Amazon blames inflation for raising the cost of Prime in Europe

Amazon is raising prices for its Prime membership program in its main European markets, months after raising fees for US customers, in a bid to offset the costs of operating the e-commerce giant.

In Germany, Amazon’s largest market outside the United States, membership fees will increase by 30%, while Prime members in France will pay 43% more for benefits such as faster delivery and Amazon’s online entertainment. Increases will also be applied in Spain and Italy.

The increases are bigger than the 17% jump in the Prime membership price that went into effect for new US subscribers in February.

For UK customers, the price of an annual subscription will increase by 20% from £79 to £95 per year. The price will drop from £7.99 to £8.99 per month for those paying monthly.

A spokesperson attributed the move to “increased inflation and operating costs.” The changes will come into effect on September 15.

An Amazon spokesperson noted that this was the first time since 2014 that the company had raised the cost of Prime in the UK. According to research group Insider Intelligence, the UK has at least 27 million Prime members. It estimated that penetration among the UK population exceeded 50% in 2021. It predicts 32.2 million Prime subscribers in the UK by 2024.

Amazon had yet to confirm plans to implement Prime price increases outside of the United States.

“Amazon is raising the price of Prime membership is not surprising given recent inflation – and that it already pulled that leverage in the US six months ago,” said Insider Intelligence’s Andrew Lipsman . “While the timing of this price hike will generate more grumbling than it would have in February, consumers will eventually ignore the increase as Prime remains a great value.”

The price increase comes as the $1.2 billion e-commerce and cloud giant faces soaring costs in its retail business – due to supply chain strains, overstaffing and over-expansion of warehouse space during the coronavirus pandemic.

Meanwhile, Amazon is spending heavily to acquire content for Prime Video, its answer to Netflix. The company has splashed out the rights to broadcast Premier League and Champions League football, as well as creating a new The Lord of the Rings TV series. Earlier this year, Amazon closed its $8.45 billion deal to take over film studio MGM.

Prime members are key to increasing Amazon’s profit margins because they typically spend more money on the site and shop more often than regular customers. But the main attraction – free one- or two-day delivery – has become increasingly expensive for the company to maintain as fuel prices and other costs have skyrocketed.

After riding through much of the peak period of the pandemic, absorbing much of that pressure, the company has recently begun to pass on some costs to vendors and customers. In addition to the Prime price hike in the United States, in April it instituted a 5% fuel surcharge on deliveries to that country.

Operating costs for Amazon’s international business — excluding its AWS cloud division — rose in the January-March period from $29.4 billion to $30 billion as the segment grew. from an operating profit of $1.3 billion for the quarter in 2021 to a loss of $1.3 billion in 2022.

During the same period, global sales on Amazon’s online store rose from $52.9 billion to $51.1 billion.

Amazon is expected to release earnings for the April-June period on Thursday. Its stock is down more than 30% year-to-date, part of the broader sell-off in Big Tech stocks.

Amazon shares fell about 4% in after-hours trading on Monday following a profit warning from Walmart, its biggest U.S. retail competitor. Walmart said inflation was hurting its shoppers and forecast full-year adjusted earnings per share to decline by as much as 13%. Shares of other retailers, such as Target and Costco, also fell on the warning.

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