Amazon.com Inc. announced yesterday that it is increasing the price of its annual Prime subscriptions by 17% as it tries to offset the higher shipping costs of its products, as well as salaries.
Its share price rose 17% as Amazon exceeded its expectations for profitability during the holiday season.
If its share price rises by the same percentage on Friday, it will be the largest percentage increase since October 2009, while the fortune of the company's founder, Jeff Bezos, will increase by about $20 billion.
For the holiday season, Amazon earned $ 14.3 billion, doubling its net revenue from a year earlier.
That revenue included $11.8 billion in pre-tax profits from the company's stake in electric vehicle maker Rivian Automotive.
Immediately after the unexpected revenue from online orders due to the pandemic, Amazon spent money to improve its operation, in order to manage its malfunctions, most recently, caused by the Omicron variant of COVID-19.
The company promoted financial incentives to attract hundreds of thousands of workers to a tight job market, while paying more for product shipments as it could not send them to suitable warehouses.
Now, as analysts expected, Amazon has more than 200 million subscribers to the Prime program, to whom it can turn and entice them with its products and services, while increasing their annual subscription.
The monthly subscription to the US for the fast delivery of products, but also for the services of the streaming service, increases to $14.99 from $12.99, while the annual subscription increases to $139 from $119.
The increase will take effect on February 18 for new subscribers and reflects greater benefits, such as reductions in prescription drugs, but also faster delivery, according to Amazon.
The company's chief financial officer, Brian Olsavsky, told reporters in an online press conference that Amazon expected some of its subscribers to cancel their subscriptions.
Revenue per subscriber Prime increased significantly during the pandemic, Olsavsky added.
With more than 200 million members worldwide, the Prime service is an incentive for consumers to do more of their shopping through Amazon.
In this way they make most of their subscriptions.
Revenue from these subscriptions for the fourth quarter of 2021 increased by 15% to $8.1 billion.
Amazon has not announced any changes for Prime subscribers outside of the US.