SAN FRANCISCO - Many Amazon Prime users would cancel their subscription if the cost of the shipping program increased, according to a recent survey, highlighting the risk the Internet retailer is taking in announcing a possible price hike.
During a conference call with analysts on Thursday, following disappointing quarterly results, Amazon said it may increase the cost of Prime in the U.S. by $20 to $40. The service, which includes free two-day shipping on most products from Amazon.com, currently costs $79 a year in the U.S.
Bizrate Insights surveyed Amazon Prime members in recent days and asked whether they would renew at different price points. Almost 200 responded and 46% of those said the current $79 price was too high.
About 24% of those surveyed were happy with $79 a year but said they would not renew if the price was $89. More than 15% said $99 was too much, the survey found.
Almost 5% said $109 was too much and 3% said $119 would cause them to cancel. Less than 8% of Amazon Prime members who responded to the poll said that they would pay any amount for the program, according to Bizrate, a unit of online price-comparison firm Shopzilla.
Amazon lured millions of shoppers by having the lowest prices, so it is always a risk when the world's largest Internet retailer raises prices, or even considers such a move. However, the company is struggling to keep a lid on transportation and fuel costs, so an increase in the cost of Prime will help cover those expenses.
Amazon is also moving away from its low priced strategy to focus more on convenience in some new parts of its business, such as the company's AmazonFresh grocery delivery service.
"We would not describe the move as a big risk, but there is some risk, as with any 25% to 50% price increase in something like this," said Michael Levin of Consumer Intelligence Research Partners, or CIRP.
USA TODAY's Jan. 30 story about possible Prime price hikes was posted on a customer discussion forum on Amazon's website. About half of the 18 shoppers who commented as of Feb. 3 said they would cancel Prime, or would consider quitting, if the price increases.
Amazon shares fell 5% to $340.86 during afternoon trading on Monday, adding to losses of about 10% on Friday. The stock is now trading at its lowest levels since October.
Amazon spokeswoman Julie Law noted that Amazon has not raised the cost of Prime in almost a decade, even as fuel and transportation costs have climbed. "We believe Prime will still be a great value," she added.
CIRP surveyed 300 Amazon customers in the three months leading up to Nov. 15, 2013 and estimated that almost 10 million, or 58%, of the company's Prime subscribers had been members for less than a year.
That presents a bigger risk for Amazon because newer Prime members may be less loyal than older ones, CIRP said.
Overall, 7% of Amazon Prime members indicated that they probably would not renew their membership. Of those who had been members less than a year, 10% said they would probably not renew. In contrast, only 3% of Amazon Prime members that have had their membership for more than a year said they probably would not renew, CIRP's survey found.
"Amazon Prime Members who joined in the past year represent a different risk to Amazon," Levin said.
These shoppers have not renewed their original membership and have not yet had the chance to weigh the value of free shipping and other benefits, such as free streaming video, against the cost, he added.
Amazon's Prime program will likely grow more slowly if the company raises the price, but it will also gain members who will spend more on Amazon.com, Levin said.
Amazon may be betting on the psychological effect of Prime and other shopping membership programs, such as Costco's warehouse club. When consumers pay up-front for these subscriptions, they often use them more to make sure that they are getting their money's worth.
Indeed, Amazon's Law said Prime users order more items across more categories than other customers. That increased usage is another reason why the company is considering increasing the price of the program, she added.
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