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: Amazon itself denied culpability, blaming the carriers. But it's hard not to see the specter of overpromising in those million pre-Christmas Prime sign-ups. Shipping rates can't get any lower once the system is maxed out. Exclusive Offer
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Even though there's no other indication that Prime's fabled reliability has otherwise been compromised, the price of keeping its two-day promise has apparently become too much for Amazon to bear. On last week's earnings call, Amazon CFO Tom Szkutak said that Prime's popularity has risen dramatically during the nine years of its existence and that Prime members are ordering more per customer than ever before. And yet, he said, "even as fuel and transportation cost have increased, the $79 price has remained the same." Even if Amazon does raise Prime's price to cover those increased costs, it may still lose money. Shipping losses are growing by a rate of nearly one-quarter year-over-year, and Amazon is spending almost twice as much on shipping as it charges, writes Colin W. Gillis, director of research at BGC Financial. The proposed Prime price hike won't cover that deficit, Gillis predicts. "