FORTUNE -- How much more would customers pay for an Amazon (AMZN) Prime membership?
That's the question Amazon is mulling over. During Thursday's quarterly earnings call, CFO Tom Szkutak announced that management might up Prime's $79 annual fee by anywhere between $20 and $40 due to increasing fuel and shipping costs.
The news surprised analysts. "The way they went about announcing it just didn't seem very Amazonian," says Mark Mahaney, managing director at RBC Capital, who expected a digital letter penned by Jeff Bezos on amazon.com, if anything. More importantly, Mahaney says he doesn't see "a financially obvious reason" to raise prices, pointing out that Amazon's shipping costs seemingly remain stable.
If a Prime price hike is in the works, the move could affect Prime's substantial U.S. user base, which could range between 10-15 million according to RBC Capital, depending on how it is executed. Raising the standard price as high as $119 a year -- a 50% increase -- would be asking a lot of members, spurring some to end their membership.
Instead, Mahaney predicts Amazon may take a different route and introduce a tiered pricing system: the higher the annual the fee, the faster the shipping. For $99, members could expect guaranteed next-day, sometimes same-day, shipping. Meanwhile, users could expect standardized two-day delivery for $79.
Since its introduction nine years ago, Amazon Prime has evolved into an amalgamation of the company's different services, including shipping, e-book lending, and video streaming. Last year alone, management disclosed the number of TV and movie streaming available had climbed from 33,000 to 40,000 movies and TV episodes.
Not only have those myriad features made Prime a more appealing proposition for customers, Prime members are emboldened to spend more because of expedited shipping. Consumer Intelligence Research Partners (CIRP), a Chicago-based equities securities research firm, estimates Prime members spend roughly $1,340 a year, compared to just $708 a year for non-Prime customers. (Mahaney goes further, calculating Prime members can spend up to four times their non-Prime counterparts.)
In the end, higher prices needn't mean bad news for Amazon if it plays its cards right. Says Mahaney: "This could actually be very positive for Amazon's fundamentals."
"Tens of millions" of Prime members could find themselves paying significantly more for expedited shipping.
FORTUNE -- Despite another quarter of solid sales growth for Amazon (AMZN), the Seattle-based e-commerce goliath saw its stock slide over 8% in after-hours trading.
For the fourth quarter of 2013, profits grew to $239 million, or 51 cents per share, from $97 million the same period before. Revenues climbed 26% year over year to $25.6 million. Profits MOREJP Mangalindan, Writer - Jan 30, 2014 5:50 PM ET
It's not just a loyalty-shipping program.
FORTUNE -- Last Friday, Amazon (AMZN) announced customers can now officially give others a $79 Amazon Prime membership -- a move that came just before the official start of holiday season.
Users simply add an Amazon Prime membership to their online cart, enter the recipient's email address, then select a virtual delivery date.
When it debuted in 2005, Prime was notable for two-day shipping. But the loyalty MOREJP Mangalindan, Writer - Nov 26, 2013 5:00 AM ET
Is the retail giant's rewards program profitable? Probably not. Is it a vital part of the company's future? Almost certainly.
FORTUNE – Launched in 2005, Amazon Prime aimed to get customers to spend more. For $79 a year, members got free two-day delivery on an unlimited number of items. Amazon sweetened the pot from there. Last year, it introduced Prime Instant Videos, an unlimited movie and TV streaming service similar to MOREJP Mangalindan, Writer - Feb 21, 2012 3:02 PM ET
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* Apple CEO Tim Cook spoke at the Goldman Sachs Technology and Internet Conference in San Francisco yesterday, addressing topics like working conditions in Chinese Foxconn factories, the runaway successes of the iPhone and iPad, and emerging markets. Cook also revealed there are now 100 million iCloud users -- 15 MOREJP Mangalindan, Writer - Feb 15, 2012 8:26 AM ET
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* Is Google (GOOG) working on an Amazon Prime competitor? The Wall Street Journal reports that the Internet giant wants to tackle Amazon's successful $79-a-year program, which offers features like expedited shipping, by letting its own users order goods online and receive them within a day. (The Wall MOREJP Mangalindan, Writer - Dec 2, 2011 10:20 AM ET
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