November 6, 2012, 3:27 PM

Amazon offers Prime at a monthly rate

Consumers previously had to subscribe for a year to the two-day shipping service.

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Amazon.com Inc. has begun offering a monthly membership to its Amazon Prime shipping program.

Consumers can pay $7.99 a month to receive two-day shipping on purchases along with access to streamed content that includes some 25,000 TV show and films. That would translate into an annual fee of $95.88.

Under Prime’s standard pricing, Amazon sells memberships for $79 per year—that translates to about $6.58 per month. The $79 annual fee is the same price as that from competing service ShopRunner, which includes more than 60 retailers. That’s also the price of a recently launched two-day shipping service from Sears Holdings Corp., No. 8 in the Internet Retailer Top 500 Guide.

ShopRunner offers a monthly subscription at $8.95.

Amazon, No. 1 in the Top 500, would not elaborate much on the new Prime pricing. “We are always looking at ways to improve the shopping experience for our customers,” an Amazon spokeswoman says.  “We are testing a monthly Amazon Prime subscription.”

The monthly Prime pricing could be appealing to holiday shoppers, says analyst Colin Sebastian at Baird Equity Research. “[It] effectively offers consumers a short-term option to use Prime, without the annual obligation,” he writes in a research note today. “While one risk for Amazon is that consumers use Prime for just one month to take advantage of free shipping on large purchases, the test could also reveal that a ready market [exists] for alternative pricing, and serve as a new customer acquisition tool.”

With the streamed content offered to all Prime members—including those paying by the month—Amazon also puts pressure on such content providers as Netflix Inc., No. 9 in the Top 500, and Hulu, he says. “As Amazon continues to add movie and TV content to Prime, we see it likely adding more competitive pressure to the legacy online video services,” Sebastian writes.

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