: Amazon to add inflation and fuel surcharge to U.S. sellers: report

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Amazon.com Inc. will hit U.S. third-party sellers with an inflation and fuel surcharge of 5%, saying in a memo that it already has absorbed “significant cost increases.”

The fee will go into effect April 28 and will be on top of existing fees that Amazon collects from U.S. third-party sellers who use Amazon’s AMZN, +3.15% fulfillment services. It would apply to all merchandise. CNBC earlier Wednesday reported the plans for the surcharge.

Rising fuel prices and inflation are “further challenges” for Amazon just as it expected a “return to normalcy” from pandemic-related restrictions and other snags, the company said in the memo. The fee is subject to change, Amazon said.

The fee makes “financial sense” for the online giant, said Neil Saunders, a managing director with data analytics and consulting company GlobalData.

Rising fuel prices and other increases have put many retailers under pressure, but online operations are particularly exposed as they depend on deliveries, Saunders said. Those delivery costs are not fully passed on to consumers in most cases, he said.

“Amazon has seen its shipping costs increase. If left unchecked, these have the potential to erode profits,” Saunders said.

The potential surcharge would “help cover some, although not all, of the margin deterioration,” and as it is not being applied directly to consumers, Amazon will be unlikely to suffer pushbacks from end users, Saunders said.

Third-party sellers, however, would be squeezed. Amazon, thanks to its efficient fulfilment services and the “extensive” audience it offers sellers, has the upper hand, Saunders said.

Several companies have announced fuel surcharges in recent weeks, including ride-hailing Lyft Inc. LYFT, +4.04% and Uber Technologies Inc. UBER, +2.00%.

According to travel and leisure company AAA, the national retail gas average hit $4.083 a gallon on Wednesday, up from an average $2.861 a gallon a year ago.

The average has headed lower in recent days as the U.S. plans further taps into its crude reserves.

Amazon shares edged higher in the extended session Wednesday after ending the regular trading day up 3.2%.

Through the past 12 months, the stock has lost more than 8%, contrasting with an advance of around 7.3% for the S&P 500 index. SPX, +1.12%.

This article was originally published by Marketwatch.com. Read the original article here.

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