Amazon is slapping a new five percent “fuel and inflation” surcharge on US sellers enrolled in its “Fulfilment by Amazon” service. The surcharge will not apply to sellers who don’t use this service.
Many small business that sell on Amazon will be affected by the move. They are already struggling to make a profit and have already lost a lot of customers. Jeff Bezos was the founder of Amazon and serves as its executive chair.
Amazon: We are required to increase Prime prices and add a 5.5% inflation surcharge”
Also Amazon: our profit tripled since pre-pandemic times, our founder is worth $190 billion (up $77B in the pandemic) and we just gave shareholders $10B in stock buybackshttps://t.co/iTPNT28RRj
— Dan Price (@DanPriceSeattle) April 15, 2022
Fulfillment By Amazon (or FBA) is an Amazon service that allows sellers to send inventory to Amazon warehouses around the country. Amazon receives customer orders, picks and packs the products, then ships them. Most shoppers don’t realize that they have purchased from an outside company. They just go to Amazon.com and place an order. Soon after, they receive an Amazon-branded box.
FBA is a great option for sellers. FBA Sellers see sales rise by 30-50% when they switch from self fulfillment to FBA. This is because FBA sellers get to be part of Amazon’s Prime program, where Prime Members can choose free two-day shipping. “Free,” meaning that they’ve ponied up for the $139 Prime membership fee.
Here are some stats
- Amazon has 9.5 million sellers around the world.
- FBA is used by 73% of Amazon sellers.
- Amazon’s net income in 2021 was $33.4 billion, a 56.41% increase over the previous year.
Evidently, Jeff Bezos’ and Amazon’s pandemic did not go unnoticed. This new seller price hike won’t hurt him or Amazon, but it will be catastrophic for many small retailers. Although a five percent price increase might not seem like much, when you take into account that most of these sellers are operating at a margin of under five percent, it is clear that this will result in a significant drop in sales. This five percent does not include the cost of shipping. TopFBA sellers are already subject to a variety of other fees.
While @EtsyThe seller fees were increased by 1.5% and 6.5% respectively. This caused outrage. However, I feel that this hike was justified in comparison to other platforms. The 5% increase by @amazonThis is insane.
We can’t build an OSS Platform which decentralizes the Amazon business model.#amazonfees #etsyfees #OSS
— Siva Rajadurai (@sivadotblog) April 16, 2022
Amazon already took the pressure off consumers by increasing the price of Prime Prime to $119 from $139 in February.
Why are they raising fees on businesses and consumers when they’ve enjoyed insane profits the last two years? Inflation, of course, or as Joe Biden would say, “Putin’s Price Hike.” A February headline from The Nation:
The Inflation Secret: Corporate Profits and Prices are being inflated
Democrats are failing to speak to the realities of the economic moment—and it could cost them in the midterms.
Among other questionable business tactics, Amazon also stands accused of using data on its third-party sellers’ sales to make competing products. Source: Business Insider
Amazon has long fielded backlash over what critics say is undercutting the competition on its online marketplace and has faced lawsuits and antitrust scrutiny over the matter. The company has consistently pushed back on that characterization, including during a July 2020 Congressional testimony by then-CEO Jeff Bezos where he said Amazon does not favor its own retail products over those of third parties.
Ruthless.
But back to the seller fee hikes — who’s hurt in the end? It will impact small sellers, who already struggle to survive as I have pointed out. But it will end up hurting. You. The cost will be passed on to consumers by the companies, who simply increase their prices.
Amazon makes shopping easy and simple. However, as many of the company’s moves over recent years have shown, this new surcharge seems to be intended to eliminate the small guy.
Disclosure: This is me, one of those little guys that owns small businesses using FBA.
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