Amazon Is Raising the Price of Prime: Here's What That Means for Sellers and Vendors
What experts had long expected is officially happening: Amazon is raising the price of Prime again, boosting it from $119 to $139 annually (and from about $155 to $180 for those who pay monthly).
Obviously, Prime affects not only customers but sellers and vendors. Prime-eligible products hold a huge advantage because of free two-day (and sometimes one-day) shipping, and therefore vendors and sellers can boost product sales by making them Prime-eligible.
But does this overall price increase for customers have an impact on your ecommerce business? That’s a more complicated question.
Why Is Amazon Increasing the Price of Prime?
It's the first time Amazon has raised the price of Prime since 2018, and experts have said the price increase is long overdue. The reason for the boost is that the company is facing higher costs and demand for Prime remains strong, with the company adding tens of millions of members every year. Many online services, like Netflix and Hulu, are also raising their prices. With rising costs and demand still strong for Prime, a price increase like this was only a matter of time.
What Does This Mean for Vendors and Sellers?
Boosting the price of Prime doesn't have a direct impact on individual vendors and sellers. The main impact a price increase on Prime would have is by dampening the increase in memberships or causing members to cancel, and therefore shrinking the available customer base that would be attracted to products that are Prime-eligible.
Potentially smaller Customer Base
So if you're a vendor or a seller who has put a lot of emphasis on making your products Prime eligible, it doesn't help that Amazon is raising the price of the service and therefore potentially reducing the total number of customers who would make the decision to buy your product because of its Prime eligibility. However, it's unlikely that an individual vendor or seller would notice any near-term impacts.
That’s because price increases have not historically harmed Amazon Prime membership, at least not noticeably. The last Amazon Prime price increase was in 2018, when it was boosted from $99 to $119. But it didn't appear to slow down membership rates. In 2018, there were 100 million paying Amazon Prime members, and today there are more than 200 million.
Impact Likely to Be Minimal
Now that Amazon dominates the online retail landscape so thoroughly, price increases like this may have less and less of an impact going forward. Amazon Prime’s benefits are so attractive and people have become so dependent on the site that they won’t be driven away by Prime price increases like this, particularly since they only happen once every few years.
"While raising prices always risks negative feedback from customers, Prime membership still offers tremendous value by comparison to other memberships," said Joe Shao, Chief Product Officer at Reason Automation. "I would expect this increase will not materially change customer buying behaviors and, as a proxy, have little impact to sellers/vendors."
So while it could dampen membership increases a little bit, vendors and sellers can continue to expect that Prime eligibility will have greater and greater returns in terms of product sales due to an ever-expanding customer base.
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