To keep up with the rising costs of fuel and inflation, a leading e-commerce company is increasing its prices. Here’s who will feel the impact and when it will take place.
What Happened: E-commerce leader Amazon.com Inc (NASDAQ:AMZN) announced Wednesday the addition of a 5% fuel and inflation surcharge to sellers who use the Amazon fulfillment services.
The 5% surcharge amount is “subject to change,” according to the notice sent by Amazon to sellers that was viewed by CNBC.
“The surcharge will apply to all product types, such as non-apparel, apparel, dangerous goods, and small and light items. The surcharge will apply to all units shipped from fulfillment centers starting April 28,” the notice says.
Amazon offers its Fulfillment services to sellers, which include having inventory stored at Amazon warehouses and the use of the company’s shipping operations.
Amazon had over two million active sellers in 2021, with around 89% using Fulfillment by Amazon, according to Jungle Scout.
“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,” an Amazon spokesperson told CNBC.
Related Link: Amazon Q4 Earnings Takeaways: Holiday Costs, Prime Price Hike, Stock Soars
Why It’s Important: Other logistics and shipping companies have recently added fuel and inflation surcharges.
In the email to CNBC, Amazon noted that its surcharge works out to 24 cents per unit, which is lower than what United Parcel Service Inc (NYSE:UPS) and FedEx Corp (NYSE:FDX) have added at 42 cents and 49 cents per unit, respectively.
Passing on the costs to the sellers who use Amazon’s platform could have a backfire effect. Etsy Inc (NASDAQ:ETSY) recently saw some of its sellers strike against the platform over a fee increase for sellers on the platform.
Amazon also recently raised prices for its buyers with the cost of Amazon Prime rising from $119 to $139 annually as of March 25, 2022.
Given its massive size and the strong demand for its products, Amazon is unlikely to see as much pressure as smaller companies that make changes, but investors should note the potential backlash against the increased rates for sellers.
AMZN Price Action: Amazon shares were down 2.06% at $3,046 Thursday afternoon, according to Benzinga Pro.
Photo courtesy of Amazon.
