Amazon is hitting its sellers with a 5% fee due to inflation and increased fuel costs, and there's a good chance products will get more expensive as a result
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- Amazon is hitting some of its third-party sellers with a 5% fuel and inflation surcharge.
- Bloomberg first reported the latest decision from Amazon, which boasts a big third-party sales business.
- Third-party sales expert Jon Elder said merchants will likely pass the costs onto consumers.
Amazon is slapping a 5% surcharge onto its online sellers starting on April 28, the company confirmed to Insider on Wednesday.
The surcharge, first reported by Bloomberg, will apply directly to sellers, not Amazon shoppers, although it will likely lead prices to increase across the board as sellers' margins are impacted. The decision from Amazon is just the latest instance of costs increasing due to soaring fuel costs and rising inflation.
"We know that changing fees impacts your business, and our teams are working each and every day to ensure FBA remains a great value for the premium fulfillment and delivery service it provides," the Fulfillment by Amazon team wrote in a message to third-party sellers that the company shared with Insider. "Since 2020 and inclusive of this change, Amazon has increased fulfillment rates less than other carriers, and continues to cost significantly less than alternatives."
The affected merchants are all based in the US and use Fulfillment by Amazon, the online giant's suite of warehousing and delivery services for third-party sellers. Overall rates for these sellers remain $2.52 per unit for "the slowest standard shipping options" and $14.08 per unit for two-day shipping options, according to a spokesperson. Third-party sales are a major component of Amazon's overall business, representing $30.3 billion in sales for the company's latest fourth quarter. Currently, UPS features a $0.42 per unit fuel surcharge, while FedEx features one that extracts $0.49 per unit.
In its message to third-party sellers, Amazon touted the fact that it has "significantly invested in Amazon's store and fulfillment operations to better support you and our customers" and strived to absorb "significant cost increases."
"In 2022, we expected a return to normalcy as COVID-19 restrictions around the world eased, but fuel and inflation have presented further challenges," the FBA team wrote in the message. "It is still unclear if these inflationary costs will go up or down, or for how long they will persist, so rather than a permanent fee change, we will be employing a fuel and inflation surcharge for the first time—a mechanism broadly used across supply chain providers."
Black Label Advisor CEO and founder Jon Elder, who consults for third-party merchants, told Insider that "the vast majority" of his clients "will be raising their prices alongside this Amazon surcharge." He predicted that in most cases, that would amount to a "slight increase in prices" for consumers.
"It's a very bad thing for customers obviously, but costs have hit Amazon just as hard as small business owners," Elder told Insider. "Costs inevitably have to be shared across the economy, customers included. FBA sellers can only handle so much margin compression before customers are affected."
Read the email Amazon sent to sellers here:
Hello selling partners,
Since the start of the pandemic, we have significantly invested in Amazon's store and fulfillment operations to better support you and our customers. We've nearly doubled fulfillment capacity, added over 750,000 full- and part-time roles, and our average hourly wage in the U.S. has climbed from $15 to $18. These investments enabled tremendous growth for sellers, who have increased sales in our store by more than 70% during this time.
Like many, we have experienced significant cost increases and absorbed them, wherever possible, to reduce the impact on our selling partners. When we did increase fees, we were focused on addressing permanent costs and ensuring 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 presented further challenges. It is still unclear if these inflationary costs will go up or down, or for how long they will persist, so rather than a permanent fee change, we will be employing a fuel and inflation surcharge for the first time—a mechanism broadly used across supply chain providers.
Beginning April 28, we will implement a Fuel and Inflation Surcharge of 5% on top of our current Fulfillment by Amazon (FBA) fulfillment fee per unit rates. We know that changing fees impacts your business, and our teams are working each and every day to ensure FBA remains a great value for the premium fulfillment and delivery service it provides. Since 2020 and inclusive of this change, Amazon has increased fulfillment rates less than other carriers, and continues to cost significantly less than alternatives.
Thank you for your understanding and we look forward to our continued partnership.
The Fulfillment by Amazon Team
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