing as necessities at all.

              I mean, humans once lived without roofs. Or clean water. (Humans still live without clean water.) Or clothing. Or fire(1)

              So either you don’t define _any_ invented object as a necessity and just have on the list of necessities ‘some sort of water’ and ‘uncooked food’…

              …or you include something that was invented by humans, at some point in time, and are thus forced to admit that humans lived for hundreds of thousands of years without that ‘necessity’.

              1) The fire thing is perhaps debatable. There is some evidence that Homo erectus used fire, but also evidence that they didn’t really know how to start it or keep it. So, heh, perhaps it was merely a ‘luxury’ item. It took modern humans to actually figure out how to start fire on demand.

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          • As I mentioned in a previous comment, back in the early 90’s, cell phones and broadband internet access were luxuries. Today, while not necessary for human survival, the are practically necessary to function in modern society.

            Needs change, but Prime has not moved past the realm of luxury/high end convenience.

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  5. I mostly have Prime for the video. They have a lot of movie classics available as a pay-per-view, if you are a Prime member. Yeah, that’s annoying. If I had to choose between Netflix and Prime because of video, I’d choose Netflix, because the shipping doesn’t mean that much to me.

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  6. I think that this is part of the downside of Amazon being located in the part of the country where it is.

    They don’t know anybody who wants to have it that doesn’t have it.

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    • Respectfully disagree with this point. Amazon has some of the best analytics folks to be found. Granted they could be applying there data wrong, but they purposely get that data. They spend millions knowing exactly who does and does not have prime, what those customers want, and how to expand it to other market gaps where it fills a need and can thrive.

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      • I’ve no doubt that they’ve done analytics until the cows come home and that they have numbers that say that they can raise prices 20% and only lose 8% (or whatever) of their customers and they’re going to walk away with a tidy profit… and, get this, some of that 8% (or whatever) will come back after a few months without.

        They’ve run the numbers and their numbers are *TIGHT*.

        But what I’m saying is that they don’t know anybody who wants to have it that doesn’t have it. Like, they don’t go over to their house on Thursday nights to eat some ice cream and watch Big Bang Theory and Young Sheldon and then say “see you next week!” They don’t go bowling with these people. They don’t play Fantasy Football with them.

        They’ve run the numbers. Of *COURSE* they’ve run the numbers.

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        • It’s fair to say that Clinton’s people ran the numbers, Trump’s people just used their gut, and voila, here we are today.

          But the difference is that when Bezos’ people run the numbers, they get concrete feedback on their numbers in short order, and then run more numbers on those numbers in an itterative process – not just getting the ‘ground truth’ one time in November at the end of everything.

          (And CBS certainly runs the numbers in their decision to keep the Sheldonverse on the air)

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            • I am coming to think many large corporations discount “good will.”

              After all: the walmart here SUCKS, I hate going there, and yet I continue to – because the small regional grocery chain I like doesn’t carry everything I need, and the other choice is an hour’s round trip. And there are people in town who don’t have the regional chain (which is a bit more expensive) in their budget. So Walmart knows it’s got people over a barrel and it has no incentive to improve the shopping experience, which is frankly terrible.

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            • “good will” isn’t erroded by one time visible price hikes. Good will is eroded through below the radar nickel and diming price hikes and/or cuts in service, either dramatic or subtle.

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              • Like if, say, Amazon constantly whittled down the number of items eligible for Prime 2 day shipping, and the items left were the least popular items in their catalog.

                That would ding the goodwill.

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  7. My plan is to allow my Prime to expire. I find that I buy more with Prime than I actually need; I don’t think I save a lot compared to the stuff I can get retail; the “free” shipping is nice when I buy something eligible for for but it feels like quite often the thing I want is from a third party vendor and thus outside of Prime’s offers anyway.

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    • Yeah, that’s my plan – though I have the “autorenew” option so I will have to consciously remember to cancel when my “cheap” Prime approaches its end next April.

      (I’m sure Amazon is counting on people forgetting….)

      Though the cynical pessimist in me says “Just wait, you’ll cancel Prime and then several more small businesses will pull out of town and you’ll be left either paying shipping or making time to drive an hour’s round-trip to get stuff.”

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    • I don’t have Prime, but I’ve noticed I fall for the “free shipping on orders o $x or more” and use it as an excuse to buy more (almost always things I don’t need) just so I can get the free shipping, even though I’d pay less if I just got what I was going to get while paying for shipping.

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  8. For me and I suspect many others there is another major reason to stick with Prime: when you use an Amazon credit card, you get 3% credit back on purchases, but that increases to 5% if you also have Prime. I did the math, and this 2% bump pays for most the cost of Prime. Shipping and video are just nice extras.

    Now, this only works if you buy a lot on Amazon. But I think there are many people who do. If you use Prime, and you are not using their credit card, you are not doing it right.

    Going forward, I would predict that Amazon at some point will split Prime into levels, say a Prime Light for $79 and a Prime Premium for $179 for heavy spenders.

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    • I could see them pricing it like some ISPs do internet use: you have a certain amount of “bandwidth” (e.g., number of orders or weight of orders or however they choose to measure) and once you’ve used that up, you have pre-authorized them to bump you up to the next level of costs. So you could get away with “Amazon Cheap Prime” but you’d have to carefully watch orders and, for example, plan ahead if you planned to order lots of birthday or holiday gifts, and not “use up” the shipping on stuff for yourself)

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    • I doubt we’ll see tiers between heavy and light users on shipments. I think tiers are more likely to look like this:

      Basic Prime: Three days instead of two and no deliveries on weekends. No video or audio streaming. $89/yr

      Prime Prime: What we have now $119/yr

      Prime-Cubed: 10 one-day deliveries a year, free subscription to the Washington Post and one subscription service (Prime Unlimited music, Kindle Unlimited, or one select Prime Video channel). $149/yr

      You get the idea.

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  9. I really only use Amazon through the local bookstore. I get them to order books for me, presumably from Amazon, and pay the difference, which is never that high. I can say it’s to support the local bookstore, which is partly true, but it’s also to reduce the risk. I’ve ordered books through Amazon from bookstores in the states before and never gotten them.

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  10. Luxury? Meh. I can buy a Hyundai Veloceptor (sp) or a M3 BMW One’s a luxury, the other basic. Then there is “convenience” premiums. I wouldn’t call Prime a luxury, but a convenience. That’s more price sensitive that basic but less than a luxury. Depends upon a lot of factors. Some may consider it a luxury, but I suspect for vast majority of middle class folks, it’s not.

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  11. Damon has it right. Amazon Prime is a major convenience. We have limited shopping options where I live, so things like books, movies, clothes, computer gadgets, and cooking gear are ordered from Amazon. When all the local grocery stores run out of cinnamon or canned pumpkin or dry cured black olives, we order from Amazon. Two day shipping is less than the usual weekly restocking time.

    As the author of this post notes, it all depends on what you find useful. He mentioned Sirius digital radio as something useful. We last listened to car radio in the late 1980s. Useful is a relative term.

    Amazon is raising the price of Prime for a whole slew of reasons: to make more money, to cover rising transportation costs, to pay for more video production, to learn more about its users. I doubt they’ll split Prime into tiers. It’s too useful to Amazon as a combined product. Odds are, there are people who get Prime for Whole Foods discounts on their lunch smoothies, and the whole ordering stuff, streaming stuff thing is a pleasant side perk.

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    • We’ll see if they tier. I don’t think they will ever fully unbundle for the reasons you describe, but I still see room within that for three tiers.

      I consider a convenience to be a luxury, leaving me not disagreeing with you on that point.

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