Is Amazon making its profit off Prime members?

  • Crystal Ng
  • May 1, 2018
  • 0

  • Amazon’s earnings in the first quarter is twice of its earnings before.
  • The company plans to increase its Prime membership fee by 20%.

Towards the end of last month, Amazon has announced that its earnings have exceeded expectations, reaching an astronomical sum of $1.6 billion. That is twice of its earnings before. With that said, Amazon’s stock is spiraling sky-high and it is still, only the first quarter of the year, which means that its profit is most likely to increase further.

Much of Amazon’s success can be traced back to their advertising and cloud businesses, as pointed out by the Washington Post.That is also the reason for their two consecutive quarters of billion-dollar earnings. In terms of total sales, the company has attained $35.7 billion in the previous year. This year, it has come to a total of $51 billion. This is a vast increase of forty-three percent.

Unfortunately for consumers, as the company’s overall stocks and earnings rise, it seems that Amazon’s prices will follow behind. Starting from May 11, the company has expressed its desire to raise its Amazon Prime membership fee to $119 per annum. That is a tremendous hike of twenty percent. While current users will not be affected at the moment, they will however, be held onto the new prices, from June 16 onwards, when they renew their Prime memberships. Amazon has also disclosed, for the first time, that the total number of Amazon Prime users within the month. As seen from the high number of overall sales, the total number of Prime members is equally as high, at a hundred million.

Brian Olsavsky is the Chief Financial Officer of Amazon.com. He expressed the importance of the Prime program in an earnings call with the firm’s financial analysts last Thursday.

“The Prime program continues to drive great strength to our top line.”

Olsavsky further elaborates that the two-day free shipping provided by the Prime program has allowed up to twenty million products four years ago. Now, having a Prime membership entails free two-day shipping for about a hundred million products.

Once again, the role that the Amazon Prime program plays in contributing to the company’s retail business is undeniable.

During the after-hours trading, Amazon’s shares had risen by about seven percent, reaching $1,619 like never before. This subsequently annuls the losses that they had endured after President Trump’s attempt to bring down the company by bringing up the possibly questionable trade between Jeff Bezos’ Amazon and the United States Postal Service.

While Amazon’s success may be attributable to the company’s business strategies, the actions taken by the company is still questionable. As they turn a profit, they begin to further increase their earnings by dipping further into their customers’ pockets.

Amazon Prime members have shown loyalty and support for the longest time, which is precisely the reason behind the company’s increasing triumph. Hence, why does it seem as though these consumers are suffering from it? Is a 20 percent hike in membership fee really the best way to go? As a matter of fact, if these Prime members have not been present, will this 20 percent plan cease to exist? In this way, did Amazon Prime members just get punished for being loyal? As a business that values their customers, they should be finding ways to increase customer satisfaction. Especially since they know that they are the reason for its title as the leading retail line.

Yet again, it should not come as a surprise. This is because businesses are more focused on profit maximization rather than customer’s satisfaction in this day and age.

This is clearly seen from Jeff Bezos’ personal wealth. Holding the title of the first centi-billionaire in the United States, perhaps he is going about in the right direction. After all, in a capitalist state, the only measure of success is placed on the number of the stocks and earnings charts.

Featured image via flickr/ Robert Scoble

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The concept of time is lost on me as I venture into the world of business, politics, technology and all other matters concerning recent events. No matter where I am; out in the big cities or isolated in the desert, writing is seemingly the only constant in my life.