How is the economy? Are we in a recession? What is the impact of global inflation on companies?
On all these questions, Amazon (AMZN) – Get Amazon.com Inc. report, the giant of online retail and streaming, can provide answers. The company is a multinational company that can help take the pulse of the world economy.
While waiting for July 28th, the date of the second-quarter results release, one can already get a glimpse of the company’s responses to the price explosion.
Amazon wants to pass some of the cost increase on to consumers. Thus, after the United States, the group has just increased the prices of subscriptions to Prime, its service that 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 UK, 39% in Spain and Italy, 43% in France and 30.3% in Germany
The annual subscription for Prime Passes increases in Germany from 69 euros to 89.90 euros. In France, households from 49 euros pay 69.90 euros per year, in Italy and Spain from 36 euros to 49.90 euros.
In the UK, consumers pay £95 a year compared to £79 currently.
Prime prices for monthly subscribers have also increased in these countries.
These increases all apply from September 15, or the date of a Prime member’s next renewal, the platform said. An email has been sent to subscribers to announce the changes.
“With increased inflation and ongoing increases in operating costs in the UK, we will be changing the price of Prime,” a spokesman told TheStreet. “This is the first time Amazon has changed the price of Prime in the UK since 2014 and we will continue to work to ensure Prime offers exceptional value to its members,”
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Customers can lock in the current annual price for the next 12 months if they sign up or switch to the annual plan by August 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 is expected to announce on July 28 whether this latest decision has impacted subscriptions.
inflationary pressures
In late April, Amazon warned during its first-quarter earnings call that inflationary pressures would push up its costs. The group was already suffering from an increase in labor and logistics costs, impacted by rising petrol prices.
“Our results are inherently unpredictable and can be significantly affected by many factors, including uncertainty surrounding the impact of the Covid-19 pandemic, currency exchange rate fluctuations, changes in global economic conditions and customer demand and spending, inflation, the labor market and the world supply chain constraints, world events, the growth rate of the internet, online commerce and cloud services and the various factors,” Dave Fildes, director of investor relations, told analysts on April 28.
“We continue to face multiple cost pressures in our consumer business,” added Chief Financial Officer Brian Olsavsky. “We divide these into two areas: externally generated costs, mainly inflation, and internally controllable costs, mainly productivity and fixed cost reduction. The external costs are the result of mounting inflationary pressures throughout the first quarter.”
To defend its sharp rise in Prime prices, Amazon highlights the various advantages that this subscription offers.
“We’ve increased the number of products available with fast, unlimited Prime delivery, recently added ultra-fast fresh grocery delivery, and significantly expanded our high-quality digital entertainment, including television, movies, music, games and books,” the spokesperson said.
Prime Video has tripled the number of Amazon Originals since 2018, the spokesperson said, launching new series and films like The Boys and The Terminal List, as well as locally produced originals like Clarkson’s Farm, Backstage, Totems, Jack Reacher, LOL: The Last laughs.
The service also offers access to Premier League football and Autumn Nations rugby in the UK.
Amazon isn’t the only one passing on the current rising costs to consumers. Its rival Netflix (NFLX) – Get the Netflix Inc. report did this too.
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