Is Amazon Prime Still Worth It?


On Friday, for the first time in four years, Amazon has raised the price of its Prime benefits program. What once cost $99 annually now costs $119 for new members; existing Prime subscriptions will get bumped whenever they renew, starting June 16. But while nobody likes a 20 percent hike, it’s a good reminder that Amazon Prime is as worth it as you want it to be.

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If past is prologue, the price change won’t inspire many people to cancel their Prime accounts. When Prime jumped from $79 to $99 in 2014, a Consumer Intelligence Research Partners survey showed that over 90 percent of subscribers intended pay up. For most of Amazon’s 100 million Prime members, the benefits should be well worth the price. Even at $120, Prime remains one of the best deals in tech. If anything, you’ll just end up using it more.

Prime Time

At this point Prime has nearly too many benefits to name them all, at least in a paragraph of any reasonable length. There are the headline features, like free two-day shipping, or same-day, in some zip codes. There’s Prime Music and Prime Video, which you can think of as Budget Spotify and Netflix Minus Narcos, respectively. There are diaper discounts for new parents and gaming discounts for Twitchers. There are limited free books and generous photo storage. There are exclusive savings for Prime members only, and early access to Amazon’s so-called Lightning Deals. There are not one but two credit cards you can tie to Prime, and Prime-exclusive multivitamins. It recently added dog food.

There’s a wide spectrum of potential savings, and the decision of whether to stick with Prime hinges on where you intersect with it, and how fully.

“My hunch is that if you’re interacting with Amazon at least on a monthly basis in some way, shape, or form, which probably at least half of Prime customers already do, those are going to be consumers who are incentivized to stay,” says Sucharita Kodali, a retail analyst with Forrester Research.

Interestingly, the foundational Prime offering has also become the least distinctive. Pretty much every retailer offers some sort of free shipping now; Walmart will get most orders over $35 to you for free in two days, no annual membership required. It also has 400 million distinct items on offer; Amazon has around a tenth as many.

But Amazon has countered the dulling of free shipping by building out the rest of the ecosystem. The Amazon Prime Store card gives you 5 percent back on every purchase. If you spend $2,400 per year with Amazon—not as crazy as it sounds, especially if you get your big-ticket electronics there—you’ve paid for your subscription with that alone. A year of Prime still costs less than a year of Netflix; if you’re a devotee of The Marvelous Mrs. Maisel, it seems worthwhile just for Prime Video. If you’re not a Mrs. Maisel fan, do yourself a favor and become one. If you shop at Whole Foods, you can get your groceries delivered free in two hours or less in some cities. A standalone grocery-delivering Shipt membership costs $100 per year. And not everyone has to pay full freight; Prime costs $59 a year for students now, or you can choose the low-commitment monthly Prime membership for $12.99.

Bargain Basement

The point isn’t that you need Prime. No one does, just like you don’t need a frequent flyer number or a lawn service or a chinchilla wearing a comically tiny cowboy hat. There are also plenty of reasons one might object to Amazon generally. Its effects on small businesses and its warehouse working conditions deserve close scrutiny. Its digital shelves have been flooded with counterfeit products. Its HQ2 cattle call upended cities across America.

But from a purely transactional point of view, is Prime worth it? You can almost certainly slice and dice the benefits in a way that adds up to a yes.

“You can find an analogous service for any of these. But if you’re using very many of those services, the value equation doesn’t look very good,” says Jason Goldberg, an executive at digital marketing company SapientRazorfish. “It looks better to buy Prime.”

That’s especially true thanks to a particular quirk of human behavior. “When you look at Costco as a proxy, it’s really interesting. Consumers use it up to the amount that it costs,” says Kodali. “The savings they get from using it ends up being almost breakeven with the amount that it costs them.”

The same dynamic has played out with Prime as well. Prime customers spend twice as much on Amazon as non-members, according to CIRP research. And since March 2015—which marked the first full year that all Prime subscribers made the jump to a $99 plan—CIRP estimates that Prime members have increased the number of times they’ve shopped at the site from 22.7 to 24 times per year. In other words, the price increase prompted more use. Consciously or not, people wound up getting their money’s worth.

Which goes some way to explaining why Amazon invests so heavily in Prime to begin with. In and of itself, it’s likely a money-loser for the company. “It’s fair to say that they don’t charge customers the full cost of Amazon Prime, of what it costs them,” says Kodali. “I think that absolutely is the case, even after the price increase.”

But without a smartphone or a social network, and with Alexa still in its relative infancy, Prime is Amazon’s clearest shot at a platform. Come for the exclusive Thursday night football games, stay for whatever Prime Wardrobe gets you. The more Amazon offers, the more you’re sucked in.

The Everything Store

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