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Amazon hikes Prime membership fees in U.S. as wages, costs rise

Amazon.com Inc on Thursday said it was raising the price of its annual U.S. Prime subscriptions by 17%, as it looks to offset higher costs for shipping and wages that it expects to persist this year.

Shares rose as much as 17% in extended trade as Amazon also beat profit expectations for the holiday season. If shares increase on Friday by that much, it would be the stock’s biggest percentage gain since October 2009 and grow founder Jeff Bezos’ wealth by about $20 billion.

For the holiday quarter, Amazon earned $14.3 billion, double its net income from a year earlier. That included a pre-tax gain of $11.8 billion from its stake in electric car maker Rivian Automotive (RIVN.O).

On the heels of a windfall from greater at-home shopping in the pandemic, Amazon has poured money into its operations to manage disruptions, most recently the Omicron variant of COVID-19. It has marketed signing bonuses to attract hundreds of thousands of workers in a tight labor market, and it has paid more for shipping because it could not get products into the right warehouses.

Now, as analysts have expected, Amazon is raising the price of Prime. U.S. monthly fees for the fast-shipping and media service are increasing to $14.99 from $12.99, and annual membership is going up to $139, from $119. The change is effective Feb. 18 for new members and reflects greater benefits such as savings on prescription drugs and faster delivery, Amazon said.

Chief Financial Officer Brian Olsavsky told reporters on a conference call that Amazon expected some members to quit, but retention loss “hasn’t been large in the past.” The annual fees last went up by the same amount four years ago, and four years before that.

Revenue per Prime member “did grow significantly during the pandemic,” Olsavsky added.

With more than 200 million members globally, Prime is an incentive to consumers to direct more of their shopping to Amazon. That way, they make the most of their subscriptions. Revenue from such fees for the fourth quarter rose 15% to $8.1 billion.

The company announced no changes for Prime members outside the United States. Reuters

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