Is Amazon Prime Worth the Money? Readers Speak Out
Following Amazon's price increase of its popular shipping service, Minyanville readers reached out with interesting responses about their Prime usage.
Prime works for me based on my usage of Amazon's services, and I encouraged readers to do some basic number-crunching to see if Prime was worth it for them.
However, Minyanville readers reached out to me with some interesting responses regarding their Amazon Prime usage, which means it's time to revisit the topic.
Reader Donald addressed the issue of gasoline savings:
This is an interesting topic, but gasoline costs aren't necessarily relevant here.
I've been an Amazon customer for years. I live in a small Kansas town which is 50 miles round trip from any and all stores, including groceries and clothing. The $99 Prime fee is easily saved through lower gasoline costs.
You can technically save money on gas right now by placing an order on Amazon without a Prime membership instead of going to the store. The main benefit with Prime is that you'll get what you ordered faster.
Remember, many items on Amazon are already eligible for free shipping.
Now, if having Prime would specifically allow you to make less car trips, that's another story.
All things being equal, if your car gets 20 miles per gallon, you'd have to drive 537 fewer miles to save $99.
That assumes the US Energy Information Administration's April 21 average national gas price of $3.683. The less efficient your vehicle and the higher your local gas prices, the faster you'll make that $99 back.
And of course, you'd still be reaping other benefits, such as access to Amazon's Instant Video service and the Kindle Owners' Lending Library.
Reader Harry thinks I left out multiple customer benefits for Prime:
The time savings issue is like the gasoline issue -- it's not necessarily a Prime-specific benefit, unless you're sure you'll drive less specifically because you have Prime. You can just as easily save time online shopping without Prime.
I think you may have overlooked several important Prime value points.
First up, there is time savings.
And an additional benefit for the eco-minded is the carbon footprint reduction.
Moreover, I am not sure you brought to light the value added for the $20 either. The number of additional product offerings, games, movies, original content series, etc. since the Prime inception has increased substantially. If you work the numbers correctly, I think you get a whole lot more value for your dollar today.
There may be some merit to the environmental angle, but the jury is out. You may not have to drive to the store to pick up a new book, but what about all the packaging and the fuel used in the delivery? It's tricky.
A widely cited study from Carnegie Mellon University's Green Design Institute found that shopping online via Buy.com reduces energy consumption and carbon dioxide emissions by 35% relative to traditional retail shopping.
However, with Buy.com, products are shipped directly from distribution partners to customers.
Amazon operates differently and relies upon its growing network of distribution centers.
Whether that's more environmentally friendly than a traditional retail chain like Wal-Mart (NYSE:WMT) or Best Buy (NYSE:BBY) is hard to decipher because there are so many moving parts in the equation.
Researchers from the Logistics Research Centre at Heriot-Watt University analyzed the carbon footprints of "last mile" deliveries and found that "neither home delivery nor conventional shopping has an absolute CO2 advantage," but that "the home delivery operation is likely to generate less CO2 than the typical shopping trip."
That supports the green case for online shopping, but it's not exactly a slam dunk.
However, Amazon's success revolves around effective logistics, so it has a clear economic incentive to reduce waste and shorten supply chains as much as possible. The same is true for shipping partners like United Parcel Service (NYSE:UPS) and FedEx (NYSE:FDX), both of which are rolling out more energy-efficient delivery vehicles.
And finally, a reader named Frank is 100% correct about how much Prime has improved since inception. When Prime debuted in 2005, it did not include the free streaming video and e-book content that comes with Prime.
Just today, Amazon announced a content-streaming deal with HBO, which will give Prime subscribers access to a nice selection of top-quality content, including all seasons of shows like The Sopranos, The Wire, and Six Feet Under.
In that regard, a 25% increase after nine years is more than fair.
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If you've got a question on a tech product or company, email me at firstname.lastname@example.org and you may see your question answered in a future column. Wondering about which Google (NASDAQ:GOOG) Android phone is best or whether Netflix's (NASDAQ:NFLX) price increases make sense? Drop me a line and let's talk about it.
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