Why Amazon Is Raising Prime Membership Price Despite Record Sales, Profits

Because it can is the obvious answer. 

And probably the real answer. It's rising costs are more than offset by increased sales, as it's doubled profit in the fourth quarter suggests. JL

Sebastian Herrera reports in the Wall Street Journal:

The tech giant’s shares were up about 13% premarket Friday after the company reported it nearly doubled its profit in the fourth quarter. Amazon saw gains due to its investment in electric vehicle-maker Rivian Automotive Inc. and surging revenue from its cloud-computing and advertising businesses. The company cited rising costs (of) wages and transportation, as well as expansion of benefits under membership, including access to fast delivery service, Prime video streaming and free photo storage. Some analysts said increase in price for Prime membership played a significant role in investor enthusiasm for Amazon’s results.

America’s most-popular fast-delivery service is going up in price.

Amazon.com Inc. AMZN -7.81% said Thursday that it is raising the cost of its Prime membership in the U.S. to $139 a year from $119. Customers who pay monthly will see the price increase to $14.99 from $12.99. The price bump for new members will go into effect Feb. 18, while charges for existing customers will apply after March 25.

 

The tech giant’s shares were up about 13% premarket Friday after the market closed Thursday after the company reported that it nearly doubled its profit in the fourth quarter. Amazon saw gains due to its investment in electric vehicle-maker Rivian Automotive Inc. and surging revenue from its cloud-computing and advertising businesses.

Some analysts said increase in price for Prime membership played a significant role in investor enthusiasm for Amazon’s results.

The subscription service has become one of the central pillars of Amazon’s success since the company launched it in 2005. Prime membership has served as a gateway for Amazon to hook customers into its varied business lines while gleaning insights into consumer habits. Amazon has an estimated 150 million Prime subscribers in the U.S., according to Digital Commerce 360.

To explain the increase, the company cited rising costs related to wages and transportation, as well as continued expansion of benefits under membership. Memberships include access to Amazon’s fast delivery service, Amazon Prime video streaming and free photo storage.