Among the buzzed-about news from Amazon's fiscal fourth-quarter earnings release was the announcement that the cost of an annual Prime membership will climb from $119 to $139 (later this month for new members, after March 25 for renewing members).
Amazon last raised the price of a Prime membership in 2018; before that, the only price increase came in 2014, when the annual fee rose from Amazon's initial offering of $79 to $99 following the launch and expansion of Amazon Prime Video.
That Prime membership used to get members free deliveries on orders of $35 or more from Amazon-owned Whole Foods Market, but Amazon scrapped that benefit in select markets late last summer before nixing it nationwide in the fall. Now, Whole Foods deliveries cost $9.95. Delivery from the growing Amazon Fresh network of grocery stores remains free with a $35 order minimum.
An extra $20 for a Prime membership isn't likely to prompt a meaningful wave of Amazon Prime cancelations from those affected and annoyed by—but still willing to shell out for—Whole Foods' delivery fee. But for more budget-conscious consumers who now have many more streaming video options and grocery delivery options than they did in 2018, there could be a different value calculation when it comes time to decide whether to renew their Prime membership.
Rivals Walmart and Target have shown they're ready to pounce. Back in October, for one day only, Walmart offered $9.95 back on a new annual membership—currently priced at $98—to Walmart+, the Bentonville, Ark.-based retailer's membership program that launched in September 2020. The credit coincided with the launch of Whole Foods' $9.95 delivery fee.
And Target this week is quietly offering 50% off an annual membership for Shipt, the Target-owned delivery specialist serving not just Target stores but also other large retailers such as H-E-B, Meijer and CVS. New-member pricing is $49 for a limited time; membership offers free unlimited deliveries on orders of $35 or more.
Cincinnati-based Kroger, with an eye toward customers who appreciate the convenience of grocery delivery but who don't need their groceries that fast, launched its Boost paid-membership program last fall with a $59 annual option that offers free next-day delivery with a $35 order minimum and 2x fuel points. For $99, customers can get deliveries in as little as two hours.
Walmart has been mostly quiet on the performance of its Walmart+ program over the past year, though as promised when the program launched, it has continued to roll out new benefits for members. Among these are Walmart+ Rx for Less, introduced in June, which gives Walmart+ members access to select commonly prescribed medications at no out-of-pocket cost and savings of up to 85% on other prescription drugs. (Amazon launched its online Amazon Pharmacy late in 2020, offering prescription savings to Prime members and two-day delivery.) In November, Walmart+ members had early access to sales in Walmart's Black Friday Deals for Days events. Walmart is slated to announce fiscal fourth-quarter 2022 earnings on Feb. 17.
Amazon, in its earnings release, pointed to the retailer's recent No. 1 overall ranking (for the second year in a row) among U.S. grocery retailers in Dunnhumby's fifth annual Retailer Preference Index. Amazon Fresh, making its first appearance in Dunnhumby's survey of more than 100,000 U.S. households, landed at No. 5 on the index. And the retailer touted its expansion of Free Same Delivery to, now, more than 90 metropolitan areas in the U.S., and Faster Same Day Delivery (delivery in as little as five hours) to a total of 24 U.S. metro areas—although in a call with investors, Amazon CEO Andy Jassy acknowledged recent strains on fulfillment and delivery capacity due in part to the omicron-fueled surge in COVID-19 cases and related absences.
Last May, Michael Della Penna, chief strategy officer at market intelligence provider InMarket, offered this take on Amazon's grocery approach in an interview with WGB: "Amazon is building a grocery business that closely resembles that of a car manufacturer, appealing to Honda and Acura buyers with Fresh, and Lexus with Whole Foods," he said. The question is whether—and how many—of those longtime Honda loyalists may be swayed to sever their relationship with Amazon's big blue vans.