Amazon Adds Revenue Streams as Holiday Season Approaches

Amazon this past week told third-party sellers using its shipping services that it would introduce a “holiday peak fulfillment fee” from Oct. 15 to Jan. 14. The new fee is expected to increase costs for sellers in the U.S. and Canada by an average of 35 cents per item sold, according to an email sent to sellers viewed by The Wall Street Journal.

Amazon, which said in the note it was raising fees because it expected increased operating costs during the holiday period, said it had previously absorbed such costs, but that “seasonal expenses are reaching new heights.”

The fee bump is the second this year. In April, the company added a “fuel and inflation surcharge” to seller fees that averaged 5% of fulfillment costs at the time.

The company also recently indicated that it plans to host a second Prime Day-like event for the first time ever during the fourth quarter. This summer, Amazon notified some sellers of an event scheduled for the final three months of the year and asked them to submit deals for the event by July 22. The company said the event would be a “Prime-exclusive shopping event” in the fall. Amazon declined to comment on the event.

The recent moves could help Amazon boost revenue in the fourth quarter, its most important period of the year, as high national inflation continues. The second Prime event also signals that Amazon is looking to expand upon the success of Prime Day, which it has held since 2015 and typically generates billions of dollars in revenue for the company.

Amazon has previously held a fourth-quarter Prime Day. In 2020, it moved Prime Day from the summer to the fourth quarter after the early days of the pandemic caused an overwhelming amount of orders on its site, prompting the company to reschedule. That year, research firm Insider Intelligence estimated Amazon made about $6 billion from the event, adding to the company’s $125.5 billion in sales for the fourth quarter. Analysts at FactSet project Amazon’s fourth-quarter revenue this year will top $156 billion.

The second Prime event this year will likely boost end-of-year sales that are crucial to Amazon’s overall performance for the year. The company said customers purchased more than 300 million items during its July Prime Day event. Insider Intelligence projected before Prime Day that overall sales from the event would reach about $7.76 billion in the U.S., a 17% increase from last year’s event in June.

In a recent research note by investment firm

Citigroup Inc.,

analysts predicted that the second Prime event “could boost volume to some extent ahead of the peak season” and lessen the year-over-year declines Amazon has experienced this year in profit and revenue growth after a two-year period in which pandemic-induced shopping accelerated online commerce.

Amazon reported slowing sales and a net loss for the second straight quarter in July. Company executives have said that inflation is among its biggest challenges, and the company has looked to pare costs to help deal with the shifting economic landscape.

Amazon has tried to curb costs by subleasing millions of square feet of excess warehouse space, deferring construction of new facilities and finding ways to end or renegotiate leases with outside warehouse owners, acknowledging that it overbuilt as it sought to meet pandemic demand. It also has thinned out its hourly workforce through attrition. The company shed about 100,000 full- and part-time employees during the second quarter, leaving it with roughly 1.5 million people. Amazon typically ramps up head count in preparation for the holidays.

Write to Sebastian Herrera at [email protected]