2/20/14

So, how much are Amazon Prime members willing to pay?

A new survey finds solid support for no price increases, though a favored customer segment might be willing to pay more. Amazon is considering raising the price of its Prime two-day shipping program by up to $40.

Thad Rueter , Senior Editor

No, nyet, nein: Most members of Amazon.com Inc.’s Prime program say they do not want to pay more for their $79 yearly memberships that provide free two-day shipping on eligible products along with streamed access to tens of thousands of TV shows and movies, a new survey finds.

The finding, from business software and analysis firm Prosper Technologies LLC, comes as the No. 1 e-retailer in Internet Retailer’s 2013 Top 500 Guide considers raising the price of Prime by $20 to $40. Prosper conducted an online survey between Feb. 4 and Feb. 10 of 6,467 U.S. consumers who belong to Prime—days after Amazon said it might raise the price.

Amazon offered no immediate comment about the survey findings.

The survey does not qualify a potential price increase by dangling the possibility of increased Prime services—so, in one sense, the findings confirm a basic truth of human nature that few consumers want to pay more for the same level of service. But the findings also suggest that Amazon, which introduced Prime nine years ago, has some room for a price increase.

That’s because 29% of respondents say they are willing to pay between $89 and $99 yearly for their Prime memberships. 8% of respondents would pay $109 or more.

Members of that 8% class are more typically male (65%) and young (75% are no older than 45)—and their household incomes hover around the six-figure mark, Prosper says. “This is a dream segment of customers for retailers to capture, and Amazon has their attention,” the report says.

It adds that Amazon may want to introduce tiered Prime memberships: “a base level for free shipping alone and an upgrade for access to Amazon’s digital media content.” The report also says a higher-cost Prime membership could come with a rewards system—for instance, a percentage earned back on purchases—to drive more shoppers to shell out the extra cost.

Several other e-commerce shipping programs strive to compete with Prime. They include:

• Newegg Inc.’s recently introduced Newegg Premier. For $49.99 per year, the program guarantees free expedited shipping in three days or less. Members also receive free returns, no restocking fees, access to exclusive deals, early-bird sales notifications and a dedicated customer service phone line.

• For the Prime-like $79 a year, ShopRunner members receive two-day shipping on orders from ShopRunner participating merchants, which include Toys ‘R’ Us Inc. (No. 30 in the Internet Retailer Top 500 Guide), Blue Nile Inc. (No. 74) and eBags Inc. (No. 149).

Amazon says it has “tens of millions” of Prime members worldwide, but has not provided more details. An estimate from Macquarie Equities Research in January put the number of Prime members at 20 million, which would be the minimum, based on Amazon’s “tens of millions” comment. The number of consumers who take advantage of Prime is undoubtedly higher than that, as family members of Prime members can also use the service.

Prime customers buy more than other shoppers, according to a 2103 report from Morningstar Inc. and Consumer Intelligence Research Partners LLC. They estimated that the average Prime member spent $1,200 annually, including the $79 membership fee, compared with $600 for the average non-Prime Amazon customer.

 

Topics:

Amazon Prime, free shipping, fulfillment and delivery, Newegg Premier, Prosper Technologies, ShopRunner, Top 500

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