Amazon will raise the subscription fees of its Prime service for deliveries and streaming in Europe by up to 43%, the online commerce giant announced. This, as part of the efforts to offset the high costs. The announcement was made just days before the company is scheduled to release its quarterly results.
The price increase in Europe comes after a similar move by Amazon in the US in February and reflects the increasing pressure from Wall Street on CEO Andy Gassey to raise profits in light of the increase in the inflation rate and the potential slowdown.
According to a report in the Reuters news agency, an annual Amazon Prime subscription in Germany, the company’s second largest market after the United States, will increase by 30% to 89.90 euros ($91.88). In the United Kingdom, the company’s third largest market, there will be a 20% increase to -95 pounds ($114.47) per year. On Amazon in Spain, Italy and France the subscription price will increase between 39%-43%.
The changes will go into effect starting September 15 for new entrants or those renewing their subscription. Amazon cited “rising inflation and operating costs” as well as faster deliveries and more streaming content as reasons for the price increase – the first since 2018 for some of the affected countries. “We will continue to work to ensure that the Prime service offers exceptional value to subscribers,” the company said in a statement.
In April, Amazon reported its first quarterly loss in seven years due to factors such as higher wages, high fuel prices and an unrealized loss from the holding in Rivian Automotive. In the last quarter that ended in June, the value of the investment fell by 4 billion dollars. Still, Amazon emphasized that they remain committed to Rivian, which is defined as an “important partner” that helps put thousands of electric delivery vehicles on the roads in the US this year.
According to analysts, Amazon will report on Thursday a net profit of 1.38 billion dollars for the quarter. Yesterday, rival Walmart issued a profit warning for the entire year due to high fuel and food prices, which are hurting customers’ spending power.
After operating profit climbed to a record high during the pandemic, Amazon has now launched a cost-cutting plan. In some of the warehouses the company did not fill vacancies and in addition it froze a plan to build an office complex in Washington and slowed down the pace of opening new warehouses. The company also raised the prices of some of the products sold on the platform. In May, Amazon imposed an underpayment of fuel and inflation at an average rate of 4.3% on sellers who store and ship their products to the major European markets. Even earlier, she made a similar move in the US.
Analysts fear that an economic slowdown could mainly hurt the profits of the cloud division (AWS). “Revenues in the cloud division are more exposed to the economic situation than rival Microsoft given that a larger percentage of customers are from the start-up sector, which is under pressure,” wrote the analysts at the research firm Bernstein.
At this stage it is not clear how the price increases will affect the subscribers. Months after the price increase in the US, the proportion of customers who subscribe to the Prime service has increased, according to Colin Sebastian of Baird Equity Research after the Prime Day sales event.