Inflation and fuel surcharges come to Fulfillment by Amazon
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As inflation continues to soar nationwide, Amazon (NASDAQ:AMZN) is attempting to offset some its newfound costs by passing fees on to sellers. Fuel and inflation surcharges will tacked on to the existing ~5% fee currently leveled on U.S. third-party vendors who use the company's fulfillment services. The new costs will go into effect on April 2, adding $0.24 per unit to the services offered by FBA, or Fulfillment by Amazon.
Quote: "In 2022, we expected a return to normalcy as COVID-19 restrictions around the world eased, but fuel and inflation have presented further challenges," an Amazon (AMZN) spokesperson told CNBC. "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. The surcharge will apply to all product types, such as non-apparel, apparel, dangerous goods, and Small and Light items."
According to Jungle Scout, which creates market analytics for Amazon (AMZN) sellers, nearly 90% of the e-commerce giant's 2M+ sellers used Fulfillment by Amazon in 2021, which provides services like storing, packing and shipping products. Last year, sellers even shelled out a total of $103B in fees, making up around 22% of Amazon's (AMZN) revenue. "Costs inevitably have to be shared across the economy, customers included," said John Elder, CEO of consulting firm Black Label Advisor. "FBA sellers can only handle so much margin compression before customers are affected."
Go deeper: Amazon (AMZN) was quick to highlight that the despite the addition of the surcharge, its fulfillment rates will remain lower than other carriers. As of March 21, UPS (UPS) implemented a fuel surcharge of $0.42 and FedEx (FDX) applied a fee of $0.49. Several other companies have announced surcharges in recent weeks, including ride-hailing giant Uber Technologies.