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Here’s What It Costs Amazon to Run Its Fulfillment Program

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Fulfillment costs rose 30%

Amazon (AMZN) is gearing up to report its fourth-quarter earnings results after announcing a plan to raise shipping fees for its sellers in the new year. The shipping fee adjustment will take effect on February 19, and it will affect those sellers that use the FBA (Fulfillment by Amazon) program.

In the third quarter, Amazon spent $8.3 billion on fulfillment-related operations, up almost 30% YoY (year-over-year). Fulfillment expenses accounted for ~15% of Amazon’s revenue in the quarter. The rise in the company’s fulfillment expenses led to its overall operating expenses jumping 22% YoY to $52.9 billion.

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How Amazon’s peers fared

At Alibaba (BABA) and JD.com (JD), operating expenses rose 86% and 27% YoY, respectively, in the third quarter. eBay (EBAY) and Etsy (ETSY) saw their operating expenses rise 7.1% and 35.3% YoY, respectively, in the third quarter.

Delivering orders on behalf of sellers

Under the FBA program, sellers send items to Amazon’s warehouses, where they’re packed and shipped to customers. The FBA program helps sellers speed up order delivery. Through its Prime program, Amazon promises customers that they can expect to have certain items delivered to them within an hour, which explains the importance of the FBA program.

Alibaba and JD, China’s top e-commerce companies, use a mix of human drivers and specialized drones to ship items to customers as part of their efforts to cut down on delivery times.

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