Amazon Threatens Prime Price Hike In US

Amazon said it is considering increasing the cost of its Prime delivery membership in the US after increasing demand and as fuel costs increased.

It said it might raise the cost of annual membership to the 2-day delivery guarantee scheme by $20 to $40 dollars. Analysts estimated that could add $600 million (£365 million) to annual revenues.

Amazon's CFO Tom Szkutak told investors on Thursday night: 'Even as fuel and transportation costs have increased, the $79 price has remained the same. We know the customers love Prime as the usage of the shipping benefit has increased dramatically since launch. On a per customer basis, Prime members are ordering more items across more categories with free two-day shipping than ever before.'

But he concluded: 'With the increased cost of fuel, transportation as well as the increased usage among Prime members, we're considering increasing the price of Prime by $20 to $40 in the US.'

It has not raised the price of its Prime service in the US since it was introduced nine years ago. Szkutak said during the same period the number of items shipped using Prime has increased from 1 million to 19 million.

He did not say when the increase might be implemented. Some analysts said fear of a price increase might stimulate greater numbers to sign up at the current price.

One report has estimated Prime users in the US spend $1,200 annually, twice that of the average Amazon customer's spend of $600.

Amazon said in the statement released the same day that revenue in the final quarter of 2013 increased 20 per cent worldwide to $25.59 billion. It said its international revenue increased at a slower rate than in North America where growth hit 26 per cent.

Total sales at Amazon in 2013 increased 22 per cent to $74.45 billion (£45.3 billion), rising 28 per cent in North America where it makes 60 per cent of its sales. Shares in the firm fell despite a profit increase because it warned it could slip into a loss this quarter after continued investment in new initiatives.

Amazon opened more warehouses last year, increasing the number by seven to 54, according to Internetretailer.com. But it also increased the square footage by consolidating older facilities into larger new centres. It is believed to have more than 100 globally.