Amazon.com Inc. will generate an extra $300 million annually by increasing the monthly cost of Prime membership by $2, according to Cowen & Co.
The online retailer announced Friday that it would increase the price of Prime to $12.99 for customers making monthly payments, which totals $156 a year. Prime membership remains $99 for those making one annual payment, sweetening the discount for those making a longer commitment.
Cowen estimates that 30 percent of Amazon’s 60 million Prime subscribers in the U.S. pay monthly, based on its surveys of Amazon shoppers. Amazon added the monthly Prime service about two years ago as a way to rope in holiday shoppers or those who couldn’t afford the $99 fee all at once. Cowen estimated the $300 million given its analysis of the monthly customers, including students and low-income users who pay a lower rate.
Prime membership gives consumers free two-day shipping as well as some same-day delivery and access to Amazon’s media services, including Prime Video and music streaming. Combining these benefits helps turn casual Amazon shoppers into devotees of the e-commerce platform.