Should I Cancel Amazon Prime? A Seller‘s Perspective in 2023

Chances are if you‘re selling on Amazon, you already have an Amazon Prime membership. But is paying $139 per year (or $14.99 monthly) really worth it as a seller? Does canceling Prime make sense for your business?

In this detailed guide, I‘ll walk through everything you need to know about canceling Prime from a seller‘s perspective, so you can make the best decision for your ecommerce business in 2023.

Quick Answer: It Depends on Your Sales Volume and Usage

Before jumping in, let me quickly answer if you should cancel Amazon Prime or not: it depends.

For high volume sellers who frequently ship orders, Prime provides major benefits that likely outweigh the membership fee. But for lower sales volumes, Prime may be an unnecessary cost.

You have to assess your own sales, usage of Prime perks, and willingness to pay the "convenience tax". Price your items accordingly if you retain Prime.

But don’t cancel just because the $139 fee seems high. Look at the whole picture for your business. We’ll analyze the pros and cons below.

Understanding the Power of Amazon Prime

Before considering canceling Prime, it’s important to understand the immense impact and reach of Amazon Prime:

• Over 200 million members globally as of January 2022, up from 150 million in 2020.

• 65% of US Amazon customers are Prime members as of Q4 2021.

• $1,400 is the average annual spending on Amazon per Prime member vs $600 for non-members.

• Amazon Prime members account for an astounding 75% of total sales on Amazon.

• Amazon Prime grew 50% year-over-year in 2020 at the height of the pandemic.

The numbers speak for themselves – Amazon Prime is ubiquitous among frequent Amazon shoppers, drives higher sales, and continues growing quickly.

Prime members order more frequently and spend more money because of perks like free shipping. As an Amazon seller, most of your customers will be Prime subscribers.

So think hard before canceling your own Prime account and losing these member advantages…

Benefits of Amazon Prime for Sellers

Here are some of the key benefits maintaining Prime provides as a seller on Amazon:

Increased Sales Velocity and Conversion Rates

The Prime badge is one of the best ways to boost sales and conversions for your Amazon listings.

According to Feedvisor, products with Prime ship faster and sell 2.3x more than non-Prime listings. During Q4 2021, Prime items sold 4X more!

Prime signals faster, reliable shipping that shoppers love. It also unlocks Prime-only deals and coupons.

Losing the Prime badge if you cancel could significantly slow sales velocity. The 2-day logo drives urgency in purchasing behavior.

More Effective Customer Acquisition and Retention

Prime members shop more frequently on Amazon – on average 150 times per year vs just 12 times for non-members.

This loyalty gives you as a seller more opportunities to acquire Prime subscribers as new customers. It also helps retain them long-term with Prime benefits.

Canceling your own account cuts off an important customer segment and risks them buying elsewhere.

Volume Shipping Discounts and Business Pricing

For Professional sellers shipping over 200 orders a month, Amazon offers volume discounts on Fulfillment by Amazon (FBA) fees and Prime shipping:

• 50% off FBA per order fees
• 40% or more off Prime shipping costs

There is also business pricing on Prime at just $10.99 per month.

High volume sellers can offset much of the base $139 Prime fee through discounts unlocked by keeping their membership.

Exclusive Prime Coupons, Deals, and Traffic

Amazon creates Prime-exclusive promotions like Deal of the Day and Prime Day to incentivize signups.

These deals and coupons allow merchants to gain extra exposure and sales opportunities solely available to Prime members.

You also get added advertising options to have your listings show for Prime searches specifically.

By canceling Prime, you miss out on this additional, members-only traffic and potential sales velocity.

Comparable to Fulfilled by Amazon (FBA) Fees

Don‘t look at Prime fees in isolation. Compare them to similar order fulfillment and shipping costs you would otherwise pay:

For a $35 item sold FBA, Amazon commissions alone would be ~$6 + $1.80 closing fee = $7.80.

If that same item was merchant fulfilled, you may pay $5+ for packaging, materials, and postage.

For just a few monthly sales, Prime at $10.99/month could be cheaper than fulfilling orders yourself without FBA.

Drawbacks of Amazon Prime for Sellers

Now let‘s examine some potential downsides of keeping Prime as a seller:

Membership Fee Costs Add Up

For sellers not doing much Amazon volume, the $139 yearly fee can seem excessive compared to sales.

But remember – Prime gives back incremental sales, so look at total profitability rather than just the membership cost.

Use revenue attribution analysis to quantify your return on Prime investment.

Increased Expectations for Fast Shipping

Prime members expect and demand faster shipping. This places pressure on sellers to offer expedited handling and upgrade from standard 3-5 day USPS.

Without Prime, buyers may be more tolerant of slower delivery times. But with millions of Prime subscribers, expectations are high.

Harder to Compete on Price

The precedent of "free" Prime shipping often gets built into customer price expectations.

This makes it tough to compete on bargain pricing vs. Prime-subsidized listings matching your prices.

You have to account for the "Prime tax" in your pricing if you keep membership.

Can Inflate Sales During Slow Periods

Prime naturally boosts sales – but sometimes too much for limited inventory items.

During slow sales cycles, Prime may move your products faster than your supply chain can support. This inflates sales before you‘re ready.

Consider pausing Prime in off-peak seasons if you can‘t support the sales spikes it delivers.

Amazon-Centric Purchasing Habits

Prime steers buyer behavior heavily towards Amazon vs. other channels like your own website.

If you‘re trying to diversify beyond Amazon, Prime‘s convenience and friction-free purchasing may work against this effort.

This is a bigger strategic concern for brands selling direct-to-consumer in addition to Amazon.

Best Practices for Managing Prime

Here are my top tips for sellers to optimize and manage your Prime membership:

Use Business Prime During Slower Periods

Business Prime provides easy flexibility, with the ability to pause anytime and the lower $10.99 monthly rate.

Use business Prime during peak sales months, and pause during slower seasons when volume dips.

Adjust Pricing to Cover Prime Fees

Don‘t treat Prime fees as a "loss" – build them into your pricing strategy.

Add a ~3% Prime tax onto prices to cover the overhead and maintain profit margins.

Focus Prime on Top Selling Listings

You can optimize which ASINs are "Prime eligible" to reduce fees on slower items.

Make Prime selective – only enable it on proven best-sellers to maximize your return.

Promote Prime Listings Aggressively

Leverage external ads and marketing to amplify Prime listings for major exposure during promotions.

Prime badge placements and coupons convert – so push them hard through paid channels too.

Negotiate Volume Discounts

Once you reach 200+ FBA orders monthly, contact Amazon to request applicable seller discounts.

Lower Prime shipping rates help offset the base membership fees.

Analyze Member Behavior Data

Dig into Prime buyer patterns and trends so you know how to optimize offerings.

A/B test Prime listings vs non-Prime for quantified insights.

Should You Cancel Amazon Prime as a Seller?

So what‘s the verdict – should you cancel Prime or not as an Amazon seller?

If you have high sales volume (200+ orders monthly), Prime is likely worth it for the accelerated conversion, volume discounts, and exclusive promotions.

But if your sales are lower and sporadic, Prime may be hard to justify, unless you can strategically time membership around peak periods.

Sellers in the middle need to run the numbers:

• Calculate typical monthly sales and revenue.

• Estimate sales boost from having Prime, based on your category and products.

• Compare profitability scenarios with vs. without Prime.

My advice is to make data-driven decisions based on your real sales patterns, not hunches.

Understand the purchasing psychology Prime creates. Often the sales lift it provides outweighs the flat membership fee. But analyze closely rather than assuming.

And remember Prime customers expect and reward the convenience and benefits. Canceling may slow growth more than you expect.

I hope this thorough guide gave you clarity on optimizing Prime as an Amazon seller. Use the insights to make the smartest choice for your ecommerce business!