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Amazon increasing Prime fee as first quarter sales spike 43% to hit $51B

Amazon sales soared in first quarter of 2018 and it's a trend the mega omnichannel player expects to continue. One helpful factor is a move to increase Amazon's annual Prime membership fee by $20.

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April 27, 2018 by Judy Mottl — Editor, RetailCustomerExperience.com & DigitalSignageToday.com

Earnings in the first quarter of 2018 for omnichannel retail powerhouse Amazon were robust all around with a 43 percent jump in net sales, hitting $51 billion, compared to $35.7 billion a year ago.

Operating income was even healthier, Amazon reported in an earnings call Thursday, spiking 92 percent, to $1.9 billion, compared to $1 billion compared to a year ago. Net income was $1.6 billion compared to last year's first quarter $724 million.

Amazon, according to CFO Brian Olsavsky, who led the earnings call along with Dave Fildes, director of investor relations, is focused on helping emerging brands reach consumers and drive brand awareness. It's also focused on driving revenue and planning to increase its Prime membership from $99 a year to $119 a year for new customers come May 11. The increase for current Prime customers will happen starting June 16.

The Amazon leaders described the Prime program as the "general driver," for its North American sequential growth and that Amazon is seeing strong customer demand and better customer engagement on the digital front.
It is the first membership fee increase since March 2014, noted Olsavsky, who called Prime "the best deal in retail." He said.

Amazon is "always" evaluating the program's fee and the increase is due to the fact Prime is offering much more value than four years ago. "The cost is reflective of that value," said Olsavsky. He noted that in 2014 Amazon offered 20 million products available for two-day delivery. Today it offers 100 million products and a wider range of delivery options including same day and one-hour service.

The Prime cost increase comes on the heels of several other Amazon strategy moves. One is a multi-year partnership with Best Buy to sell Amazon's Fire TV Edition to consumers in the U.S. and Canada. The second is news that Amazon is readying to launch its own Best Buy-type ‘Geek Squad' home technology support service.

Amazon also recently announced that it was cancelling the Whole Foods loyalty program for Whole Foods, which it acquired last year, and offering Amazon Prime members who shop at Whole Foods a 5 percent earn back when using Amazon's Prime Rewards Visa Card. Amazon's Music unlimited subscription grew more than 100 percent over the past six months, according to a press release on the earnings news.

Amazon's financials may be evidence of a new study's findings which claim consumers, especially millennials, are increasingly expecting an "Amazon-like" experience when in a retail store environment and that means retailers need to double down on engaging, convenient shopping experience.

Going forward Amazon expects its robust sales growth to continue, hitting between $51 billion and $54 billion in the second quarter and operating income to hit between $1.1 billion and $1.9 billion.

Regarding its evolving voice assistant device technology strategy via its Echo line of products the Amazon leaders said the devices are driving voice commerce forward and proving to have "great stickiness" in the home.

About Judy Mottl

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Judy Mottl is editor of Retail Customer Experience and Digital Signage Today. She has decades of experience as a reporter, writer and editor covering technology and business for top media including AOL, InformationWeek, InternetNews and Food Truck Operator.

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