Amazon is raising Prime prices in Europe as the retailer struggles with costs

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NEW YORK, July 25 (Reuters) – Amazon.com Inc (AMZN.O) will increase fees for its delivery and streaming service Prime in Europe by up to 43% per year, the online retailer announced on Monday , while moving to the switch days before the release of quarterly financial results higher costs.

The price hike Amazon announced for Prime in the United States in February reflects mounting pressure from Wall Street on new chief executive Andy Jassy to shore up earnings as inflation rises and a downturn threatens.

For shoppers in Germany, Amazon’s second largest market after the United States, annual Prime membership fees will increase by 30% to €89.90 ($91.88). The retailer’s third-biggest market, the UK, is set to rise 20% to £95 ($114.47) a year, while Amazon sites covering Spain, Italy and France give Prime members between 39% and 43% a year will charge more.

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The changes will take effect from September 15th when members join or next time they renew.

Amazon cited “increased inflation and operating costs” as well as faster delivery and more content to stream in statements about the price hikes, the first for some of the countries since 2018. “We will continue to work to ensure Prime offers members exceptional value,” it said.

In April, Amazon posted its first quarterly loss in seven years on headwinds including higher wages, rising gas costs and an unrealized loss on its stake in Rivian Automotive Inc (RIVN.O).

In the June quarter just ended, that investment declined in value by an additional $4 billion. Ford Motor Co (FN), also a Rivian investor, recently sold part of its stake.

Amazon said it remains committed to working with Rivian, “a key partner” that will help it get thousands of electric delivery trucks on the road across the United States in 2022.

Amazon’s logo is seen at the company’s logistics center in Bretigny-sur-Orge, near Paris, France, on December 7, 2021. REUTERS/Gonzalo Fuentes

According to Refinitiv IBES data, analysts on average expect $1.38 billion in net income when Amazon reports results on Thursday. This week, Walmart Inc (WMT.N) warned its profit would fall more-than-expected in 2022 as higher fuel and grocery prices prompted consumers to ease discretionary spending. Continue reading

After generating record operating profits from at-home shopping during the pandemic, Amazon is now on a cost-cutting program. It hasn’t filled roles at some warehouses, halted construction of large office lots in Bellevue, Wash., and slowed warehouse openings while leases expire.

It has also increased prices for some merchants selling on its platform. In May, Amazon imposed an average fuel and inflation surcharge of 4.3% on sellers who stock and ship their products in key European markets, after similar action in the United States.

Analysts worry that a downturn could slow a key earnings engine for the company, its Amazon Web Services (AWS) cloud division.

“AWS revenue is more exposed than (cloud rival Microsoft Corp’s (MSFT.O)) as a larger portion of customers are from the startup space that is under pressure,” Bernstein Research said in a recent note.

How much the Prime increases will offset costs was unclear. After months of increases in the US, the percentage of shoppers who were Prime members for a year has increased, Baird Equity Research’s Colin Sebastian said after Amazon’s Prime Day event.

While the July marketing blitz was “no slouch,” he said, “there is less churn than feared due to higher membership costs.”

($1 = 0.9785 euros)

($1 = 0.8299 pounds)

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Reporting by Jeffrey Dastin in New York Editing by Matthew Lewis and Deepa Babington

Our standards: The Thomson Reuters Trust Principles.

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