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Is Amazon Prime Worth the Money?

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Amazon.com just raised the price of its Prime delivery service. Is it still a good deal?

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Editor's Note: This article was updated to reflect Amazon Prime's shared shipping benefits.

A reader asks the following:

Is Amazon (NASDAQ:AMZN) Prime worth the money? The company just raised the price by $20 and I can't decide whether it's still a good deal.

Great question. Let's take a look at what you get with Amazon Prime:

  • Free two-day shipping on most, but not all, items on Amazon.com (for example, used products from third parties typically aren't Prime-eligible)
  • Access to Amazon's Prime Instant Video Service, which offers free streaming of movies and television shows, including Amazon exclusives such as Alpha House and Betas
  • The ability to "borrow" e-books from the Kindle Owners' Lending Library -- those e-books can then be read on Amazon Kindle devices, with a limit of one book per month
  • Eligibility for the Kindle First program, which gives Kindle owners free access to one of four e-books selected by Amazon editors.

So is this worth $99 per year following a 30-day free trial?

It depends. There are a lot of moving parts to think about. If you like really, really like shopping on Amazon and won't miss $99, just get it. If you spend a lot of money on shipping charges and/or you value getting items to your door quickly, Prime may also be a good buy.

Also, keep in mind that the Prime shipping benefits (but not the digital content) can be used by up fo four additional family members.

However, if you're an active Amazon shopper, depending upon your purchase patterns, you actually may not be spending much on shipping as it is. Many Amazon orders above $35 qualify for free standard shipping. And keep in mind that Amazon's standard delivery time is five to eight business days, but it's not uncommon for orders to be delivered much faster than that (does two-day shipping actually matter to you?).

So it's a good idea to go through your online purchases from Amazon over the past year and add up the numbers -- you may have spent less money on shipping than you think and still received items in a timely manner.

Finally, if you like Amazon's selection of Instant Video titles (especially if you own a Fire TV or other compatible device) and/or you're a Kindle owner, you can get a lot out of Prime in terms of video and book content. That could be the swing factor for some people.

Here's why I decided to stick with Prime, despite the $20 increase:

  • I regularly order small items that don't quality for free shipping, and I often want these products (typically small electronics, accessories, personal care items, and snacks) quickly. Typically, I'm paying less than what I otherwise would in stores.
  • When I order bigger and more expensive stuff, two-day shipping offers something close to instant gratification.
  • I own a Kindle and I like using the Lending Library. That's probably worth $30 to $40 to me over the course of a year.
  • I occasionally make use of Prime's Instant Video service (which I'd value at $10 to $20), even though I'm actually more of a Netflix (NASDAQ:NFLX) guy.

So for me, Amazon Prime makes sense. I save money on most things I buy, and the free content sweetens the deal a bit.

Now there is a downside to "free" (if you're paying a $99 annual fee, it's not exactly free) two-day shipping -- it could very well turn you into a shopaholic. A 2013 study from Consumer Intelligence Research Partners found that Amazon Prime customers spend an average of $1,340 per year versus $650 for Amazon customers who don't use Prime.

So if you think Prime could give you reason to shop for things you don't need, you'd better think twice, lest you end up with a pirate flag on your office wall:



Nonetheless, I crunched the numbers on my own Amazon account to see if Prime is actually costing me money through irresponsible shopping.

From January 1, 2012, to August 15, 2012, I placed just nine orders on Amazon.

I joined Prime on August 16, 2012, and by the end of the year, I had placed an additional 42 orders.

In 2013, I was up to 72.

Of those 72 orders, I truly regret only three of them:

1. A $17.88 beef jerky variety pack:




2. The Four-Hour Chef by Tim Ferris, a $16.34 book I never read:


3. The Breakfast Club on Blu-ray, which cost $13.14 -- it popped up on Netflix the day after it was delivered:


That's a total of $47.36 in wasteful spending -- not too bad for 72 orders.

And in 2014, I haven't made any dumb buys yet. I actually view the pirate flag as a valuable addition to Minyanville's NYC headquarters. It's worth the $6 just to see people laugh. Plus, a lot of my additional orders came from replacing in-store purchases, and on many of those buys, I saved money -- at least $20 to $30 on chewing gum and almonds alone.

However, unless $99 means nothing to you, I highly recommend doing the math before picking up Prime. It's great for me, but it may not be great for you.

Got a question about a tech product or company? Email Mike at mcomeau@minyanville.com, and maybe you'll see an answer here.

Twitter: @MichaelComeau

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No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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