How's the economy? Are we in recession? What is the impact of global inflation on businesses?
To all these questions, Amazon (AMZN), the giant of online commerce and streaming, can provide answers. The company is a multinational that can help take the pulse of the global economy.
While waiting for July 28, date of the publication of the results of the second quarter, one can already have an outline of the answers which the company brings to the blaze of the prices.
Amazon wants to pass on some of the cost hike to consumers. Thus after the United States, the group has just increased the prices of subscriptions to Prime, its service which includes a free fast delivery service, but also series, films and sports competitions from Prime Video, music with Amazon Music, etc, in Europe and the United Kingdom.
Prime Prices Are Skyrocketing
And it's not a cosmetic or minimal increase: the annual price increase varies between 20.2% in the United Kingdom, 39% in Spain and Italy, 43% in France and 30.3% in Germany
The annual subscription to Prime passes will thus increase from 69 euros to 89.90 euros in Germany. In France, households will start paying 69.90 euros per year from 49 euros, and from 36 euros to 49.90 euros in Italy and Spain.
As for the United Kingdom, consumers will pay £95 British per year against £79 British currently.
Prime prices for monthly subscribers have also increased in these countries.
These increases will all be effective from Sept. 15 or on the date of a Prime member’s next renewal, the platform explained. An email was sent to subscribers to announce the changes.
"With increased inflation and operating costs in the UK continuing to rise, we will change the price of Prime," a spokesperson told TheStreet. "This is the first time Amazon has changed the price of Prime in the UK since 2014, and we will keep working to ensure Prime offers exceptional value for members,"
Customers can lock in the current annual price for the next 12 months if they sign up or switch to the annual plan by Aug. 14, the spokesperson added. Customers can also cancel their membership.
Prime's price hike in Europe and the UK comes a few months after a similar move in February in the US. The company will probably announce on July 28 if this latest decision has impacted subscriptions.
Inflationary Pressures
At the end of April, Amazon had warned during the conference call presenting the results of the first quarter, that inflationary pressures were increasing its costs. The group was already suffering from an increase in the cost of labor and logistics affected by soaring gasoline prices.
"Our results are inherently unpredictable and may be materially affected by many factors, including uncertainty regarding the impacts of the covid-19 pandemic, fluctuations in foreign exchange rates, changes in global economic conditions and customer demand and spending, inflation, labor market and global supply chain constraints, world events, the rate of growth of the Internet, online commerce and cloud services and the various factor," Dave Fildes, director of investor relations, told analysts on April 28.
"We continue to face a variety of cost pressures in our consumer business," Chief Financial Officer Brian Olsavsky added. "We'll break these into two buckets: externally driven costs, primarily inflation, and internally controllable costs, primarily productivity and fixed cost deleverage. The externally driven costs are a result of intensifying inflationary pressures throughout Q1."
To defend its sharp rise in Prime prices, Amazon highlights the various advantages offered by this subscription.
"We have increased the number of products available with fast unlimited Prime delivery, recently added ultra-fast fresh grocery delivery, and have significantly expanded our high-quality digital entertainment, including TV, movies, music, games, and books," the spokesperson said.
Prime Video has tripled the number of Amazon Originals since 2018, the spokesperson said, rolling out new series and movies such as The Boys and The Terminal List, plus locally-produced originals such as Clarkson’s Farm, Backstage, Totems, Jack Reacher, LOL: Last One Laughing.
The service also offers access to Premier League football and Autumn Nations rugby in the UK.
Amazon is not alone in passing on current rising costs to consumers. Its rival Netflix (NFLX) has also done so.
