Amazon upped Prime's price tag — here are a few reasons why (AMZN)

pulse

April 30, 2018 3:48 PM

Amazon is increasing the price of Prime to $119 a year, up from $99, which could help it secure more revenue as its e-commerce sales growth slows. The price will switch on May 11, and will apply to renewals starting June 16.

This story was delivered to Business Insider Intelligence "" subscribers hours before appearing on Business Insider. To be the first to know, please .

Amazonreportedits earnings for Q1 2018 last week, revealing that it brought in $51 billion in net sales, up 43% year-over-year (YoY).

A number of segments drove this performance, with third-party seller services racking up $9.3 billion, up 39% YoY, AWS drawing $5.4 billion, jumping 49% YoY, and its physical stores, which include Whole Foods locations, bringing in $4.3 billion.

Its “Other” segment, which primarily consists of sales of advertising services, skyrocketed to $2 billion, which is up 132% YoY, more than doubling the segment’s 60% YoY growth in Q4 2017.

But Amazon’s biggest sales segment, its online stores, saw sales decelerate for the second consecutive quarter. The segment brought in $26.9 billion in sales for the quarter, marking an increase of 13% YoY. However, that's down from the 17% and 22% YoY growth seen in Q4 2017 and Q3 2017, respectively.

This slide has been masked by other segments’ stellar performances, but Amazon’s expanding e-commerce dominance may be slowing. Of course, 13% YoY growth for such a large number of sales is still good, but it's notable that Amazon’s ascension is decelerating, though it could certainly bounce back soon.

The company is increasing the price of Prime to $119 a year, up from $99, which could help it secure more revenue as its e-commerce sales growth slows. The price will switch on, and will apply to renewals starting, CFO Brian Olsavsky said in the company’s most recentearnings call. With a subscriber base of over100 million consumers, this hike will add a significant amount of revenue for Amazon, supplementing its online sales if they continue to decelerate.

Amazon may be raising Prime’s price tag for a few reasons: