Amazon raises Prime prices in Europe as retailers grapple with costs

NEW YORK, July 25 (Reuters) – Inc (AMZN.O) said it will raise fees for its Prime delivery and streaming service in Europe by up to 43% annually, the online retailer said Monday, in The time it moves to tackle rising costs is days before it announces its quarterly financial results.

The price hike, after Amazon’s announcement of Prime in the US in February, reflects mounting pressure from Wall Street on new CEO Andy Gacy to shore up earnings with soaring inflation and a recession looming.

Shoppers in Germany, Amazon’s second-largest market after the US, will see its annual prime membership fee increase 30% to €89.90 ($91.88). The number 3 retail market, the UK, will see a 20% increase to £95 ($114.47) per year, while Amazon’s locations covering Spain, Italy and France will charge prime members between 39% and 43% per year.

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Changes are effective September 15th upon members joining or the next renewal.

Amazon cited “increased inflation and operating costs” as well as faster delivery and more content to stream in the data on price hikes, a first since 2018 for some countries. “We will continue to work to ensure Prime delivers exceptional value to members,” she said.

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

In the quarter ending in June, the value of that investment fell another $4 billion. Ford Motor Co (FN), also an investor in Rivian, recently sold some of its stock.

Amazon said it remains committed to working with Rivian, a “critical partner” that helps it put thousands of electric delivery trucks on the road in the United States in 2022.

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

Analysts expect average net income of $1.38 billion when Amazon announces results Thursday, according to IBES data from Refinitiv. This week, Walmart (WMT.N) warned that its 2022 earnings will fall more than expected as higher fuel and food prices prompt consumers to reduce discretionary spending. Read more

And Amazon, after record operating profits from home shopping in the shadow of the pandemic, is now on a cost-cutting program. It hasn’t refilled roles in some warehouses, paused construction on major office space in Bellevue, Washington, and slowed warehouse openings as leases are delayed.

It has raised the prices of some of the merchants who sell on its platform as well. In May, Amazon imposed an average of 4.3% fuel and inflation fees on sellers who store and ship their products in major European markets, following a similar move in the United States.

Analysts worry that the economic downturn could slow a key profit engine for the company, the Amazon Web Services (AWS) cloud division.

“AWS earnings are more vulnerable to exposure than (cloud rival Microsoft Corp. (MSFT.O)) due to a larger portion of customers in the startup space, which is under pressure,” Bernstein Research said in a recent note.

It was not clear to what extent the initial increases would offset the costs. The percentage of shoppers who have been Prime members for a year has grown, Colin Sebastian of Baird Equity Research said after the Amazon Prime Day event after months of surge in the US.

He said that while the marketing campaign in July “wasn’t a huge hit, there is less to be feared about rising membership costs”.

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(Reporting by Jeffrey Dustin in New York; Editing by Matthew Lewis and Deepa Babington)

Our Standards: Thomson Reuters Trust Principles.

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