The news was electric. Amazon, the great dark god of retail, was going to raise its prices on its popular Amazon Prime subscription service, from $99 a year to $119 a year.
That wasn’t the electric part though. That was reserved for the admission that Amazon has 100 million subscribers of its Prime service (worldwide). Assuming the price rise is the same across the whole world, that means that next year, Amazon will make $2 billion more from its Amazon Prime service than it did this year.
This is diabolically smart on Amazon’s part. To be honest, I’m surprised it hasn’t happened sooner.
Some purchases are sticky, meaning that once one signs up, it’s hard to change, and so takes a lot of motivation. Checking accounts can be like that, and so can internet service providers. Who wants to go to the trouble of changing all that information, making all those calls, and updating all those payments?
This is precisely what Amazon is going for here.
Amazon Prime is selling convenience. Fast, free, shipping. Period. There’s other stuff in there (books, music, movies) but it always feels like those offerings are add-ons, kitchen-sink stuff thrown in to make Prime more valuable for people who are on the fence.
I can’t imagine people wouldn’t cancel their Prime membership because they couldn’t live without Amazon’s streaming movies, though I guess it’s possible. But I really think the shipping is the deal here.
Our lives are busy and full. Whether you’re a CEO or a stay-at-home parent, you probably don’t want to spend the time shopping for things. And besides, most of the selection is better online anyway.
Shipping costs and shipping time are friction points to the online purchasing experience. If I have to pay more to get my items, and a lot more to get them quickly, I may think twice about my purchases.
But when I can get anything I want to may door in around two days or less, for free, then that friction goes away.
This is extremely alluring. And when you have this service, you are much more inclined to buy things on Amazon than any other place, not just because you’ve already invested the money in the subscription, but because it’s just so easy.
The problem is that this behavior is tailor-made to make you not think about your spending, which will make you spend more. The whole point is to make buying things almost autonomous (see 1-Click ordering).
Is $119 in a year a lot of money? Not really. Maybe to some.
But I resent the idea of paying money to Amazon so I can be induced to give more money to Amazon.
(Am I a hypocrite here? You decide.)
And I resent that Amazon knows that they’ve got people stuck on their service, and so they can, on a whim, make a decision that nets them $2 billion (per year).
Which is one of the many reasons why I don’t subscribe to the Prime service. I want the online shopping experience to have a certain amount of friction to it. The last thing I need is to make buying things be any easier.
But enough about me. Will this Amazon price rise affect you?