Amazon.com, Inc. (AMZN): Is ‘Prime Exclusive’ Smart or Outrageous?

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Amazon.com, Inc. (AMZN) would love for you to become an Amazon Prime member. The company offers many carrots to encourage you to fork over the $99 for an annual membership. But it looks as though Amazon may have crossed a line with it’s new Prime Exclusive titles.

Amazon.com, Inc. (AMZN): Is 'Prime Exclusive' Smart or Outrageous?

Specifically, AMZN has moved from carrot to stick by designating some popular video games and movies as “Prime Exclusive.” If you aren’t an Amazon Prime member, you’re out of luck. At least if you’re hoping to score a copy at Amazon’s low price.

It was website Videogamer that first noticed some of the current top-selling video game titles had been made Prime Exclusive selections on Amazon’s UK website. GTA 5, Assassin’s Creed Syndicate, FIFA 16, Far Cry Primal and Rainbow Six Siege were among the titles designated Prime Exclusive for various consoles.

If you tried to select these titles without an Amazon Prime membership, they could not be added to your shopping basket.

Amazon offered this explanation to Videogamer:

“One of the many benefits of Amazon Prime is access to exclusive selection on a number of great products. Customers who are not Prime members can sign-up for a 30-day free trial of Amazon Prime, or they can purchase those items from a Marketplace seller.”

Additional digging showed Prime Exclusive games and popular movies on the main Amazon site as well.

Prime Exclusive Experimentation: Good or Bad?

For example, I checked out the movie Interstellar on Blu-Ray and at the $9.00 Amazon price, the title is marked as a Prime Exclusive. When I tried to add it to my cart, a message displayed noting the movie is exclusively for Prime members. AMZN helpfully added a button to try out a 30-day free trial of Amazon Prime to get the movie, or I could buy a copy for $15.69 from a third party Marketplace seller.

It appears that AMZN is experimenting with using Prime Exclusive as another carrot to sell Amazon Prime memberships, but in doing so, it is hurting those who aren’t members.

CNN Money reported in January that 46% of US households have at least one Amazon Prime member. That’s pretty impressive, but it still leaves a lot of customers who don’t have a membership and in many cases, the cost may be a barrier.

And for someone who is not an Amazon Prime member — whether because they can’t afford the cost or because they shop infrequently — buying an item designated as an Amazon Exclusive is either not possible, or much more expensive.

Although the items affected seem to currently be limited to movies and video games, it’s entirely possible Amazon could extend the Prime Exclusive designation to other products.

As Gizmodo’s Andrew Liptak points out, this could be problematic for several reasons. Restricting the best prices to those with an Amazon Prime membership can end up forcing lower income buyers — the ones who can’t afford the $99 annual cost — to pay more. AMZN could also use that Prime Exclusive designation as a weapon against its suppliers, using it to restrict the number of potential buyers.

Finally, if expanded into other product categories, the Prime Exclusive program has the potential to harm AMZN, with non-member shoppers who run up against higher prices opting to shop elsewhere.

Once offsite, they may well continue shopping with the competition.

Amazon is quick to point out anyone can sign up for a free 30-day trial of Amazon Prime. The company also recently introduced $10.99 monthly prime membership plans, so someone could sign up just for the holiday shopping season, for example. Plus, that membership gets all sorts of goodies besides the Prime Exclusive deals.

Amazon Prime memberships are something of a Holy Grail for the retailer, in the form of recurring revenue that also keeps members locked into shopping with Amazon.

However, before going too far with Prime Exclusives, Amazon should remember how it got to be such a retail behemoth in the first place — by offering competitive prices and massive product selection for everyone.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

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Brad Moon has been writing for InvestorPlace.com since 2012. He also writes about stocks for Kiplinger and has been a senior contributor focusing on consumer technology for Forbes since 2015.


Article printed from InvestorPlace Media, https://investorplace.com/2016/04/prime-exclusive-amazon-prime-amzn-outrageous/.

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