Amazon is glancing to offset costs to third-party sellers in the US resulting from skyrocketing inflation and fuel prices. The new 5% “fuel and inflation surcharge” for sellers who use Amazon’s fulfillment services will generate from April 28.
Since most items bought off Amazon are from third-party sellers, you can anticipate these new costs to be given along to shoppers.
Eighty-nine percent of Amazon’s over two million third-party sellers utilize Fulfillment by Amazon (FBA) to leverage the retail giant’s warehouses, supply chain, and shipping operations.
“In 2022, we predicted a recovery to normalcy as Covid-19 restrictions worldwide reduced, but fuel and inflation have presented different challenges,” said an Amazon spokesperson. “It is still unclear if these inflationary prices will go up or down or how long they will last, so rather than a permanent fee change, we will be operating a fuel and inflation tariff for the first time — a mechanism extensively used across supply chain providers.”
FedEx levies a fuel surcharge of 49 cents per unit, while UPS demands 42 cents. Amazon’s surcharge is 24 cents.
If Amazon prices begin going up, this is the explanation why….
Amazon revealed this week that third-party sellers will now pay “a 5% fuel and inflation surcharge” to utilize the company’s FBA fulfillment services. That new surcharge will involve “all product types,” Amazon said in a statement to sellers seen by CNBC. It will affect all units shipped from Amazon fulfillment centers starting April 28. Sellers will likely give some of those costs to consumers, so expect Amazon prices to rise.
Amazon expenses might be on the rise.
Inflation in the US has been increasing speedily since last fall. The inflation rate bounced to 8.5% in March — the most significant jump since 1981. Energy prices have grown as fast as any, which explains why Amazon has felt the requirement to implement this surcharge.
Nearly 90% of Amazon’s third-party sellers employed FBA in 2021. A vast majority of sellers depend on Amazon’s fulfillment services to deliver their goods. So if they’re each heading to be hit with a 5% surcharge on their shipments, it’s all but unavoidable that consumers will be affected.
“In 2022, we expected a return to normalcy as Covid-19 restrictions worldwide eased, but fuel and inflation have presented further challenges,” Amazon told. “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.”
How much will sellers have to pay?
Amazon’s fuel and inflation surcharge will be 24 cents per unit. That’s far lower than the UPS fuel surcharge of 42 cents per unit and the FedEx surcharge of 49 cents. In addition, Amazon claims that FBA “continues to cost significantly less than alternatives.”
That may be true, but it won’t mean much to consumers when countless items on Amazon’s storefront cost way more. Speaking with Bloomberg, Molson Hart of Viahart Toy Co. made it clear that his company “will need to raise prices.”
Stacy Mitchell of the Institute for Local Self-Reliance also spoke with Bloomberg. She believes that the fee “can be problematic when it comes to antitrust because Amazon locks you into using this service.” She says this fee is “an antitrust vulnerability for Amazon because that’s what monopolies do: corner the market and raise prices.”
Consumers might not see the surcharge reflected in Amazon’s prices right away. But if prices suddenly start going up, at least we’ll know why.