Amazon hits pause on controversial seller fee rollout that had caused a revolt

Hundreds of thousands of merchants on Amazon will get a brief reprieve from a new controversial fee that was to take effect on April 1, a company executive said.

Amazon will still charge affected sellers the fee as planned, but will credit them back at the end of April. The company is referring to this grace period as a “transition period" that will show sellers how they would be affected by the so-called low-inventory fee without the sellers yet footing the bill.

“We have heard feedback from a number of sellers that they are uncertain about how, if at all, the new fee will impact their business,” Dharmesh Mehta, an Amazon vice president, said in a post published to LinkedIn on Monday. “To help address these questions and ensure sellers better understand how or if the fee will impact them, we have decided to have the month of April 2024 be a transition period for which all of these low-inventory-level fees will be credited back to sellers.”

As its name indicates, Amazon will charge some sellers who store goods in the company's warehouses this new fee if they do not consistently keep enough inventory.

Mehta’s post was met with relief and thanks from some sellers in the comments section, while others continued to express disgust for both the idea behind the fee as well as the execution of the rollout. Amazon will also hit U.S. sellers with new "inbound placement fees" if sellers do not ship inventory into at least four different Amazon warehouses. Previously, a seller might ship inventory to only one Amazon warehouse, and Amazon would then foot the bill to split up the inventory among different warehouses in various regions nationwide.

Over the last month, Fortune has reported on this new slate of fees that have caused widespread angst and outrage across the seller community that's responsible for more than 60% of goods that Amazon sells globally. A week after the first article on this topic, Fortune reported exclusively that the Federal Trade Commission had begun contacting Amazon sellers and probing for more information about the anticipated impact of these fees.

Amazon generated $140 billion in revenue alone last year from fees it charges sellers, which can amount to a 50% cut of sellers' sales when their advertising costs were added in. Now, with the new fees, Amazon's cut will rise above 50% for certain merchants. Some sellers told Fortune that the new low-inventory fee is unfair because Amazon also charges them extra if they store too much inventory in one of their warehouses.

"You gotta precisely thread the needle to not get completely killed,” Judah Bergman, CEO of baby-product company Jool Baby, previously told Fortune about the challenge of the new low-inventory charges coupled with existing inventory fees that Amazon levies for storing too much inventory.

As the post from the Amazon executive implied, other sellers have been confused by how the low-inventory fee will affect them. Sellers specializing in seasonal products, for example, are worried about being charged because their items may not be in demand year-round.

Some Amazon sellers have told Fortune that the combination of the two new fees will either force them to raise prices or close up shop. Others have said they are looking into storing and shipping products on their own, rather than paying Amazon to do so through its Fulfillment by Amazon (FBA) service. One challenge for sellers is that FBA is the only way to guarantee that their merchandise qualifies for Amazon Prime shipping, which makes their products more attractive to many buyers. Still, other sellers are choosing to pay Amazon for another warehousing service, called Amazon Warehousing and Distribution (AWD), because the company says sellers can avoid low-inventory and inbound placement fees if they use that service.

Are you an Amazon employee or Amazon seller with thoughts on this topic or a tip to share? Contact Jason Del Rey at jason.delrey@fortune.com, jasondelrey@protonmail.com, or through secure messaging app Signal at 917-655-4267. You can also message him on LinkedIn or at @delrey on X.

This story was originally featured on Fortune.com