Amazon Prime could be too popular?

Dan Weissmann Mar 20, 2014
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Amazon Prime could be too popular?

Dan Weissmann Mar 20, 2014
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There’s been speculation that Amazon may drive away customers by jacking up the price of its Prime service, which includes free two-day shipping and amenities like streaming video. In a survey, about 40 percent of Amazon Prime customers told Consumer Intelligence Research Partners (CIRP) that, yes, they might ditch the service if the price went up twenty bucks. 

However, CIRP partner and co-founder Josh Lowitz doesn’t believe them. He says Prime is still a good deal: Free shipping, plus the video streaming, and word of more to come, like free streaming music.

“We think people will figure it out. In fact, we think when people make the $99 commitment to Amazon Prime, they’re going to be even better Amazon customers.  Because they’re going to want to get their money’s worth out of the shipping.”

Which could be the real problem for Amazon. That’s how Colin Gillis, a tech analyst at BGC Partners, sees it. He points out that Amazon already loses billions of dollars a year on shipping, and those losses are growing fast.

“If you look at their shipping losses, it’s about 4.7 percent of total revenue. And that’s about the margin that a decent retailer makes.”

Worst-case scenario, Amazon becomes a big-scale version of an old joke:  Sure, I lose a penny on each one, but I sell a ZILLION of them!


*CORRECTION: An earlier version of this story misstated the name of a CIRP partner and co-founder. He is  Josh Lowitz. The text has been corrected.

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