Amazon said it will impose a 5 percent “fuel and inflation surcharge” on third-party sellers shipping through Amazon starting April 28. The new shipping fee in the US was described on Amazon Seller Central and applies to Amazon’s fulfillment (FBA) service, where sellers rely on Amazon to store products in their warehouses and ship them to customers.
The 5 percent charge will be applied to fulfillment fees on products shipped April 28 or later, including products purchased before that date. Amazon also said that this “surcharge is subject to change.” Amazon reportedly told sellers that “the surcharge will apply to all product types.”
In a “message sent to vendors Wednesday, the company said its costs had risen since the start of the COVID-19 pandemic due to increases in hourly wages, hiring workers and building more warehouses,” the Associated Press wrote.
FBA products are eligible for free two-day shipping through Amazon Prime. While Amazon also offers a “Seller Fulfilled Prime” option as an alternative, “it does not currently accept new listings.”
Supplements can go up or down, Amazon suggests
“In 2022, we expected a return to normalcy as COVID-19 restrictions around the world eased, but fuel and inflation have posed further challenges,” Amazon said in the note to sellers, according to NPR. “It is still unclear whether these inflation costs will rise or fall, or how long they will last, so instead of a permanent fee change, we will for the first time use a fuel and inflation surcharge – a mechanism that is widely used on across supply chain providers. ”
The new surcharge puts pressure on sellers to raise the prices they charge consumers, Bloomberg wrote:
“We absolutely have to raise prices,” said Molson Hart, whose Viahart Toy Co. sells educational toys and other products on Amazon. “Some sellers can not because customers do not accept the new higher prices.”
Hart said he has already had to take lower profit margins on some larger toys that are more expensive to ship because consumers would not pay the higher prices.
The consumer price index for all goods rose “8.5 percent for the 12 months ending March, the largest 12-month increase since the period ending December 1981,” the U.S. Bureau of Labor Statistics reported Tuesday.
“Run the market and raise prices”
While Amazon reportedly told sellers that its new surcharge is lower than fuel surcharges charged by UPS and FedEx, Amazon has already taken a significant cut in revenue from FBA sales through a number of charges. A report by the Institute for Local Self-Reliance (ILSR) in December said that “Amazon is taking advantage of its position as a gatekeeper to impose increasingly steep tolls on these companies. By using a variety of fees, Amazon now has a 34 percent reduction in the earnings earned by independent salespeople on its site, our analysis found. This is an increase from 30 percent in 2018 and 19 percent in 2014. “
Amazon previously raised FBA storage fees in February. In January, Amazon raised the fees for labeling and package preparation and for removal and disposal. “Amazon raises its fees on sellers … again. This is what the monopoly looks like: you make the market in a corner and raise prices,” ILSR co-director Stacy Mitchell wrote yesterday in response to the new fee.
Although signing up for FBA is optional, “Amazon’s algorithms strongly favor sellers who do, making FBA almost required to generate sales on the site,” the ILSR report said. Referring to data from Marketplace Pulse, the report said that “84 percent of the top 10,000 sellers on Amazon use FBA.” That number is now up to 86 percent.
“Last year, sellers paid Amazon about $ 103 billion in fees, which accounted for about 22 percent of the company’s revenue,” the AP wrote.
Update: Amazon provided Ars with the full text of the note sent to the sellers. Here it is:
Hello selling partners,
Since the start of the pandemic, we have invested significantly in Amazon’s store and delivery activities to better support you and our customers. We have almost doubled our fulfillment capacity, added over 750,000 full- and part-time roles, and our average hourly wage in the United States has increased from $ 15 to $ 18. These investments enabled a huge growth for salespeople, who have increased sales in our store by more than 70% during this time.
Like many others, we have experienced significant cost increases and absorbed them where possible to reduce the impact on our sales partners. As we increased the fees, we were focused on managing permanent costs and ensuring that our fees were competitive with those charged by other service providers. In 2022, we expected a return to normalcy as COVID-19 restrictions around the world eased, but fuel and inflation have posed further challenges. It is still unclear whether these inflation costs will rise or fall, or how long they will last, so instead of a permanent fee change, we will for the first time use a fuel and inflation surcharge – a mechanism that is widely used on across supply chain providers.
As of April 28, we are implementing a 5% fuel and inflation surcharge on top of our current Amazon Fulfillment Fee (FBA) per capita. unit rate. We know that changing fees affects your business, and our teams work every single day to ensure that FBA remains a great value for the first-class fulfillment and delivery service it provides. Since 2020 and including this change, Amazon has increased compliance rates less than other companies and continues to cost significantly less than alternatives.
Thank you for your understanding and we look forward to our continued cooperation.