A: you might have already guessed my answer, it depends . . .
I am not an Amazon Prime member but I am quite curious about this service and got to wondering if this is something that you should consider spending your money on?
I did some research and read a number of articles on the subject – I will put a link at the bottom of this post to one of my favorites on this subject, by Motley Fool.
My first question in this type of analysis is to ask why a company (Amazon in this case) would offer such a service? The answer, almost invariably, is because it makes them money. . .
There are about 90 million Prime subscribers in the U.S., so a lot of your neighbors already think it’s a good idea. Prime members in the U.S. spend about $1,200 annually, vs. about $600 for non-members. The annual fee to become a prime member is $99 (single payment) or $12.99 per month ($156 annually); the monthly cost went up 18% in January 2018, it was $10.99 previously. Amazon thinks their Prime service is a good deal (for Amazon’s profits of course – they’re already the dominant on-line retailer after all, and its not even close), but is it a good deal for you?
Let’s do a high level review of what the Amazon Prime service provides (before we pass judgment); there are many facets to this service (all included with your $99 fee), which makes the cost/benefit analysis a little complicated, and sorta depends on where you live.
1) Free and faster (2 day) shipping – with no minimum order required. This is the cornerstone of the service. This probably deserves a couple additional footnotes. You can get free standard shipping for orders over $25 anyhow (without being a Prime member) – but standard shipping takes 5 – 8 days. Although the vast majority of items qualify for 2 day Prime shipping, not everything sold on Amazon qualifies for 2 day Prime shipping – you can filter for items that are eligible for 2 day shipping (just look for the Prime logo) – just a little wrinkle I want you to be aware of. At $99, you would probably have to make 20 orders (of less then $25) to offset the upfront fee (assumes an average $5 shipping fee). Some will certainly value the convenience of 2 day shipping (note that same day shipping is available (via Prime Now) in select cities – 35 currently) and not having to wait until you build up a $25 order.
2) video streaming. Prime membership also includes free access to thousands of movies and TV shows (including some original/exclusive content – such as The Grand Tour – a reboot of the popular BBC show Top Gear). Basically Amazon video streaming is a cheaper (watered-down) version of Netflix; it’s still worth something, even if it isn’t on par with other top-tier video streaming services.
see my previous post on my experience as a cord cutter
3) music streaming. Prime membership also includes access to about a million songs (no additional charge). It doesn’t have the selection of bigger services like Spotify or Apple music (over 30 million songs each), but again, it’s worth something. See my previous post on comparing Spotify and Apple Music.
4) Audiobook streaming. Prime membership allows listeners to stream audiobooks on demand – rotating a selection of about 50 titles, as well as unlimited access to Audible channels – original programs, comedy, lectures, news articles, etc.
5) Prime reading. Prime membership provides unlimited access to a rotating selection of more than a thousand ebooks, magazines, and comics. These can be accessed via a Kindle, Fire tablet, or via the Kindle app. It will be missing some popular titles but it’s still worth something.
6) Prime photos. This service allows secure, unlimited photo storage in the Amazon cloud.
7) Twitch Prime. This service allows ad-free viewing on Twitch, the social-video platform and community for gamers.
There are other lesser perks that I didn’t list here, such as early access to Amazon lightning deals, but I think I have listed the vast majority of the services you get (for no additional charge) with Amazon Prime membership.
Let me circle back and remind readers that data indicates that Prime members spend about twice as much as non-members and about 40% more per transaction. I believe some of this behavior is psychological – people want to make their membership “worth it” – something to justify their annual $99 membership fee. I think this is potentially dangerous – while Amazon does offer fairly low prices, some analysis indicates that about 50% of their items can be purchased cheaper elsewhere (e.g., Walmart – their biggest competitor – which offers an online price match guarantee and free shipping options as well). I don’t want your Prime membership to be a license to spend more and I certainly don’t want you to stop comparison-shopping. I recommend you try dealnews.com to help compare online prices. I believe Amazon is counting on you getting lazy and buying more and more from them (blind loyalty) – remember, they aren’t always offering the best prices. . .
In summary, Amazon Prime might be a good deal if you already frequently order from Amazon (at least 20 orders per year) – they certainly have great prices on some items – don’t stop comparing prices! It certainly makes shopping more convenient – especially if you’re already invested in the amazon ecosystem (Kindle e-reader, Fire tablet, echo, etc.). I’m sure faster shipping is important to a lot of you as well – especially if you live in a fairly remote area that’s not that close to big box retailers (e.g., Wally World). It also might make sense if you opt for Amazon Prime and then cancel your Netflix and Spotify Premium subscriptions – this savings alone could offset the $99 annual fee.
However, if you don’t frequently (20 or more) order from Amazon and won’t use their video or music streaming services, then you should probably not become an Amazon prime member. Think about it (use critical thinking) – run some numbers. (review your own Amazon order history). Are you a disciplined shopper? – or will you spend more if you have a membership? Compare Amazon Prime to Walmart – many of the Walmarts prices are cheaper and they offer free shipping options as well (called shipping pass) – plus I think Walmart’s return policy could be easier to use (more physical locations). I recommend you try a free 30 day trial of Amazon Prime before you pony up the $99 (or $156 if you pay monthly) for an annual membership.
See my previous post on critical thinking skills.
I personally will not be paying $99 to become a Prime member. We don’t order that much from Amazon (maybe a few times per year – mostly at Christmas) and I don’t think I would use the other (e.g., music, video, book streaming etc.) services much either.
Let me know what you think of Amazon Prime. I might do a separate post on which items are usually cheapest at Amazon vs. other online retailers – it’s tricky (by design) . . .
https://www.fool.com/investing/2017/01/16/is-amazon-prime-worth-99-a-year.aspx
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