Amazon.com Inc. announced yesterday that it was raising the price of its annual Prime subscriptions by 17% as it tries to offset higher shipping costs for its products, as well as wages.
Its stock price rose 17% as Amazon beat expectations for profitability over the holiday season.
If its stock price increases by the same percentage on Friday, it will be the biggest percentage increase since October 2009, while the fortune of company founder Jeff Bezos will increase by around $20 billion.
For the holiday season, Amazon earned $14.3 billion, doubling its net income from a year earlier.
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That revenue included $11.8 billion in pretax profits from the company’s stake in electric vehicle maker Rivian Automotive.
Immediately after the unexpected pandemic-driven online ordering revenue, Amazon spent money improving its operations to deal with its malfunctions, most recently, caused by the Omicron variant of COVID-19.
The company promoted financial incentives to attract hundreds of thousands of workers in a tight labor market, while paying more for product shipments because it could not send them to proper warehouses.
Now, as analysts expected, Amazon has more than 200 million Prime subscribers, whom it can turn to and entice them with its products and services, while increasing their annual subscription.
The monthly subscription in the United States for the fast delivery of products, but also for the services of the streaming service, is reduced from $12.99 to $14.99, while the annual subscription is reduced from $119 to $139 .
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The increase will take effect on February 18 for new subscribers and reflects greater benefits, such as prescription drug discounts, but also faster shipping, according to Amazon.
The company’s chief financial officer, Brian Olsavsky, told reporters in an online press conference that Amazon expected some of its subscribers to cancel their subscriptions.
Revenue per Prime subscriber has increased significantly during the pandemic, Olsavsky added.
With over 200 million members worldwide, the Prime service inspires consumers to shop more on Amazon.
This way they make most of their subscriptions.
Revenue from these subscriptions for the fourth quarter of 2021 increased 15% to $8.1 billion.
Amazon announced no changes for Prime subscribers outside the United States.
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