In an analyst conference call yesterday, Amazon’s CFO said the company is considering increasing the member’s fee for Amazon Prime by $20 to $40 to add cash to the company’s spare bottom line, reported the New York Times.
Some 25 million customers currently pay $79 a year to belong to the loyalty program that promises free two-day delivery, streaming videos, and tax services. But Forrester retail analyst Sucharita Mulpuru estimates the company loses between $1 billion and $2 billion a year on the service.
Amazon is known for big revenue totals and measly profits. It reported just $274 million in net income on sales of $61 billion in 2013, and the company looks to add $500 million or more to its profits by hiking membership fees for Amazon Prime.
The fee hike is also needed to offset rising shipping costs. FedEx and UPS both raised rates by 5% recently, and the U.S. Postal Service’s 6% rate increase took effect at the end of January. “Shipping costs have gone up a lot, fuel costs have gone up a lot,” said Amazon CFO Thomas J. Szkutak during the call.