Dive Brief:
- Amazon announced a peak season fee on its fulfillment services for third-party sellers from Oct. 15 to Jan. 14, the first time the company has instituted such a surcharge.
- The holiday peak fulfillment fee will cost an average of $0.35 per item sold through Fulfillment by Amazon (FBA) in the U.S. and Canada, the company wrote in its announcement to sellers. Amazon said the fee will cover increased fulfillment and logistics costs that coincide with the holiday shipping spike.
- "We have previously absorbed these cost increases, but seasonal expenses are reaching new heights," Amazon said. "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."
Fulfillment by Amazon fees increase for peak season
| Size tier | Shipping weight | Before Oct. 15 | Oct. 15, 2022 - Jan. 14, 2023 |
|---|---|---|---|
| Small standard | 6 oz or less | $3.07 | $3.28 |
| Small standard | 12-16 oz | $3.77 | $3.98 |
| Large standard | 2-3 lbs | $6.08 | $6.60 |
| Large standard | 3-20 lbs | $6.44 + $0.32/lb above the first 3 lbs | $6.96 + $0.32/lb above first 3 lbs |
SOURCE: Amazon. Fees include a fuel and inflation surcharge.
Dive Insight:
For businesses selling on Amazon, using the company's fulfillment services instead of other carriers will no longer shield them from added peak season shipping costs. As Amazon noted in its announcement, the fee is similar to the surcharges or price hikes major delivery providers — such as FedEx and the U.S. Postal Service — implement during the holidays. UPS is expected to announce its peak season surcharges soon.
The new fee is another example of Amazon passing on the elevated operating costs it has seen this year to independent sellers leaning on FBA. The company implemented a 5% fuel and inflation surcharge for FBA in April after already hiking fees in January. The fuel and inflation surcharge applies to both peak and non-peak fulfillment fees, according to Amazon.
Desert Cactus, an e-commerce consumer products company that sells licensed products on Amazon, will likely see $100,000 in added costs due to the new fee, President and founder Joe Stefani said in an interview. The company has passed on a portion of previous fulfillment cost increases to customers, but it doesn't plan to raise prices higher in response to the peak season fee, at least in the immediate future.
"It's too big of a pain in the butt because we have over 30,000 SKUs to do like a slight modification, because they don't make it easy to do so," Stefani said. "So if we were going to raise prices, it would take a while. I think we'd rather just kind of hold the line if we possibly could."
Amazon told sellers that despite the added peak season charge, its fulfillment fees will remain 70% less expensive on average than comparable two-day shipping alternatives. Stefani said Amazon remains the least expensive option for his company to use.
It is surprising Amazon didn't implement a peak fulfillment fee sooner, wrote Joshua Rawe, co-founder of eSpark, wrote on LinkedIn. The company provides services for brands' Amazon marketplace channels.
"Amazon has barely raised fulfillment fees relative to the increases in shipping costs," Rawe wrote. "They assuredly absorbed a lot of those price hikes. Of course I'd rather fees go down, but this change is to be expected. My takeaway is to increase margins wherever possible whether it's negotiating with suppliers or offering a superior product."
