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Amazon is set to raise feest this holiday season for sellers who use Fulfillment by Amazon (FBA) to store and ship goods sold through its marketplace.
The company announced to third-party sellers on Wednesday that it will be increasing fees by an average of 35 cents per item sold using FBA in the US and Canada for the peak holiday season. The hike will be in place from Oct. 15, 2022-January 4, 2023.
In explaining the fee increase, Amazon wrote the following:
Our selling partners are incredibly important to us, and this is not a decision we made lightly. The entire industry sees increases in fulfillment and logistics costs during the holiday peak period due to the concentrated volume of shipments. We have previously absorbed these cost increases, but seasonal expenses are reaching new heights. As a result, we decided that similar to other carriers, we will implement a holiday peak fulfillment fee that applies during a timebound period each year.
The increase comes during a period of 40-year-high inflation, which has elevated costs for the company. Third-party sellers have already been the recipients of increases on one occasion during this time, as Amazon announced a 5% fuel surcharge in April that it said at the time would be temporary. This came after it made permanent changes to fees to account for rising supply chain-related costs in January. It has also raised fees for sellers using a program to ship to Mexico and Canada, and made inventory changes to classifications for the smallest and largest packages it ships.
It’s true that Amazon isn’t the only service that delivers ecommerce orders to raise fees for the high-volume holiday season. USPS has proposed a rate increase for commercial and retail parcels. Meanwhile, FedEx will implement rate hikes that focus on large customers of the carrier and oversize packages.
On one reading of these moves, Amazon is behaving more like one of the big carriers as it increasingly becomes one. But Amazon is unique in the services that FBA provides, and the role that third-party sellers play in its business. In its second quarter earnings report, the company said these sellers were responsible for 57% of sales on Amazon, which was a record. Revenue from third-party seller services rose 13% to more than $27 billion, a record for a non-holiday quarter. On the other hand, Amazon's overall sales from ecommerce fell 4%.
On the recently-completed Prime Day, Amazon said the growth of third-party seller sales outpaced Amazon’s, adding that customers spent over $3 billion on more than 100 million items from small businesses included in a program called the Support Small Businesses to Win Big sweepstakes. Nevertheless, sellers have said they face the same challenges with supply chain snarls and overstocked inventory as Amazon and other retailers.The company has made some moves to bolster what it offers to sellers. This summer, it introduced tools for sellers to convert funds from Amazon to a bank account, and more easily manage compliance with Amazon policies. With fees continuing to increase, striking a balance between what it provides and what it charges will only become more important.
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Welcome to a new week. It’s an active week for the consumer economy. The Fed will issue its latest decision on interest rates, while Amazon and key consumer goods brands such as Clorox offer insights in earnings reports. Check out what’s ahead:
Manifest 2023: The community of logistics and supply chain professionals gather in Las Vegas to hear from more than 250 speakers. The event features more than 1,000 startups, and attendees from more than 50 countries. Jan. 31-Feb. 2
Consumer Confidence: The Conference Board releases monthly data on consumer sentiment and expectations in areas such as purchasing and inflation. Jan. 31, 10 a.m.
FOMC: The Federal Reserve releases its latest decision on whether and by how much to hike benchmark interest rates. The Fed is on an aggressive campaign to bring down inflation. Feb. 1, 2 p.m.
Jobs Report: The U.S. Labor Department releases monthly data on the number of new jobs in the economy, and the unemployment rate. Feb. 3, 8:30 a.m.
Monday, Jan. 30: Pitney Bowes
Tues., Jan. 31: Snap
Wed., Feb. 1: Meta
Thurs., Feb. 2: Amazon, Hershey, Clorox, Columbia Sportswear, Lightspeed Commerce, Skechers, HanesBrands