Starting April 28, Amazon will be implementing a 5% inflation and fuel surcharge on top of the current FBA fulfillment fee per unit costs. The announcement by Amazon on April 13 has rattled sellers and is just the latest in a series of fee increases across marketplaces and supply chain businesses. The price of doing business as usual is going up, and Amazon is dinging sellers who are trying to pass it on to the consumer for unfair pricing.
At the same time that fees are rising and the supply chain is stressed, Amazon is also adding thousands of new sellers daily across its global marketplaces. If some of those are disgruntled merchants who were leaving Etsy or eBay due to the fee hikes on those platforms, it just shows that sellers can run, but they can’t hide from the inflationary eCommerce landscape that is touching every layer of the system.
The new inflation-caused 5% per-unit surcharge will surely sting sellers where it hurts. Let’s look at Amazon’s justification for the surcharge, the reaction from sellers, and what to expect next.
Will new Amazon fees make sellers ditch FBA?
Amazon’s rationale for the surcharge is interesting. Amazon first notes the types of investments they’ve made in the marketplace, fulfillment, and worker wages. Then, they explain how they have experienced cost increases and justify the fee increases they’ve made as necessary to stay competitive with other platforms.
Finally, they say they expected things to return to normal in 2022, but “fuel prices and inflation have presented further challenges.” Where it gets intriguing is this part: “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.”
So, while Amazon indicates that the surcharge isn’t permanent, the reality is quite different. For example, fuel surcharges have existed for many years at UPS and FedEx, but they have never been completely eradicated. Amazon even says, “It’s still unclear if these inflationary costs will go up or down, or for how long they will persist.” In other words, it’s likely that even if things get back to “normal,” the surcharges may remain.
Of course, sellers are not happy about yet another fee increase. Complaints have been registered on Seller Central about everything: the timing (only 15 days from notice), corporate greed, the name “inflation and fuel surcharge” (Call it what it is—a price hike!), Amazon pricing practices, FBA, and more.
Look, Amazon was always going to do what it had to do to keep making its billions. If other marketplaces were raising fees and adding surcharges, they weren’t going to miss out on the fun. Amazon’s ultimate justification? “Since 2020, and inclusive of this change, Amazon has increased fulfillment rates less than other carriers and continues to cost significantly less than alternatives.”
This sentiment is of little solace to sellers, especially SMEs and solopreneurs who will bear the brunt of losing another 5% per transaction. Amazon has shown little inclination to let all the fees be passed on to the customer, as it has been deactivating listings and alerting sellers that they are violating the fair price policy. It all leaves sellers with fewer options than before to successfully maintain and grow their business, whether on Amazon or other platforms.
In the short term, merchants will likely try to do less FBA and perhaps spread their selling over other platforms. As Amazon noted, the long term is uncertain. The only sure thing is that selling on Amazon will not get any less expensive anytime soon. Someone really needs to tell that to those thousands of new sellers joining the marketplace each day.
eBay Spring Seller Update brings positive changes
Spring has sprung, and so has eBay’s Spring Seller Update. The good news is there are no new fee increases for sellers since those were announced back in February. Instead, eBay advised sellers of changes and new features under three topics. Here’s the rundown:
Running Your Business
eBay is expanding its efforts to reduce unpaid auction items by “asking buyers to pay when they accept a seller’s Offer to Buyer or a counter offer.” Unpaid items have become a big issue for sellers recently. The 4-day waiting period to file a claim for an unpaid item affected the market of items with volatile pricing, such as trading cards and other collectibles.
eBay is also changing the way it counts listing and page views, with an eye on more accurate counts and employing more effective filtering of bots. eBay admits that this process may cause a significant drop in page view numbers but says it will not reflect a reduction in actual potential buyers viewing a listing.
Listing and Promoting
eBay will be making “category changes to create more intuitive buying, selling, and search experiences. The changes bring eBay into closer alignment with industry-standard classifications, enhance search engine optimization, and make it easier for domestic and international buyers to find your items.” Full lists of the affected categories can be found here.
eBay will also be updating item specifics in the categories of Collectibles (Toys), Health & Beauty, Home & Garden, and Parts & Accessories to “give buyers important at-a-glance information about an item, and can include things like brand, color, or size.” The goal is to improve the discoverability of searched items in the marketplace.
Our friends at Value Added Resource note that while this filtering in this way may provide a better buying experience, it does not necessarily create a better browsing experience on the platform. These types of changes have been rough on sellers in the past, at least initially.
Fees & Financials
eBay will “be enabling on-demand payouts for sellers who have a weekly, biweekly or monthly payout schedule,” along with additional scheduling options for the payouts. These bank transfers will still be subject to 1-3 day processing. Sellers in a hurry will be able to transmit available funds immediately to their debit card within 30 minutes for a fee later this year.
Finally, eBay will be rolling out Spendable funds, which will give sellers the “option to use the earnings from their sales to fund their eBay purchases—without waiting for a payout to their bank account.” This program began as invitation-only and will now be rolling out to the seller community en masse.
In a rare sign of calmness this Spring, there were no major shockers in the Seller Update. But given the rate at which marketplaces are hitting sellers with fee increases, eBay merchants should feel grateful that the changes are mostly positive this time.
Read more at eBay.
High container and fulfillment costs impacting eCommerce
A pair of recent reports have confirmed what most sellers feel: fulfillment and the supply chain continue to be unreliable and challenging, with perhaps the only reliable element being that the process is more expensive than ever.
Marketplace Pulse has noted that “container shipping rates from China to the US have been above $10,000 for nine months.” Container prices have drastically increased since 2020. The average price for shipping a 40-foot container from China to West Coast ports in the US has risen from $1,500 at the beginning of 2020 to $15,000 today, with a high of $20,000 in September 2021.
When coupled with COVID-19 lockdowns, container shortages, port closures, shipping bottlenecks, labor shortages, demand imbalance, and even typhoons, one thing is clear: The product manufacturing pipeline connecting China and the United States used to be both quick and inexpensive. Right now, it’s none of those.
At the same time, record eCommerce order volume has been a boon to sellers and a fulfillment nightmare. Digital Commerce 360’s report on a study by Saddle Creek Logistics indicates that the most common fulfillment challenges for sellers have been delivery expectations and transportation capacity. Raising costs associated with labor shortages and carrier fee increases have also played a part in the boondoggle. 51% of sellers reported that their fulfillment costs increased last year.
Sellers are trying to mitigate the issues by switching carriers and renegotiating rates, while shippers turn to robot labor and automation to fill personnel gaps. Ultimately, the report concludes that disruptions to the supply chain will last another year or longer, so get used to the “new normal.”
Also in the news
- New Brand Analytics search dashboards are now available. Amazon US.
- Update on upcoming changes to buyer-initiated order cancellations. Amazon US.
- Apply for a chance to win a €100,000 prize and one year of free access to Amazon Launchpad! Amazon UK.
- Extension of FBA fee promotion for minimum order quantity. Amazon UK.
- Promotional discount on Amazon Partnered Carrier program fees. Amazon UK.
Webinars in the week ahead
April 26: eBay Canada Women in Ecommerce. eBay.
April 28: eBay Canada Small Business 101. eBay.
Various dates: Amazon advertising’s global webinar program continues with 20+ webinars scheduled, covering Sponsored Products, Sponsored Brands, reporting, optimization, and tips. Amazon.
For US sellers
April 26: How to Transform the Customer Experience Through B2B Commerce. Digital Commerce 360.
April 27 & 28: The 2022 D2C Summit. Tinuiti.
For UK sellers
Various dates: Amazon webinars covering selling, fulfillment, SFP, advertising, and Amazon Business. Amazon.
USPS rhymes with “hot mess”
And finally, when US eCommerce sellers think of symbols of a decadent monarchy trying to keep them down, they probably think of US Postmaster General Louis DeJoy. In a recent interview with Government Executive, DeJoy wastes no time setting the record straight: he’s not one of us. “I have a very accomplished life,” the postmaster general, whose net worth is at least tens of millions of dollars. “I don’t have to work. I’ve got lots of things I could do.”
Reminiscent of the legendary (but most likely falsely attributed) Marie Antoinette quote, “Let them eat cake,” DeJoy’s contempt for the hard-working people of normal society has resulted in a series of delivery slowdowns and rate hikes that have adversely affected eCommerce sellers.
His 2022 greatest hits are more like mob hits on sellers’ bottom lines:
- Slowing down first-class package delivery and making packages that need to travel longer distances take even longer by transporting them via ground instead of air.
- Increasing rates on Priority Mail and Priority Mail Express (3.1%), Priority Mail International (3.7%), First Class Packages (8.8%), and First-Class Package International Service (4.2%).
As you might imagine, DeJoy’s reign at the USPS has been cloaked in controversy, including numerous scandals and political shenanigans. In the interview, Dejoy positions himself as a maverick changemaker. “Boy, I’d love to be Mr. Great Guy who didn’t raise the prices and didn’t change a thing yet, all of a sudden, had the place profitable,” DeJoy said. “It doesn’t get done that way. It doesn’t get done without making changes.”
However, with customer satisfaction dropping fast, it seems DeJoy is slowly running the USPS into the ground and taking sellers along with it. It’s a hot mess of slowdowns, scandals, and fee increases with little reliability or accountability. Perhaps it’s time for sellers to consider switching fulfillment from using USPS to privately owned carriers—and give “Mr. Let Them Eat Cake” a proverbial “pie in the face.” Read more at eCommerceBytes.