Cash infusion can help offset rising fulfillment expenses

SEATTLE – Amazon announced it will help offset rising fulfillment costs by raising the price of Prime, increasing the annual fee for U.S. members by $20 to $139, beginning next month.

The company made the announcement February 3 as part of its financial report for the three months ended December 31. Amazon posted sales of $137 billion in the fourth quarter, its fifth consecutive quarter with sales north of $100 billion.

Its quarterly profit of $14.3 billion owes greatly to its cloud computing business, Amazon Web Services. Earnings were also boosted by growth in its advertising unit and the rising value of its stake in Rivian Automotive, an electric-vehicle startup in which Amazon has a 20% interest and some exclusive rights to Rivian’s delivery vehicles for four years.

These profit centers offset the 1% decline in online sales compared to the year-ago figures. Amazon’s U.S. segment recorded $206 million in operating losses, while the international operations lost $1.6 billion. The retail business has been hobbled by labor supply shortages, higher wages, and supply chain issues.

Amazon said it spent $23.6 billion on shipping in the fourth quarter, a 10% increase from a year earlier, as the company sought to ensure fast deliveries despite pandemic-related challenges.

The increase in the Prime membership fee takes effect March 25. Amazon last raised the cost of a Prime membership in 2018, with a $20 increase to $119 a year. Prime members in more than 90 metropolitan areas get free one-day delivery on a variety of Amazon purchases. Other perks include free streaming video content and cloud storage.

“When we look to do price increases, we take it very seriously. And we’re always balancing the value to customers versus the cost of supplying benefits,” Brian Olsavsky, Amazon’s chief financial officer, said during the earnings call with Wall Street analysts. “There will be always be some potential [subscriber] loss, but it hasn’t been large in the past, and we feel pretty confident in the value proposition of our Prime offering.”