Amazon has partnered with UPS, FedEx, and the U.S. Postal Service to introduce a 3.5% fuel surcharge on third-party sellers, a move aimed at addressing rising fuel expenses linked to the ongoing war in Iran. Experts say this could lead to increased prices, potentially harming some businesses.
Beginning April 17, Amazon will levy these new “fuel and logistics surcharges” on sellers using its fulfillment services in the U.S. and Canada. This reaction comes amidst historic disruptions in energy supplies, causing oil prices to spike above $100 a barrel and gasoline to hover around $4 a gallon.
Amazon argues that these surcharges are “significantly lower” than what other carriers impose, with an average addition of only 17 cents per item shipped. However, experts caution that these costs can accumulate rapidly, especially when combined with customs duties.
According to Alex King, founder of a personal finance site, if retailers face another 5% to 10% in tariffs along with this 3.5% surcharge, some might be pushed toward bankruptcy. He highlights that small, low-cost household items like laundry detergent and toilet paper will be particularly affected due to tight profit margins.
A 17-cent surcharge might seem minor, but for sellers dispatching thousands of packages, it can lead to significant extra costs, supply chain experts suggest. Larger retailers often manage to buffer these increases, at least for a while, but small businesses typically lack such flexibility.
Brandon Daniels, CEO of Exigar, estimates that about 30% to 40% of sellers will pass some of this surcharge onto consumers, while the remaining 60% to 70% will still be in a very competitive environment.
This could soon mean consumers see higher prices on everyday goods. Companies in competitive sectors, like toy manufacturers, may struggle to maintain low prices or could even shut down entirely.
Sellers on Amazon are reportedly already feeling the pinch from fee increases. Recent policy changes have also lengthened the wait for receiving payments from customers, which now takes at least a week longer, compared to just a few days previously, according to Chris McCabe from ecommerceChris.
There’s skepticism about whether this fuel charge will disappear once the conflict subsides. King expressed that temporary surcharges often become permanent price increases, with companies adjusting their baseline prices upward.
Starting April 26, the U.S. Postal Service will also impose an 8% fuel surcharge on certain packages, including Priority Mail. FedEx recently added a 26.5% shipping fee, while UPS has inflated its prices by an additional 27%.
With jet fuel prices reaching an average of $4.88 per gallon, concerns have arisen about fuel-related surcharges extending to other high-transportation-cost industries, particularly airlines. While airlines haven’t yet added these surcharges to ticket prices, JetBlue Airways and United Airlines have increased checked baggage fees, which might indicate future changes.
Food delivery services in major urban areas are likely contemplating similar fuel-related surcharges to offset rising gas costs. In response to these challenges, DoorDash is implementing an emergency relief initiative to assist drivers with rising fuel prices, offering cash-back and weekly gas payments based on miles driven.
