in Suzhou, China, Online toy store owner Cameron Walker relies on Amazon to ship nearly a million packages for his company each year. The 42-year-old’s toy company, which designs and manufactures toys and craft materials in China and then sells them in English-speaking markets, including the UK, US and Canada, has been running on Amazon’s third-party fulfillment service, Fulfilled by Amazon (FBA), since 2016. ( Walker has asked WIRED not to disclose the name of his company, as successful businesses on the site are often attacked by competitors who report fictitious issues to Amazon to try to downsize their online position.)
“We work almost exclusively through Amazon, about 90 percent,” he says. The company is in the top three largest kid-centric arts and crafts brands on Amazon in the UK, and among the top in the United States and Canada.
“It’s a great scaling program,” he says. “For a minimum amount of money, you can scale a business without almost no infrastructure.”
Walker is almost entirely reliant on Amazon’s warehouses and shipping capabilities, keeping him engaged in product design, manufacturing, and marketing. He has not considered alternatives or competitors. “That was the plan from the start,” he says, “because it’s the easiest.”
But easy is not cheap. When Amazon announced it had built or purchased $2 billion too much warehouse space, Walker and other outside FBA customers received a letter. In the UK, it said their FBA fees would rise 4.3 percent as a result of a “fuel and inflation surcharge”. In the US, where the price hike took effect a little earlier, it was deemed necessary “to partially offset the higher permanent operating costs we face in the future”.
The FBA service allows third-party sellers to store their products in Amazon fulfillment centers and transfer the picking, packaging, shipping and customer service to the online retail titan, taking advantage of Amazon’s Prime delivery service speed. It is used by many companies.
“With all the storage Amazon has, it becomes easier for them to fulfill fulfillment because they already have products everywhere,” said Ben Graham, marketing operations manager at a nutritional supplement company called Toniiq. “They’re already driving those trucks around, so it’s easy for them to say, ‘We’ll just ship it. It’s fine.’” But Toniiq is trying to reduce its reliance on Amazon, in part because it was attacked by a competitor, temporarily shutting it out of Amazon and the FBA facility, affecting its 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. “It makes it harder to offer any value. You get significantly lower margins on Amazon than if you were to offer the products on your own website.” The e-commerce giant is cheaper than many competitors, Graham admits, but its dominance means that when price hikes roll in, it’s Amazon’s way or the highway.
“In 2022, we expected a return to normalcy as Covid-19 restrictions eased around the world, but fuel prices and inflation have presented further challenges,” said Amazon spokesman Dagmar Wickham. “It is still unclear whether these inflationary costs will rise or fall, and how long they will last. As of May 12, we will introduce a fuel and inflation surcharge of 4.3 percent on top of our current FBA costs per unit rate in the UK, Germany, France, Italy and Spain.” Wickham denied that there was any connection between fee increases and Amazon’s spare warehouse space.
