How do you help your customers get the best prices while still making a profit? For Amazon, it’s been raising seller fees to offset inflation. According to Amazon, inflation has risen by 2% in 2018 alone and could continue to rise over the next few months because of tariffs and other factors outside of Amazon’s control. What’s more, sellers have found it increasingly difficult to break even on their inventory since the price of products already costs more than last year, even when you factor in Amazon’s fees and shipping costs. The end result?
As part of its most recent move to combat rising inflation, Amazon intends to boost fulfilment fees during the holiday shopping season, shifting some of its additional expenses to the millions of merchants that depend on the site to sell their goods.
The business announced Tuesday in an email to sellers that third-party sellers that utilise Fulfillment by Amazon, or FBA, will be required to pay 35 cents for each item sold in the United States or Canada beginning on October 15 and continuing until January 14. Amazon manages the choosing, packaging, and delivery of merchandise for businesses who use FBA.
In addition to the regular fees that sellers must pay to use FBA services, there is now a holiday cost. These fees differ according to the weight, category, and size of an item.
As “expenses are reaching unprecedented heights,” Amazon said it is adding a holiday surcharge for the first time because it is becoming more difficult for the business to absorb costs associated with the busiest shopping period.
In the email, Amazon stated that “our selling partners are extremely important to us, and this is not a decision we make lightly.”
Amazon’s third-party marketplace, which now represents more than half of all online retail transactions, has evolved into the core of the company’s thriving e-commerce operation. Many merchants rely on Amazon for the bulk, and in some cases the entirety, of their revenue due to the company’s vast client base and global presence.
Amazon has profited from its leverage. Third-party seller services had a 13% increase in revenue year over year in the second quarter, reaching $27.4 billion. These services include fulfilment, shipping, and other costs in addition to profits Amazon collects from third-party sellers. During the same time period, Amazon’s overall ecommerce income decreased 4%.
This year, sellers’ fees have already begun rising as Amazon deals with inflation-related expenditures, supply-chain issues, and the conflict in Ukraine. Due to the quick hiring of warehouses to fulfil the spike in e-commerce demand brought on by the pandemic, Amazon’s costs also increased.
CEO Andy Jassy stated in an interview with CNBC in April that “you can’t keep absorbing all those expenditures and operate a firm that’s economic.”
During the busy Christmas shopping season, major carriers like UPS and FedEx routinely announce fees. The U.S. Postal Service asked for a temporary price increase last week to assist offset higher handling expenses over the holidays.