Amazon (NASDAQ:AMZN) Prime has set the standard for shipping from an online retailer. Members pay $119 a year, or $12.99 a month, and get free two-day shipping on tens of millions of items. (You get lots of other stuff, including a video service, but for the majority of consumers, the shipping perks are the draw.)
For most people, it's a great deal and sort of a reasonable tax on the cost of doing a lot of business online. In other cases, however, Amazon Prime is a waste of money. Not everyone needs to pay for the service, and there are scenarios where you should save your money.
1. You buy in big batches
If your orders normally exceed $25, then you qualify for free shipping. That shipping won't be two-day, or at least you won't be guaranteed to get your order in two days. Instead, Amazon's free shipping takes two to five business days.
That's slower, but do you really need your order in two days? If you're the type of person who places multiple small orders every day, then Prime might make sense. If you make a list and place bigger orders, standard free shipping might be fine for you.
2. Your orders have moved to digital
Back when I first signed up for Amazon Prime, my primary orders contained books, DVDs and CDs. Now, I subscribe to a streaming service, read almost exclusively on my Kindle, and have not ordered a DVD for myself in years.
I remain a pretty big Amazon customer, ordering everything from tea to trash bags, shirts to sandals. That makes Prime still logical for me, but if my orders had remained mostly about entertainment -- as I'm sure some people's do -- then paying an annual fee would not make sense.
Check out the latest earnings call transcript for Amazon.
3. You're mixing it up
Amazon is no longer the only game in town. That may mean you now order from lots of different retailers -- sometimes maybe even paying for shipping -- in order to get exactly what you want.
In that scenario, you need to really look at your purchases. Prime costs $119 a year, and it makes total sense to pay that if you order items that you'll need in two days at least a few times a month.
For those who order less than that because they're using other retailers for some of their shopping needs, Prime may not make sense. Amazon does allow you to pay for two-day or even same-day delivery on many items (usually $5.99 for two-day). If you only need quick delivery occasionally, then it may not make sense to be a member.
The Prime directive
Having Prime lets you order from Amazon without doing a lot of planning, which is very convenient for some people. And not having to put the effort into hitting minimums or not having to wait more than two days can simply be all it takes to make Prime a good deal for many people.
It's important, though, to really look at how you use your Prime membership. Is it saving you money? Do you order things you don't need because of it? Are you truly getting a benefit from the free two-day shipping, or would waiting a little longer be OK for you?
You don't have to stay a Prime member just because you've always been one. Evaluate your personal situation and stay or leave based on what's best for your bottom line.