I think amazon knows perfectly well that they will lose customers by this. They're doing it so that at the next shareholder meeting, they can point at their declining revenues from prime and say "hey, look you idiots. We know what we're doing. leave us alone".
Amazon has always been very careful to make exactly as much profit as they choose to. Their sales volume is huge enough that they could probably raise an extra $500mm by tweaking their pricing algorithm without anybody even noticing, instead they have increased prices in the most visible way possible. This has to be about sending a message, not about making money.
Do you really think that Amazon is doing something that they believe will lose customers so that they can make a point to about how they are smarter than stock analysts?
I have a very, very hard time believing that the people running Amazon would do that.
Amazon's advantage in this space is not what is once was: You have to factor in that we now get charged sales tax in California. Also, no-hassle and no time limit return policies at Lowes, Costco, Bed bath and Beyond, etc, and internet price matching, Amazon purchases are not as appealing to me as they once were.
Example: I can buy Nest Protect on Amazon for exactly the same price as it is from my local Lowes. However, with Lowes I get the ability to return it at any time for any reason, in person, without the return shipping price or hassle. I'm going to buy it from Lowes, where in the past I would have just used my Prime account to buy it from Amazon.
Amazon has always been very careful to make exactly as much profit as they choose to. Their sales volume is huge enough that they could probably raise an extra $500mm by tweaking their pricing algorithm without anybody even noticing, instead they have increased prices in the most visible way possible. This has to be about sending a message, not about making money.