3 Things You Need to Know About Amazon Whis Week

Amazon is shaking things up in the e-commerce world. Here's what you might have missed this week.

Feb 21, 2014 at 6:00PM

It has been a busy week for the world's largest online retailer. From a price hike for its U.K. Prime service and the upcoming launch of a reported TV set-top box, to potential partnerships with brick-and-mortar retailers, Amazon.com (NASDAQ:AMZN) is firing on all cylinders. Let's take a closer look at Amazon's moves in the past week, and how these developments could push the stock higher in the weeks to come.

Amazon Instant Video

Source: The Motley Fool.

On Friday, Amazon said it would bundle two popular subscription services -- Amazon Prime and LOVEFiLM -- for customers in the U.K. and Germany starting on Feb. 26. The online retailer is using the bundle as an opportunity to increase the price of a Prime membership in these markets -- something Amazon has also considered doing in the United States.

Prime numbers
Amazon will now charge customers in the U.K. £79 (U.S. $131) for an annual Prime membership, up from £49 ($81) per year, according to GigaOm. Prime members in Germany will see a similar price hike  from €29 ($40) per year to €49 ($67) annually. Amazon says new customers who sign up for Prime before Feb. 26 will be able to lock in the lower price. Nevertheless, as part of the roll up, Prime members will get unlimited streaming for more than 15,000 movies and television shows, on top of unlimited one-day delivery on more than 7 million products.

In the U.S., Amazon currently charges an annual fee of $79 for its Prime membership, which already includes unlimited video streaming for users. However, that price could soon change. During the company's fourth quarter earnings call, Amazon said it would consider charging as much as $20 to $40 more for its U.S. Prime service .

Amazon Amzn Prime

Source: The Motley Fool.

While the e-commerce giant would likely lose some members if it goes through with a price hike in the U.S., it's a smart time to take such a risk, particularly as Amazon counts "tens of millions" of paying Prime members worldwide today.

Also this week came news that Amazon is finally ready to launch a TV set-top box. Amazon could release the streaming TV device as soon as next month, according to reports. While many of the details remain unclear, TechCrunch said the device would likely run Android software and might feature game support in addition to providing access to Amazon's growing library of digital content. One thing is clear: a TV set-top box would be a nice tie-in to Amazon's Prime service. Ultimately, it would act as a hub where Prime users could access all of the content included in their annual membership.

Calling all retailers
Rounding out this week's news is word that the company is in talks with major retailers to list their products on Amazon.com. Abercrombie & Fitch (NYSE:ANF) and Neiman Marcus are among the group of retail brands working with Amazon on a possible deal, according to The Wall Street Journal. Here's how the arrangement might work.

Amazon would promote products from a retailer such as Abercrombie on its site, though the listings would link directly to Abercrombie.com.. Having a listing on Amazon.com would give the retailer a much broader customer base. Meanwhile, it would give Amazon the opportunity to offer a wider selection of products with Prime shipping.

This type of deal is particularly well timed as Amazon considers raising prices for Prime membership. "Amazon would offer the goods with free shipping to its Prime customers ... though the retailers would be responsible for arranging and paying for the deliveries," the Journal reported.

As you can see, Prime is becoming an integral part of Amazon's growth strategy. Why shouldn't Amazon work deals around the program? After all, Amazon Prime delivered a 22% jump in sales for the online retailer last year -- bringing Amazon's total sales to $74.5 billion in 2013. That's because the service entices customers to spend more (and more frequently) on Amazon.com by offering free two-day shipping on an unlimited amount of deliveries for just $79 a year (for now).

If and when Amazon ultimately  increases its annual fee on Prime membership, customers may be more willing to stick around if products from mainstream retailers such as Abercrombie are eligible for Prime shipping. Looking ahead, these three developments should boost revenue growth for Amazon in the quarters to come. Still, the stock looks pricey today as about $346 a share. For that reason, investors may want to consider these growth stocks instead.

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Tamara Rutter owns shares of Amazon.com. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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