Amazon is increasing the cost of its Prime membership for U.S. customers, in part to offset rising expenses associated with wages and transportation, the company announced ahead of its quarterly earnings call Thursday.
The monthly fee for Prime membership will go up from $12.99 to $14.99, and the annual membership from $119 to $139.
The price change — Amazon's first since 2018 — will go into effect on Feb. 18 for new members. For current Prime members it will apply after March 25, on the date of their next renewal.
"As expected over the holidays, we saw higher costs driven by labor supply shortages and inflationary pressures, and these issues persisted into the first quarter due to Omicron," Amazon CEO Andy Jassy said. "Despite these short-term challenges, we continue to feel optimistic and excited about the business as we emerge from the pandemic."
Amazon saw more than $4 billion in costs from "inflationary pressures" and lost productivity in operations, said chief financial officer Brian Olsavsky. The company isn't having trouble hiring, he said, but is having trouble keeping workers on the floor. Many have had to call in sick and others have filled in for colleagues, racking up overtime hours and overtime pay.
"We've shown that we can hire well, we just have to get everyone healthy and regain our productivity from all the investments we've made in people and capital over the last couple years," Olsavsky said Thursday. "We're seeing those costs trickle into Q1 as well."
Amazon's net sales increased 22% in 2021, reaching $469.8 billion, compared with $386.1 billion in 2020.
The company reported net income of $33.4 billion, or $64.81 per diluted share, in 2021, a jump from $21.3 billion, or $41.83 per diluted share, in 2020.
Amazon Web Services, which drives a large part of the company's revenue, grew 40% year over year. Sales for Amazon's online store dropped 1% while its physical stores saw sales increase 17%. Subscription services, including Prime, grew 15%.
The Prime price change will go into effect on February 18 for new members. For current Prime members it will apply after March 25, on the date of their next renewal.
Amazon has raised Prime members twice before: in 2014 and 2018, Olsavsky said.
In the past, Amazon hasn't lost many Prime members following the bump in price and Olsavsky doesn't expect retention will significantly drop this time either. He touted the addition of benefits like Thursday Night Football and the increase of one-day shipping to more than 90 markets.
"It's not a static program," he said. "We'll continue to add faster shipping, greater video and other features...We're pretty confident in the value proposition of our Prime offering."
"Given the extraordinary growth we saw in 2020 when customers predominantly stayed home, the fact that we've continued to grow on top of that in 2021, our retail teammates have effectively operated in peak mode for almost two years," Jassy said.
"There's a lot to look forward to in the months and years ahead."
In the last quarter of 2021 — the three months from October to December — Amazon reported net sales increased 9% to $137.4 billion, compared with $125.6 billion in the same period in 2020.
Net income increased to $14.3 billion, or $27.75 per diluted share. In the fourth quarter of 2020, Amazon reported net income of $7.2 billion, or $14.09.
"Given the extraordinary growth we saw in 2020 when customers predominantly stayed home, the fact that we've continued to grow on top of that in 2021, our retail teammates have effectively operated in peak mode for almost two years," Jassy said.
"There's a lot to look forward to in the months and years ahead."
