Amazon is charging its marketplace suppliers an inflation and fuel surcharge of 5% to compensate the firm for higher costs. That doesn’t sound unreasonable given soaring inflation, but it should be a reminder to all small businesses who hitch their wagon to big dominant marketplaces like Amazon, Facebook, and Google, that when times get tough, smaller partners’ margins will be the first to get sacrificed.
Etsy is imposing a similar price hike, raising their take of sales to 6.5% from 5%. Etsy sellers are trying to boycott, but Etsy holds all the cards in these relationships. The upshot for small businesses is that over the next 5-10 years we may see crypto projects emerge that offer the opportunity for new decentralized marketplaces that are controlled by participants in those marketplaces. Think of an Etsy managed by its sellers.
Dave Lee reports at the Financial Times:
Amazon is adding a 5 per cent surcharge to its delivery fees in response to rising fuel costs and inflation, the company told its third-party sellers on Wednesday.
The fee, which takes effect April 28, will be applied to US sellers using Amazon’s logistics network to deliver products, known as Fulfillment By Amazon. It is not intended to be permanent, nor will it be passed on to consumers directly.
The fee will be added to the per-unit delivery cost, not the overall product price, a spokesperson said. For instance, the cost to deliver a T-shirt would rise from $5.07 to $5.32. The average rise will be 24 cents per package.
While the company does not disclose how many packages it ships, an estimate from logistics consultancy MWPVL suggested 3.25bn packages from third-party sellers were sent to US customers via Fulfillment By Amazon in 2021.
The surcharge does not apply to deliveries made by other companies, such as the US Postal Service or UPS.
In a message sent to sellers on Wednesday, Amazon said it had, until now, absorbed some of the increased costs of doing business, such as adding more than 750,000 new workers, increasing wages and rapidly increasing its warehousing footprint.
“In 2022, we expected a return to normalcy as Covid-19 restrictions around the world eased, but fuel prices and inflation have presented further challenges,” the statement read.
“It’s still unclear if these inflationary costs will go up or down, or for how long they will persist.”
The move is one of several Amazon has made to offset rising costs of its logistics operation. In February, it said the price of its Prime membership scheme — where customers pay a monthly or annual fee for free delivery — would increase from $119 to $139 per year.
The change was made partly because of a rise in “wages and transportation costs” in its logistics network, the company said at the time.
The pandemic has added to strain between Amazon and its millions of third-party sellers, whose products made up 56 per cent of units sold on the ecommerce store in the most recent quarter.
“I just threw my hands up in the air,” said Jason Boyce, chief executive of brand agency Avenue7Media. “What’s next for these sellers? Amazon is just in an insurmountable position right now to do whatever they want.”
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