Amazon to hike Prime prices in Europe as retailer grapples with costs

Amazon’s logo is seen at the company’s logistics center in Bretigny-sur-Orge, near Paris, France, December 7, 2021. REUTERS/Gonzalo Fuentes

NEW YORK, July 25 (Reuters) – Amazon.com Inc (AMZN.O) will raise fees for its Prime delivery and streaming service in Europe by up to 43% a year, the online retailer said on Monday, as set to counter higher costs days before it releases its quarterly financial results.

The price hike, after the one Amazon announced for Prime in the US in February, reflects growing pressure from Wall Street on new chief executive Andy Jassy to shore up profits as inflation rises and a slowdown looms.

Shoppers in Germany, Amazon’s second-largest market after the United States, will see annual Prime subscription fees rise 30% to 89.90 euros ($91.88). The retailer’s No. 3 market, the UK, will see a 20% increase to 95 pounds ($114.47) a year, while Amazon sites covering Spain, Italy and France will charge members Premium between 39% and 43% more per year.

The changes take effect from September 15 when members join or renew the next one.

Amazon cited “increased inflation and operating costs”, as well as faster delivery and more content to stream in the price hike statements, the first since 2018 for some countries. “We will continue to work to ensure Prime provides exceptional value to members,” he said.

In April, Amazon posted its first quarterly loss in seven years due to headwinds including rising wages, rising gas costs and an unrealized loss on its stake in Rivian Automotive Inc (RIVN.O).

In the quarter just ended in June, the value of this investment declined by another $4 billion. Ford Motor Co (FN), also an investor in Rivian, recently sold some of its shares.

Amazon said it remains committed to working with Rivian, “an important partner” helping it put thousands of electric delivery vans on the road in the United States in 2022.

Analysts on average expect net income of $1.38 billion when Amazon reports earnings on Thursday, according to IBES data from Refinitiv. This week, Walmart Inc (WMT.N) warned that its 2022 profit would fall more than expected as rising fuel and food prices cause consumers to cut discretionary spending. Read more

Amazon, after record operating profits from home shopping during the pandemic, is now on a cost-cutting program. He hasn’t filled roles at some warehouses, suspended construction of major office space in Bellevue, Wash., and slowed warehouse openings while letting leases expire.

It also increased the prices of some merchants selling on its platform. In May, Amazon imposed an average 4.3% fuel and inflation surcharge on sellers storing and shipping their products in major European markets, following a similar decision in the United States.

Analysts fear a slowdown could slow a major profit driver for the company, its Amazon Web Services (AWS) cloud division.

“AWS revenue is more at risk than (cloud rival Microsoft Corp (MSFT.O)) given that a larger portion of customers are in the startup space, which is under pressure,” said Bernstein Research in a recent note.

The extent to which Prime increases will offset costs was unclear. Months after the US surge began, the percentage of shoppers who were Prime members for a year had increased, Colin Sebastian of Baird Equity Research said after Amazon’s Prime Day event.

While July’s marketing blitz was “not a big hit”, he said, “there is less churn than feared due to higher membership costs.”

($1 = 0.9785 euros)

($1 = 0.8299 pounds)

Reporting by Jeffrey Dastin in New York Editing by Matthew Lewis and Deepa Babington

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