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Source: Amazon

The changes will be introduced from 15 September or when members next renew

Amazon is increasing the cost of its Amazon Prime subscription service in the UK to £8.99 a month, or £95 a year.

The move was due to “increased inflation and operating costs in the UK continuing to rise” the e-commerce giant said.

The monthly fee for Prime has increased by nearly 12% and the annual fee by 18%. The subscription had cost £7.99 monthly and £79 a year.

The increases are less than those taking place in other European markets, which come after a similar hike in the US in February of about 14%.

The changes will be introduced from 15 September or when members next renew. Customers can “lock in” the current annual price for the next 12 months if they sign up or switch to the annual plan by 14 August.

“This is the first time Amazon has changed the price of Prime in the UK since 2014, and we will keep working to ensure Prime offers exceptional value for members,” Amazon told The Grocer.

It also pointed to the fact the new annual fee was equivalent to £7.92 a month, less than the current pay-monthly fee.

Some merchants selling on the platform have also been hit with fee increases. In May, a fuel and inflation surcharge on sellers storing and shipping their products in major European markets of around 4.3% was imposed, following a similar move in the US.

According to research by Consumer Intelligence Research Partners, Prime membership growth in the US stagnated after the price hike earlier this year.

“I expect much the same reaction here, not least because UK consumers are really starting to feel the pinch more than anywhere else,” said Miya Knights, co-author of Amazon.

”It wouldn’t be fair to Amazon to ignore the fact that Prime has cost the same since 2014 and was therefore long overdue a price rise, and that many other subscriptions services are passing on higher operating costs to customers by increasing prices, while consumers cancel them in their droves,” Knights added.

“However, I can’t help but feel this is a huge strategic misstep on Amazon’s part to introduce this price rise now. It would’ve seemed relatively easier to absorb had they done it at the same time as the US price increase,” she said

Almost nine in 10 Brits shop at and more than 50% have access to Prime, according to Mintel.

The cost of living crisis is seeing consumers take stock of their subscriptions, with paid-for streaming services falling for the first time in Q1 after a decade of growth. Nevertheless, according to Kantar Worldpanel, Prime (along with Netflix) had the lowest rate of customer abandonment.

A recent survey by Pattern found 24% of Brits expect to increase their use of this year, with 61% reporting they would spend about the same.

Amazon has been working to boost the attractiveness of Prime. Its Amazon Fresh price-matching activity against Tesco requires Prime membership to access, likewise its recent 25% off promotion in Amazon Fresh stores.

“Prime offers the best of shopping and entertainment, and continues to improve each year,” the company said. “We have increased the number of products available with fast unlimited Prime delivery, recently added ultra-fast fresh grocery delivery, and have significantly expanded our high-quality digital entertainment, including TV, movies, music, games, and books. Prime Video has tripled the number of Amazon Originals since 2018 alone, as well as adding access to Premier League football and Autumn Nations rugby in the UK.”

In April this year, Amazon globally reported its smallest year-on-year rise in revenue for 20 years: just 7% in Q1 2022.

At the time Amazon CEO Andy Jassy said the company was “squarely focused on improving productivity and cost efficiencies” after the pandemic and war in Ukraine had brought “unusual growth and challenges”.

It is due to report its Q2 results on Thursday. Analysts have been steadily reducing their earnings and sales forecasts for Amazon this quarter, the next, and for 2023.

“Having invested heavily in sports, big budget TV shows and its physical Amazon Fresh real estate, I can’t help but feel there are going to be really tough times for Amazon ahead in the UK particularly, which is something it’s had the luxury of being relatively shielded from until now,” Knights said.