Amazon is raising the price of its yearly Prime subscriptions in the United States from $119 to $139 per year, according to the company’s earnings report released on Thursday. A monthly subscription will also increase in price from $12.99 to $14.99.
The business said it is raising the price to compensate for rising labour and transportation costs in its distribution network, as well as “enhanced Prime membership advantages,” such as added Prime Video content and expanded free same-day shipping. The decision comes as prices for almost everything have risen in recent months, from food to energy. Amazon’s (AMZN) global workforce has grown to 1.6 million people in the last two years, and the business announced last year that it had increased compensation for thousands of employees.
For new Prime members, the pricing hike will take effect on February 18. The pricing will apply to existing members after March 25, on the date of their next renewal. The reason for the increase, according to Amazon, is due to the continuous growth of Prime member benefits, as well as rising wages and shipping costs.
The price increase for Prime wasn’t the only major announcement in the report. The company’s profits more than doubled to $14.3 billion in the fourth quarter, above Wall Street analyst projections. The big increase in earnings was partly due to the company’s accounting for its investment in Rivian Automotive, an electric vehicle startup that had a blockbuster IPO in November.
While the company’s North American and foreign e-commerce businesses reported operating losses, Amazon Web Services, the company’s greatest profit generator, recorded an almost 49 percent increase in operating income to $5.3 billion. On a teleconference with analysts on Thursday, Amazon CFO Brian Olsavsky noted that AWS added more revenue year over year than in any other quarter in the company’s history.
Amazon has hiked the price of Prime in the United States for the third time this year. The last time Amazon raised the price of Prime was in 2018 as a result of rising shipping costs. The corporation had already raised the price in 2014.
Overall sales for the quarter increased by more than 9% year over year to $137.4 billion, just missing analysts’ expectations of $137.6 billion.
Following the release of the data on Thursday, Amazon stock rose as much as 17% in after-hours trade.
Despite the good initial investor reaction, several experts believe Amazon will face a tough battle in the coming quarters as it battles rising prices and moves past a period when people were more reliant on online purchasing before Covid-19 vaccinations became widely available. The company predicted net sales growth of between 3% and 8% in the first quarter of 2022, a significant drop from the roughly 44 percent sales growth it had in the same period a year ago.
According to Amazon’s earnings statement, Prime members in the United States received more than 6 billion free deliveries in 2021, and over 200 million members worldwide streamed TV and movies.