6 Reasons Why Amazon Prime is a Bad Deal

by Dave Michels

A lot of people tell me how much they love Amazon Prime. They pay a fixed annual price, and receive two day shipping on most items plus a handful of other “free” services. Considering two day shipping is at least $10 and often more, it doesn’t take a lot of purchases to make this a (perceived) steal.

Prime started with shipping, and over the years it keeps getting better – and more expensive. Prime now includes commercial-free radio, unlimited video streaming, access to a Kindle library, and access to special events such as Prime Day.  

Too good to be true? Well it is true, but not so good. it’s a bad deal and I recommend skipping it.

1. It isn’t Free

Ask most people why they have Prime, and the answer is usually “because I like the free shipping.” It isn’t free! In addition to the annual fee, Prime items are often sold at a premium. You effectively pay for shipping twice. Amazon often lists the same item from different sellers, and the Prime one is always more.

By the way, what are these “add-on items?” According to Amazon: “The Add-on program allows Amazon to offer thousands of low-priced items that would be cost-prohibitive to ship on their own.” So much for free shipping. I though small, light items were cheap to ship. The add-on items are like life without Prime – buy enough and shipping is free (see item 2). They could at least offer add-on items via Priority mail for no additional charge.

2. Corollary to Not Free:

Almost any item that qualifies for free shipping under Prime also qualifies for free shipping in general. The catch is without prime you need an minimum order of $35.  I queue stuff in my cart until I hit free shipping. if I can’t wait (about 2 weeks on average), I just go get it in town (not too often -see 3 below). The problem is Amazon so desperately wants to sell Prime that they make life difficult for non-Prime customers. They can easily take a week just to ship a free order. They think this encourages Prime, but bad service is a bad strategy to increased loyalty.

3. I Can Wait

Many people consider the biggest frustration of online shopping to be the wait time. I figure, if I can’t wait I should go buy it locally while stores still exist. I order stuff online, and forget about it. Sometimes, when stuff arrives I can’t remember what’s inside the box. It can be hard to wait, but learn to do so – the best things are worth waiting for.

4. Not Green

When you buy something at Amazon, it gets picked off a shelf, packed in a box, and shipped via trunks and planes to the doorstep. It’s impressive, but it’s a bit silly if the same item is already nearby. Especially because retail items likely got nearby far more efficiently via truck and train in large quantities. Shipping and transportation is more efficient  when in quantity and when transported on the earth’s surface.

“The rise of free or cheap shipping offered by online retailers has led to a form of logistical gluttony, where express shipping services like FedEx and UPS are being used to deliver packs of toilet paper to a customer’s door…But it all seems a little bit excessive: Having a tube of toothpaste whisked by plane and truck to your door has a very Gilded Age feeling to it, even if you’re not paying much for the privilege.” WSJ: The Gilded Age of Free Online Shipping: Enjoy It While It Lasts

I had Prime years ago. I needed new wipers for my truck and opted to order them online. Truck wipers are long, so required a large box, in fact two as they were mysteriously shipped separately. Each box was filled with paper and a single wiper shipped cross-country, two-day Air to my door. Yes, impressive, but at a ridiculous and selfish social cost.

5. Pay to Play

I walk out on bad movies. Some of my friends say they already paid, so feel obligated. I figure if I stay I’m actually paying twice. We normally associate admission fees with entertainment, but it is also a gimmick to get people to buy. This is a common gimmick at “special events,” leaving empty handed makes the admission charge a waste of money so buying something prevents us from feeling stupid? Prime is a similar hook – it’s a commitment to shop at Amazon – often without comparison shopping. The customer soon realizes that the more they buy, the cheaper Prime feels (the cost gets distributed across more orders). Amazon reports when customers buy Prime, their purchasing patterns significantly increase.

I respect loyalty, but it should be earned. It’s bad enough when loyalty gets bought. In this case we pay Amazon and give them our loyalty. if you have Prime, you are not going to buy stuff at competitors, even if it’s cheaper. There are many great alternatives to Amazon (Walmart.com, NewEgg, Netflix, Best Buy, and countless other small sites, etc.) and the world is a better place with competition. Furthermore, Prime only works with items that Amazon ships. so Amazon uses Prime as a stick to force suppliers into purchasing Amazon’s warehouse services. Prime stifles competition all the way up the supply chain.

By the way, Newegg has its own version of Prime. Newegg Premier costs $49.99 per year and offers unlimited free shipping. Packages are guaranteed to arrive in three days or less with the service, and faster shipping options are discounted. I don’t want NewEgg’s  service for the same reasons I don’t want Prime. However, it is noteworthy that the smaller competitor can offer a similar service for about half the price. Especially when you consider the shipping discount Amazon gets from UPS and and FedEx.

6. It’s About Shipping

I hear over and over that the additional services (video, radio, and Kindle library) make it a no brainer. That’s because services like NetFlix and Pandora add up. Substituting Amazon’s in-house services justifies the savings, and makes the shipping even cheaper. The problem is these services are not very desirable services – services you would never subscribe to separately. Most consider Netflix to be a superior service, and It’s pretty rare to find a Kindle book that is 1) in the library 2) Finish-able in time.

It reminds me of those late night infomercials – they always set-up the product at one expectation and then suddenly double the value of the order if you act quickly. The psychology is we can’t pass up a great deal. Act now and get two items you don’t want for the price of one.

Admittedly, my family was not happy with me for cancelling Prime. But I appealed to their anti-consumer side (buried within) and they accepted it. Even better, I recently ordered an item from Newegg – same price as Amazon and it had free shipping. It’s nice to have a choice and buying it from Newegg cost me nothing and helps maintain a competitive option.

On a final note take notice how badly Amazon wants customers to have Prime. Amazon pushes Prime harder than Burger King pushes fries. One time I accidentally bought Prime when I rushed through a checkout. If Prime is such a great deal, why do they push it so hard? It is a great deal – for Amazon.