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McDonald's, Amazon, Apple: Consumers Say They Won't Spend More, but Major Brands Disagree


Amazon's decision to raise the threshold for free super saver shipping was just one of a few price changes that surprised shoppers this week.

In the same week that a new report revealed that 72% of Americans are holding back on spending -- for reasons such as stagnant income, the need to save more, and worries about the economy -- price increases by major retailers dominated headlines. Here are three pricing changes that may require consumers to dig a little deeper into their wallets -- whether they want to or not.

The Dollar (or Two, or Three) Menu

McDonald's (NYSE:MCD) Dollar Menu has been exactly that since 2002 -- until now. Earlier this week, as the company announced third quarter earnings that included weak sales and margins, CEO Don Thompson confirmed a national rollout of the company's Dollar Menu & More. (Ad Age reported the menu will take effect on November 4.) Tested in five markets earlier this fall, the move signals a renewed shift toward value messaging in the wake of menu additions like Mighty Wings and "healthier alternatives" like Chicken McWraps.

Though the value menu will still include $1 items, the revamped selection will be priced up to $5 for apparently more valuable items, such as the 20-piece Chicken McNuggets offering. Given that Wendy's (NASDAQ: WEN) went through a similar menu change in January 2013 when it swapped the 99 Cent Menu for its Right Price Right Size Menu alternative -- which includes items priced up to $1.99 -- and increased the price of its least expensive burger to $1.19, Morningstar analyst R.J. Hottovy told the Chicago Tribune the shift may provide the direction McDonald's has struggled to find of late. He stated that "McDonald's is a place known for offering great value to consumers. I think that's something you have to keep at the core of your marketing messaging."

McDonald's national marketing campaign to introduce the new menu, slated to launch November 11, may also demonstrate its resolve to learn from the mistakes of its competitors. When asked for granularity around the outcome of Wendy's Right Price Right Size launch on its first quarter 2013 earnings conference call, President and CEO Emil J. Brolick said that the company's varied messages lead to soft business, stating, "We have to evolve to a situation where we have more continuity against a price value message … as opposed to a pillar approach."

Amazon Not-So-Super Saver Shipping

McDonald's isn't the only major brand on a quest to revamp pricing. Amazon's (NASDAQ:AMZN) first move toward an increase began back in March when it announced a change to its Amazon seller costs, citing rising transportation and fulfillment expenses. (That announcement was soon followed by competitor eBay's (NASDAQ:EBAY) attempt to lure disgruntled sellers by simplifying its own seller fee structure.)

(See also: EBay Goes All Out to Compete With Amazon on Same-Day Delivery)

But it was an announcement this week to raise the threshold to qualify for Free Super Saver Shipping from $25 to $35 for the first time in 10 years (while marketing a more aggressive push toward its $79 per year Amazon Prime subscriptions), that captured the attention of customers, investors, and analysts. Though Amazon doesn't officially release the metrics behind Prime memberships, earlier this year Business Insider reported that an analysis by Hottovy (which also covers Amazon for Morningstar) estimates an incremental profit of about $78 for every Prime member. Whether the changed shipping threshold adds more perceived value to Prime just as Amazon enters into its most important quarter of the year remains to be seen, though CEO Jeff Bezo's reiteration of Amazon's long-term strategy in his 2013 shareholder letter may say it all:

We don't celebrate a 10% increase in the stock price like we celebrate excellent customer experience. We aren't 10% smarter when that happens and conversely aren't 10% dumber when the stock goes the other way. We want to be weighed, and we're always working to build a heavier company.

Petite Increase for Apple's iPhones in France

Though most of Apple's (NASDAQ:AAPL) October media coverage has surrounded its recent hiring of Burberry (OTCMKTS:BURBY) CEO Angela Ahrendts, who will become senior vice president of retail and online stores this spring, and the October 22 unveiling of the iPad Air, they weren't the only changes afoot. Last week, Apple quietly boosted the cost of the iPhone 5S and 5C in France, both online and in stores, which resulted in a price increase equal to about $13 to $25 USD. Though moderate price fluctuations for Apple products are common in some international markets in order to adjust for exchange rates and tax (VAT) changes, the reason for the price increase in France remains unclear.

Twitter: @WellnessOnLess
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