by Felix Richter, Feb 7, 2022
When Amazon reported its latest quarterly earnings last week, the company also announced a price increase for Prime membership in the United States. The monthly fee for the popular members program will be raised from $12.99 to $14.99, while the annual membership will go from $119 to $139. Over the past few years, Amazon has added more and more perks for Prime members, including fast and free shipping as well as digital entertainment (i.e. music and video streaming) and exclusive deals (think Prime Day). While this is part of the company’s explanation for the first price hike since 2018, the other is arguably even more important: the rise in wages and transportation costs.
As the following chart shows, Amazon’s logistics costs have skyrocketed over the past decade, with shipping and fulfillment costs growing almost 40-fold between 2009 and 2021. Last year alone, the company’s shipping costs, which include sortation and delivery centers and transportation costs, amounted to $76.7 billion, with fulfillment costs (e.g. costs of operating and staffing fulfillment centers) adding another $75.1 billion to a hefty logistics bill. While Amazon’s revenue also grew more almost 20-fold since 2009, that wasn’t enough to offset the surge in logistics costs. In 2009, shipping and fulfillment costs amounted to 15.6 percent of net sales. By 2021, that share had risen to 32.9 percent.
According to estimates from Consumer Intelligence Research Partners, Amazon had 172 million U.S. Prime members at the end of 2021, up 30 million since the onset of the pandemic.
