In full disclosure, I am an Amazon Prime member. I am a member for one single reason and that is shipping. Have I used Amazon’s steaming service? Sure, but I would not cancel my Netflix subscription for it.
You see, I did a cost/benefit analysis of the price of shipping vs. the price of a prime membership and, for the amount of stuff I buy, Prime is a no brainer. It does save me money and quite a bit over the course of the year. Sure, I could choose free shipping on most things but I hate waiting and hate making others wait (especially if I waited until the last minute to order something).
To be fair, the increase of $20 may seem a bit excessive to some people. But for those who actually order from Amazon, it is really a marginal increase. And this is exactly what Amazon wants us to think.
As the Internet turns 25, Amazon has been around since the beginning. Of all the companies that do online retail, you could make a pretty good case that Amazon has got it figured out the best. I challenge you to find a significant number of people who have purchased something through the Internet and not shopped or purchased something directly from Amazon.
This increase should really not come as a surprise to anyone. Amazon did actually hint at it earlier. But the reality is that what Amazon has done is gotten Prime members accustomed to using its service and is now reaping the rewards of having a good service.
And yes, if you take it all together, shipping, streaming movies, and an online book store, it is a good service and a good value for the money, even at $99. There is, quite frankly, not a single service that has all of these elements.
What will be interesting to me is to see if Amazon Prime actually created brand loyalty or if consumers were only subscribers because there was no other option.
For me, I do not think it is as much about loyalty as it is about convenience. Although, in truth, I would be hard pressed to leave Amazon Prime unless it did not make economic sense anymore. We say that the true measure of brand loyalty is when consumers inconvenience themselves to use the brand. That inconvenience could be the result of the brand being hard to access or more expensive than a substitute. The problem here is that currently there is no single substitute and nothing on Amazon is hard to get.
What Amazon is gambling on is, that for $20 extra a year, Prime members may groan for a bit but will take it on the chin and stay. Not because they love Amazon or have loyalty to it. They will stay because there is no one to switch to.
As online retailers play catch-up with Amazon, we are beginning to see more and more of them offer free shipping. Amazon has seen this coming trend, which is the reason that it has begun to develop exclusive series (ala Netflix, HBO, TNT, AMC and the like) and it has a rumored free online music service in the works, among other things, to keep Prime fresh and valuable.
I think, in the short term, Amazon Prime will be fine. But as we all know, in tech, a single advancement could change everything. It happened to Amazon 25 years ago and it could happen again.