Amazon has too many warehouses. Now sellers pay more

In Suzhou, China, Online toy store owner Cameron Walker relies on Amazon to ship nearly a million packages for his business each year. The 42-year-old toy company, which designs and manufactures toys and craft materials in China and then sells in English-speaking markets including the UK, US and Canada, operates on the service of third-party processing from Amazon, Fulfilled by Amazon. (FBA), since 2016. (Walker asked WIRED not to release his company name because successful businesses on the site are often attacked by competitors who report bogus issues to Amazon in an attempt to diminish their online standing. .)

“We’re almost exclusively through Amazon, something like 90% and up,” he says. The company is in the top three of the biggest child-focused arts and crafts brands on Amazon in the UK, and among the best in the US and Canada.

“It’s an awesome scaling program,” he says. “For minimal money, you can scale a business with almost no infrastructure.”

Walker is almost entirely dependent on Amazon’s warehouses and shipping capabilities, allowing it to handle product design, manufacturing and marketing. He did not consider alternatives or competitors. “That was the plan all along,” he says, “because it’s the easiest.”

But easy doesn’t come cheap. When Amazon announced it had built or purchased $2 billion in excess storage space, Walker and other third-party FBA customers received a letter. In the UK, he said their FBA fees would be up 4.3% due to a “fuel and inflation surcharge”. In the United States, where the price increase took effect a little earlier, it was deemed necessary “to partially offset the higher ongoing operating costs that we face in the future”.

The FBA service allows third-party sellers to store their products at Amazon fulfillment centers and offload picking, packing, shipping, and customer service to the online retail titan, as well as take advantage of the speed of Amazon’s Prime delivery service. It is used by many companies.

“With all the warehouses Amazon has, it makes it easier for them because they already have products everywhere,” says Ben Graham, marketing operations manager at a nutritional supplement company called Toniiq. “They’re already running these trucks everywhere, so it’s simple for them to say, ‘We’re just going to ship it. It’s good. But Toniiq is looking to reduce his reliance on Amazon, in part because he was attacked by a competitor, temporarily barring him from Amazon and the FBA setup, and affecting his sales. The company couldn’t even fulfill orders placed through its own website, as it used FBA for the process.

“You are completely at the mercy of Amazon,” Graham says. “This makes it harder to offer any kind of value. You end up with significantly lower margins on Amazon than if you offered the products on your own website. The e-commerce giant is cheaper than many competitors, admits Graham , but its dominance means that when prices rise, it’s Amazon’s way or the highway.

“In 2022, we expected a return to normal with the easing of Covid-19 restrictions around the world, but fuel prices and inflation presented other challenges,” the spokesperson said. from Amazon, Dagmar Wickham. “It is still unclear whether these inflationary costs will rise or fall, or for how long they will persist. From May 12, we will be implementing a 4.3% fuel and inflation surcharge on top of our current per unit FBA fee rates in the UK, Germany, France, Italy and Spain. Wickham denied there was a connection between the fee increases and Amazon’s spare storage space.