The New York Times—People like getting their toys fast. They also like getting them cheap. Amazon is gambling they care more about the first than the second. The retailer told the 25 million members of its Amazon Prime program on Thursday that it was increasing the annual fee for the two-day shipping service by 25 percent, to $99. The new price takes effect on the renewal dates for existing customers, starting April 17.
At least one competitor quickly moved to secure some Amazon customers. ShopRunner, a network of retailers from Neiman Marcus to PetSmart that offers two-day shipping, said it would waive its fees for Amazon Prime members for a year. ShopRunner usually costs $79.
Amazon blamed rising costs of fuel and transportation for the increase in the Prime fee, but Ms. Dias said the real problem was the cost to Amazon of all the content that it includes with Prime membership. Amazon has now moved into original programming, part of its continuing competition with Netflix.
“Psychologically no one wants to pay more for something,” wrote Gene Munster, one of the analysts, in a Thursday report. He estimated that a quarter of the Prime base was highly sensitive and might rebel. That might cut $800 million, or about 1 percent, from Amazon’s revenue. On the other hand the increased fee from more easygoing customers would add $150 million to the bottom line, which for Amazon would be a lot.
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