A hot potato: Amazon is slapping US sellers who use its fulfillment services with a 5% fuel and inflation fee, a move that has seen some third parties confirm they will have to raise the prices of their goods. The surcharge is set to come into effect on April 28 and applies to sellers using the Fulfillment by Amazon service that lets them store, pack, and ship products.
The 5% addition comes only a few months after Amazon merchants had to deal with another 5.2% cost-related increase that took effect in January, writes Bloomberg.
The retail giant said in an email to sellers that it has made investments to meet increasing demand since the start of the pandemic, including doubling capacity, adding 750,000 employees, and raising the average Amazon warehouse employee wage to $18 from $15. The message also says that Amazon has absorbed the cost increases wherever possible, but the additional operating costs led to it increasing its fulfillment fees in January.
Amazon told CNBC that while it expects a return to normalcy in 2022 as Covid-19 restrictions around the world start to ease, fuel and inflation are presenting new challenges. Inflation hit a four-decade high of 8.5% in March, the result of increasing energy and food costs, supply constraints, and strong consumer demand, while Russia's invasions of Ukraine keeps pushing up gas prices.
Amazon said that rather than permanently increasing (again) the amount it charges sellers for using its warehouses and shipping channels, it imposed a surcharge as it's "unclear if these inflationary costs will go up or down, or for how long they will persist."
Around 89 percent of Amazon's two million+ third-party sellers use Fulfillment by Amazon, reports Jungle Scout research. "We absolutely will need to raise prices," Molson Hart, whose Viahart Toy company sells goods on Amazon, told Bloomberg. "Some sellers cannot because customers are not accepting the new higher prices."
Amazon noted that its surcharge of 24 cents per unit is lower than the fuel surcharge imposed by UPS (42 cents) and FedEx (49 cents).