Like Amazon (AMZN) or not, one thing’s for sure: the company has made getting things people need much easier and faster than ever before.
In the days before Amazon was the place we went for everything from household items to clothing, mail-ordering an item (as it was called back in ye olde days) meant you would wait as little as a week or as long as months on end, depending on what shipping service the retailer used.
But then February 2005 came, and for the now cheap-sounding price of $79 a year, Amazon would bring a massive variety of things to your home within two days. It sounded like a wild proposition — how could they manage it? But somehow, Amazon did.
Today, not only does the two day shipping still fly, but in many areas Amazon also offers same day as well for a small fee (or, if you spend enough, for free), leaving you shaking your head in mild disbelief as you open the item that you ordered a mere two hours ago from your laptop.
The power of Amazon’s fulfillment services came in quite handy for many third-party sellers in need of a service to deliver items to their customers. But now, those same sellers are about to have to reach a bit more deeply into their pockets to afford Amazon’s brisk services.
What Is Amazon Changing About Its Fulfillment Services?
On August 16, Amazon made an announcement on its Seller Central forums informing its users that a holiday price hike is on the way.
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“For many years, we have continued to evolve how we charge fulfillment fees to better reflect the underlying operational costs, while ensuring that we provide a great value for sellers. As we look ahead and prepare for the busy holiday shopping season, we expect greater utilization of our fulfillment network. Across the supply chain, this creates increased operating costs during this holiday peak period,” the announcement read.
“As a result, similar to other major carriers, we will introduce a holiday peak fulfillment fee from October 15, 2022, to January 14, 2023. The fee will be an average of USD 0.35 per item sold using US and Canada FBA.”
35 cents per item doesn’t sound like that big of a deal at first. But when you consider that Amazon has over 1.9 million selling partners worldwide, or that Amazon Business (the B2B ecommerce channel) serves over 150,000 sellers, it’s easy to see how what seems like a small upcharge will add up fast.
Holiday surcharges are nothing new, however. UPS (UPS) and FedEx (FEDEX) charge these every year, as the volume of packages rises to titanic proportions. In 2021, USPS estimated it would deliver between 850 and 950 million packages, and that number is expected to keep going up in the future.
Another reason for the upcharge may also be to offset the decline in demand. Net sales through Amazon’s online stores are down 4% year over year, with recession fears no doubt to blame.
“Our selling partners are incredibly important to us, and this is not a decision we made lightly,” the announcement said. “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.”