Amazon.com Inc has decided to hike the annual fee for its popular Prime service by 25 per cent to $99. The increase comes about six weeks after Amazon warned that it may raise prices by as much as $40 to offset rising fuel and shipping costs.
"We wonder if a meaningful price increase would dissuade some on-the-fence potential Amazon Primers from ponying up for the membership," said Mark Mahaney, RBC Capital Markets analyst.
Amazon's shipping costs grew almost 30 percent to $6.6 billion as its sales grew. The increase in Prime's fee could add about half a billion dollars to Amazon's annual operating income, according to some analyst estimates.
The $20 hike might affect Amazon's ability to attract new customers to Prime.
"If you consider things like inflation and fuel costs, a Prime membership valued at $79 in 2005 would be worth more than $100 today," said Julie Law, Amazon spokeswoman.
Another analyst also said, ‘the hike was expected and consumers would get accustomed to paying more.’
