Amazon blames inflation for raising Prime price in Europe

Amazon blames inflation for raising Prime price in Europe

Amazon is increasing the prices of its Prime membership scheme in its main European markets, months after it increased fees for US customers, in a move aimed at recouping the e-commerce giant’s operating costs.

In Germany, Amazon’s largest market outside the US, membership costs will increase by 30 percent, while Prime members in France will pay 43 percent more for perks like faster shipping and Amazon’s online entertainment. The increases will also apply in Spain and Italy.

The increases are on top of a 17 percent jump in the cost of Prime membership that went into effect for new subscribers in the US in February.

For UK users, the price of an annual subscription will increase by 20 per cent from £79 to £95 per year. The price will range from £7.99 to £8.99 per month for those paying in monthly instalments.

The spokesman attributed this move to “increased inflation and operating costs”. The changes will take effect on September 15.

An Amazon spokesperson noted that it was the first time since 2014 that the company had raised the price of Prime in the UK. According to research group Insider Intelligence, the UK has at least 27 million Prime members. Penetration among the UK population is estimated to exceed 50 percent in 2021. 32.2 million Prime subscribers are predicted in the UK by 2024.

Amazon has not previously confirmed plans to implement price increases outside the US.

“Amazon raising the price of a Prime membership is not surprising given recent inflation — and that it already pulled this lever in the US six months ago,” said Andrew Lipsman of Insider Intelligence. “While the timing of this price increase will be met with more outcry than there would have been in February, consumers will ultimately reject the increase because Prime remains a great value.”

The price hike comes as the $1.2 trillion e-commerce and cloud giant faces rising costs in its retail business – the result of supply chain strains, overstaffing and overexpansion of warehouse space during the coronavirus pandemic.

Meanwhile, Amazon is spending heavily to acquire content for Prime Video, its answer to Netflix. The company snapped up the Premier League broadcast rights and Champions League footballas well as creating a new one Lord of the Rings Television series. Earlier this year, Amazon closed its $8.45 billion deal to acquire movie studio MGM.

Prime members are key to boosting Amazon’s profit margins, as they typically spend more money on the site and shop more often than regular customers. But the main attraction – free delivery within a day or two – became increasingly expensive for the company to maintain as the price of fuel and other costs rose.

After riding through much of the peak of the pandemic absorbing much of that pressure, the company has recently begun to pass some of the costs on to sellers and buyers. In addition to raising Prime prices in the US, in April it introduced a 5 percent fuel surcharge on deliveries to that country.

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

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

Amazon will announce earnings for the period April-June on Thursday. Its shares have fallen more than 30 percent since the start of the year, part of a broader selloff in Big Tech stocks.

Amazon shares fell about 4 percent in after-hours trading Monday after a profit warning from walmart, its primary US retail competitor. Walmart said inflation was hurting its customers and predicted full-year adjusted earnings per share would fall as much as 13 percent. Shares of other retailers, such as Target and Costco, also fell on the warning.

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