Amazon has announced a 3.5% fuel surcharge on its sellers, joining UPS, FedEx and the US Postal Service in a strategy meant to counter rising fuel costs amid the Iran war – but experts are warning it could raise prices and put some companies out of business.
Starting April 17, Amazon will apply a new “fuel and logistics-related surcharge” to third-party sellers in the US and Canada that use the e-commerce giant’s fulfillment services, an attempt to offset a historic energy supply disruption that has sent oil above $100 a barrel and gasoline to $4 a gallon.
Amazon has argued the surcharge is “meaningfully lower” than those from other carriers, adding that it will amount to just an average additional 17 cents per unit for shipments via Amazon’s fulfillment centers – but those surcharges could quickly pile up, especially on top of tariffs, experts said.
“If you’re taking an extra 5% to 10% from tariffs, an extra 3.5% from this fuel surcharge … there are definitely gonna be some retailers where this might be the final straw and it actually pushes them into the red,” Alex King, founder of personal finance site Generation Money and a former international trade VP at Barclays, told The Post.
Smaller, lower-price staples like laundry detergent, paper towels, toilet paper and cleaning supplies will be hit hardest by the new fuel surcharge, since sellers of those products typically operate with very tight profit margins, according to King.
A surcharge of 17 cents might sound puny, but many of these smaller goods are bought in bulk, so third-party sellers shipping out thousands of packages each month could face thousands of dollars in added costs, according to supply chain experts.
Larger retailers tend to have stronger margins and will likely be able to absorb the added costs, at least temporarily, but smaller businesses often have much less wiggle room.
“Maybe 30%, 40% of sellers will have to pass some of the surcharge on,” Brandon Daniels, CEO of Exiger, an AI supply-chain optimization firm, told The Post. “The other 60% to 70% are in really competitive sectors on Amazon.”
That means consumers could soon notice higher prices on everyday household items. Firms in highly competitive areas – like toymakers – will be forced to keep their prices low and might have to shut business altogether, Daniels said.
Amazon sellers are already feeling the effects of other recent fee increases, including a new policy that prolongs how long it takes them to get paid by for items they sell on Amazon to customers.
It typically takes just days for sellers to get paid, but now they will have to wait at least a week or longer, according to Chris McCabe, CEO of ecommerceChris, a consultant to Amazon sellers.
“The most interesting comments I’ve heard about the fuel charge is skepticism about whether it will go away when the war ends,” McCabe told The Post.
It’s not unusual for businesses to use temporary surcharges as an excuse to keep prices elevated long after one-time shocks dissipate, according to King.
“When a temporary surcharge comes in, they do often remove it, but what they’ll kind of subtly do is just increase the underlying cost afterwards, anyway, so it’s almost like everyone gets used to that extra percentage,” King told The Post.
Starting April 26, the US Postal Service is slapping a temporary 8% fuel-related surcharge on certain packages, including Priority Mail shipments.
Since March 30, FedEx has been charging an additional 26.5% of the shipping cost for domestic ground shipments. UPS has raised its own fees an extra 27%.
There are fears that fuel-related surcharges could spread to other industries with significant transportation costs – particularly airlines, as average jet fuel prices have soared to $4.88 a gallon, according to the Argus US Jet Fuel Index.
While carriers have not yet added fuel-related surcharges to tickets, both JetBlue and United Airlines this week hiked their checked bag fees – potentially a taste of things to come.
Food delivery apps in major cities are also likely considering fuel-related surcharges or hiking their service fees to cover higher gasoline prices, according to King.
In the meantime, DoorDash has rolled out an emergency relief program to help drivers cope with rising prices at the pump, offering cash-back incentives and weekly gas payments depending on mileage.
Additional reporting by Lisa Fickenscher
