Title: Amazon Prime Was Too Good to Be True After All | WIRED
Headings: Amazon Prime Was Too Good to Be True After All
Amazon Prime Was Too Good to Be True After All
Amazon really has no choice but to raise the price of its "free" two-day shipping program. The irony is that Amazon Prime has worked out just like Amazon wanted it to.
Amazon's Growth Engine Needs a Tune-Up
Profits Aren't Even the Problem

Content: As recounted in Brad Stone's The Everything Store, if Super Saver was coach, Prime was first class. For $79 per year, Prime members savored the service's speed and reliability, and, Stone writes, they were inclined to spend more based on the "faintly irrational human impulse to maximize the benefits of a membership club one has already joined." Though Amazon does not say how many Prime members it has beyond a general figure of "tens of millions", the company did claim more than one million new Prime sign-ups during the third week of December alone. Researchers have come up with various methods for gauging Prime's influence, and they estimate the average Prime member spends more than twice as much on Amazon annually than non-Prime members. All of this feeds what Stone calls Amazon's "virtuous cycle" masterminded by founder and CEO Jeff Bezos. " When customers spent more, Amazon's volumes increased, so it could lower shipping costs and negotiate new deals with vendors." Stone writes. " That saved the company money, which would help pay for Prime and lead back to lower prices." Amazon's Growth Engine Needs a Tune-Up
But now that cycle appears to be breaking down. The first sign may have been the Christmas 2013 shipping debacle that led Amazon to offer $20 gift cards to customers whose orders came late.