Amazon Prime membership fee could soon rise to over £90, despite record UK sales of £23.6bn

Even though Amazon has just announced record sales of £23.6bn here in the UK, it’s unlikely that will stop a rise in Prime membership fees of around 17%, forecasts the home delivery expert ParcelHero.

ParcelHero’s Head of Consumer Research, David Jinks M.I.L.T., says: ‘Amazon had a bumper year in the UK, with sales jumping from £19.6bn in 2020 to £23.6bn in 2021. Some online retailers saw their income fall as non-essential store closures ended last spring and shoppers returned to the High Street, but Amazon has more than held its own.

‘In its Christmas quarter, Amazon also posted a 9% rise in global net sales of $137.4bn (£101.1bn). However, that hasn’t stopped it from bumping up its subscription fee for American customers by 17%, taking it from $119 (£88) to £139 (£103).

‘Although not imminent, we’d be surprised if Amazon didn’t follow suit here in the UK, given the current increase in fuel and energy costs. A similar 17% rise in its UK membership fee would take it from £79 to £92. That’s quite a jump, but probably not enough to result in mass cancellations.

‘Of course, Amazon likes the psychology of rounding off its fees with a number 9 (hence the US rise from $119 to $139). Retailers call this strategy “charm pricing”. Researchers at MIT have found that prices ending in 9 create increased customer demand for products. This psychological phenomenon is driven by the fact that we read from left to right, so when we encounter a new price at £1.99, we see the 1 first and perceive the price to be closer to £1 than it is to £2.  With that in mind, Amazon might just settle for a 12.6% rise to £89, or go for a hefty 25% rise to £99. That might have a few previously loyal customers thinking twice.

‘Amazon UK currently has around 15 million subscribers. For the current, £79 fee they get:

  • Free deliveries on most items and Unlimited One-Day Delivery, Same-Day Delivery, and 2-Hour Delivery
  • Prime video, the streaming channel
  • Same-day grocery delivery in many urban areas, via Amazon Fresh and Morrisons
  • Amazon Music (a music streaming service like Spotify)
  • Other perks including access to Amazon Prime Day deals

‘An Amazon UK spokesman said this week: “The price change only applies to the US. We keep this under constant review, but have nothing to announce at this time.” However, we suspect the phrase “at this time” signifies a 17% to 25% membership hike is on the cards.

‘Our top tip for anyone thinking of joining the 53% of UK households who are already Prime members, is to sign up within the next few months to beat any potential rise.

‘Several other UK stores also offer free deliveries for a one-off fee, but they cannot match the many other perks that Prime membership offers. Amazon was able to build up its same-day delivery capacity through its Amazon Logistics arm, funded in part by its Prime membership fees. A smaller store chain might have trouble convincing people to splash out £79 on a membership scheme that funds their infrastructure growth. That’s a loyalty scheme that really tests loyalties.

‘To discover more about how retailers can adapt their existing infrastructure to meet changing customer expectations, see ParcelHero’s study at: https://www.parcelhero.com/research/shop-of-the-future

 

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