Citing rising costs, Amazon is increasing fulfillment fees for sellers who use a Fulfillment by Amazon (FBA) service to send orders to the countries that border the US. At the same time, FBA said it is automatically enrolling eligible sellers in the program, unless they opt out.
In a Tuesday posting on Seller Central, Amazon said it is increasing fees for Remote Fulfillment with FBA, which is a service that allows sellers to ship inventory that is stored in the US to customers based in Mexico and Canada. The increase is effective June 30.
Under the changes, the fulfillment fees for a 6-ounce-or-less package heading to Canada will increase from $7.22 Canadian dollars to $7.58 Canada.
For a package of the same size heading to Mexico, the fee will increase from $102.39 MXN to $122.87 MXN.
The fees are dependent on the weight of a package, and increases are applied to each weight class. See a full schedule here.
Launched in 2018, Remote Fulfillment with FBA is designed to make it easier to sell outside the US – namely, to the countries with which the US shares a border. In turn, it provides shoppers in Mexico and Canada with access to more selection on Amazon's marketplaces in those countries. The service provides free shipping to Prime members in those countries.
In its announcement, Amazon said it improved the service as part of a wider fulfillment network buildout, but noted that the costs of operating it are now rising.
“Remote Fulfillment with FBA leverages both US and international fulfillment operations. Over the course of the pandemic, we have made significant investments in these operations to better serve you and our customers,” Amazon wrote. “We’ve nearly doubled fulfillment capacity and added over 750,000 full- and part-time roles, and our average hourly wage in the US has climbed from $15 to $18. These investments have enabled tremendous growth for sellers, who have increased sales in our store by more than 70% during this time.”
Amazon added that it is implementing the fee increases in order to reflect “the changing costs of fulfillment, transportation, storage, and customer service across North America.”
“These increases are in line with or below industry-average increases for fulfillment services,” the company added.
The coming change to the Remote Fulfillment with FBA program could reach beyond the sellers who are already using the service.
As EcommerceBytes flagged, Amazon also stated on a help page that eligible sellers will be automatically enrolled in the program, and have until July 1 to opt out. Here’s the language from Amazon:
Starting July 1, 2022, eligible sellers for Remote Fulfillment in Canada or Mexico or both will be automatically enrolled, unless they have unenrolled from the program prior to that date. You will receive an alert on your Seller Central homepage notifying you of your upcoming automatic enrollment in one or more of your eligible stores at least 30 days prior to the enrollment date. The notification will also provide you with access to a landing page where you can choose to opt out of one or more of the stores that you don’t want to be enrolled in at any point during the 30-day period.
You also have the option to manually enroll or unenroll from Remote Fulfillment in one or more of the stores that you are eligible for at any time.
This means sellers who have been identified as eligible for the service must take the extra step of opting out before July 1.
So far, 2022 has brought a series of fee increases and changes to Amazon’s FBA program, which allows third-party sellers to tap Amazon's network for storage, fulfillment and shipping to send goods to customers. In January, it increased permanent fees across the entire program by an average of 5.2%. Then, on April 30, the company added a 5% fuel surcharge to account for inflation. The company said the latter surcharge would be a temporary measure. In April, the company also made inventory-related changes to expand a program for small items and create a new XL storage category within FBA.
On the whole, the company is seeking to tame costs associated with its network that stores, packs and ships orders. For the first quarter of 2022, the company reported $2 billion in incremental costs as a result of having “overcapacity” in fulfillment and transportation. After making massive investments in its fulfillment network over the two years of the pandemic ecommerce boom, the company ended up having excess space as demand started to level off. CFO Brian Olsavsky said on the company’s earnings call that Amazon will aim to grow into the space it built, and added that it will be glad to have capacity for July's Prime Day and the holiday season. The company’s recently-announced Buy With Prime service, which will enable sellers to offer Amazon Prime fulfillment and delivery on any website, figures to help fill this capacity further. But Olsavsky added that costs would persist over the next several quarters.
"Many of the build decisions were made 18 to 24 months ago, so there are limitations on what we can adjust mid-year,” he said.
Amazon cited the pandemic-era investment it made in its fulfillment network in its announcement on the latest fee increases. Around the time of the inflation surcharge, Amazon CEO Andy Jassy told CNBC that the company worked to balance making improvements to meet increased demand for ecommerce, while trying to avoid raising fees. This followed Amazon’s yearslong pattern of seeking to keep seller fees down in order to make FBA as attractive as possible to sellers. But with inflation, a pandemic and war in Ukraine bringing continued swings in the economy, the company reached a limit.
“At a certain point, you can’t keep absorbing all those costs and run a business that’s economic,” Jassy told CNBC.
