Amazon cannot continue to absorb the costs

Andy Jassy, ​​CEO of Amazon Web Services, speaks at the CERAWeek by IHS Markit 2019 conference in Houston, Texas on March 11, 2019.

Aaron M. Sprecher | Bloomberg | Getty Images

Amazon CEO Andy Jassy says the company needs to add a fuel and inflation surcharge to deal with rising costs from inflation, the coronavirus pandemic and war in Ukraine.

“At some point, you can’t go on absorbing all of these costs and running an economic enterprise,” Jassy told CNBC’s Andrew Ross Sorkin in a “Squawk Box” interview Thursday.

Amazon tried to meet all of those costs as much as possible, Jassy said, but it became increasingly untenable as the pandemic continued and after Russia invaded Ukraine earlier this year. year. On Wednesday, Amazon imposed a 5% fee on US third-party sellers who use its shipping and storage services.

The surcharge will go into effect in about two weeks for sellers using Amazon’s Fulfillment by Amazon program. Merchants pay to have their inventory stored in Amazon’s warehouses and to use the company’s supply chain and shipping operations.

“We are very aware that sellers also have costs,” Jassy said. “We will continue to watch how the costs develop and we will come back.”

Some sellers expressed frustration with the fees, noting that they had already absorbed another FBA cost increase that went into effect in January.

Amazon’s spending has jumped since the start of the pandemic as the company has tried to hire and retain enough employees to meet demand at its warehouses. Faced with staffing shortages at some facilities, the company often had to send packages over longer and more expensive distances to locations with enough people to receive them.

Jassy, ​​who took over from Amazon founder Jeff Bezos in July, also pointed to the war in Ukraine, which has driven up oil and metal prices, and the latest Covid-19 outbreak in China, which has disrupted technology supply chains.

“I think some of the issues that are happening right now in China where, you know, like there are variations and they’re very conservative and the production lockdown is creating problems getting products as quickly as we have need,” Jassy said. “It’s always more expensive and takes longer to get products into the country, so there are always supply chain issues.”

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