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Inflation explains why Amazon Prime is getting more expensive in 5 European markets – Sourcing Journal

Nearly six months after raising the price of its annual Prime membership in the US from $119 to $139, Amazon is now adjusting fees for members in major European markets, including the UK, Germany, Europe. Spain, Italy and France.

In Germany, Amazon’s second largest market after the United States, the annual Prime fee will increase by 30% to 89.90 euros (around $91). The third largest market, the UK, will see a 20% increase to 95 pounds (about $114) per year, an increase of 1 pound per month from 7.99 pounds ($9.60) at 8.99 pounds ($10.80).

This represents the first Prime price increase in eight years for UK users, while subscribers in Germany last saw their Prime price change in 2016.

Prime members in France will pay 43% more with the upgrades, going from 49 euros to 69.90 euros (about 49 to 69 dollars). Italy and Spain both saw a 39% increase in Prime prices, with each country’s subscription going from 36 euros to 49.90 euros (roughly $36 to $49).

Price increases in the five countries total 31% on average, more than the 17% jump in US Prime prices recorded in February.

The new prices will take effect on September 15 and will impact all new members and renewals. Customers can lock in their current annual price for the next 12 months if they sign up or upgrade to the annual plan before August 14.

Amazon also recently agreed to make it less confusing for European customers to cancel their Prime membership amid complaints from consumer groups and ongoing European Union antitrust investigations.

In a statement to members of affected European marketplaces, Amazon cited “increasing inflation and operating costs” along with faster delivery and more content as factors behind the increase. “We will continue to work to ensure Prime provides exceptional value to members,” he said.

Consumers aren’t the only ones paying a premium in response to increased spending, with the company adding a 5% surcharge in April for sellers using Fulfillment by Amazon logistics services. In May, Amazon imposed a similar 4.3% fuel and inflation surcharge on sellers storing and shipping their products to major European markets.

Amazon is raising prices as it also seeks to downsize its industrial real estate, which it is currently doing by subleasing excess warehouse space. A Bloomberg report also raised the possibility that the e-commerce company might waive some leases entirely, freeing up additional square footage. Amazon has never confirmed whether the company would consider early lease terminations.

Southern California, New York, New Jersey and Atlanta were cited as markets where Amazon’s real estate portfolio is inflated.

The tech titan is even suspending the construction of six new office buildings in Nashville, Tennessee and Bellevue, Washington, as the company weighs its costs in a hybrid working model.

In April, Amazon reported a net loss of $3.8 billion – its first quarterly loss in seven years – due to headwinds including rising wages, rising fuel and transportation costs and a unrealized loss on its stake in electric vehicle maker Rivian Automotive. Despite the loss, Amazon is fully committed to Rivian, announcing this month that it plans to bring thousands of custom electric delivery vehicles to more than 100 cities by the end of this year and 100,000 to the United States. United by 2030.

Adding to the pressure, the company paid off a boatload of new content for fall 2022. In the US, it aims to attract and keep millions of NFL fans by making Prime Video the official home of Thursday Night. Soccer. And in Europe, the company has boomed on the rights to broadcast Premier League and Champions League football. Amazon’s growing investment in other Prime Video content includes its $8.5 billion acquisition and integration of MGM Studios and its new Lord of the Rings series slated to premiere this fall.

In addition to the expense, there are also fears that Amazon’s cash cow, the cloud division of Amazon Web Services (AWS), could feel the heat of an economic downturn if a larger chunk of startup customers drop out of the service. .

But the cost issues plaguing Amazon plague just about everyone. Walmart on Monday warned that its 2022 profits would fall more than expected as rising fuel and food prices led consumers to rein in discretionary spending. As such, the price increases come at a time when Amazon may need to make up for a potential loss in sales.

At least in the United States, membership growth appears to have stalled. Amazon’s subscription service ended the first half of 2022 with 172 million members in the United States, the same as six months ago, according to data from Consumer Intelligence Research Partners. The stagnation follows two consecutive years in which the company added 30 million net new members.

While price hikes have been the norm for many consumer brands and retail operations throughout 2022, companies have sought to soften the blow of increased spending elsewhere. Global fast fashion sellers such as Boohoo, Zara and Uniqlo, as well as other UK-based clothing sellers including Next and Sports Direct, have all introduced new returns fees in 2022, much to the chagrin of some consumers who made their opinion known on social media.

Prime’s rise also came after other companies raised their prices. Rent the Runway increased its membership fees several months ago. Earlier this month, Disney raised the price of its ESPN+ sports streaming service. And earlier this year, Netflix raised prices in several markets.

Amazon reports second-quarter results Thursday after the market close.