For many business owners, being able to sell on Amazon is a dream come true. It has millions of active buyers, you get free marketing, and if you use Amazon FBA, your customers will be happy to have the option to get their order the next day.
But how much does selling on Amazon cost?
It costs money to sell. You have to pay many different kinds of fees, and they also change depending on what kind of seller you are. For example, if you are in the Amazon FBA program, you have to pay a storage fee. If you ship your own items, you don’t have to pay this fee.
There are four kinds of fees that we will pay for:
- Amazon Seller
- Amazon Store
- After Sales
- Amazon FBA
By the end of this article, you should know how much you’ll need to save and how much you’ll have to pay in fees every month. Use this information to set the right prices for your products and avoid losing money.
Amazon Seller
Amazon makes money from sellers’ subscriptions and fees. You pay these fees either per item or on a monthly basis.
There are two main kinds of people who sell on Amazon. Individual Seller and Professional Seller are the names for these two types.
You pay $0.99 for each item you sell as a private seller. With this account, you don’t have to pay a monthly fee to sell on the platform, but you can only sell 40 items per month. This is a great way to run a small business or sell a product with a high profit margin.
Amazon will charge you $39.99 per month for a professional account, even if you don’t make any sales. If you made a sale, you don’t have to pay the $0.99 fee. This type of account also comes with a service called “inventory management” and offers to wrap gifts, but only if you are also in the Amazon FBA program.
With an Amazon Professional Account, you can buy as many products as you want every month. A Referral Fee is a fee you pay Amazon for sending customers to you. This fee is the same for both types of accounts. Depending on what you sell, the Referral Fee is between 6% and 45%.
Amazon Store
Before you can sell on Amazon, you need to pay for some other things. You cannot just sell on Amazon. It’s not the same as eBay. Most of your competitors on eBay are local businesses. On Amazon, you are competing with big brands, including big companies in China that make products.
Here are some of the costs you’ll need to pay to get your Amazon store up and running.
- UPC Barcode
- Registration
- Logo
- Box Design
- Research Tool
Not all of these are needed to sell on Amazon, but they are all important if you want to do well.
Registration
It costs $39.99 to sign up for Amazon. We’ve already talked about how you can choose to pay $0.99 per item, but if you want to sell a lot of items, it’s better to pay $39.99 a month.
Logo
You need a brand if you sell on Amazon. If you know how to make graphics, you can skip this and just make your own. But if you don’t, you’ll have to pay someone to make one for you. If you want to buy this from sites like Fiverr, you’ll need at least $15.
Tool for research
Before you can sell on Amazon, you need to know what sells and what doesn’t. You can’t do this with research done by hand. Also, where will you get the information?
There are tools like AMZ tracker and Keyword Inspector that can help. But Jungle Scout is one of the best companies that can tell you which products sell the most around the world.
You can use Jungle Scout to find the best products on Amazon. If you know what people want, you’ll have a better chance of making money on Amazon. Jungle Scout costs money. You can choose from three plans that cost between $19 and $49 a month.
The $19 plan doesn’t help in any way. It only lets you do ten searches for products and ten searches for suppliers per month. With this tool, the Jungle Scout Plan, which costs $39 per month, is your best option. It’s billed once a year.
UPC Barcode
Describe a UPC barcode. Each product on Amazon needs to have a barcode. It means Universal Product Code. Every one of your items must have a label with a bar code, which Amazon would scan when a sale is made. This is how they keep track of the stock and how Amazon knows that the item it sold was yours.
You have to get a license to get a UPC Barcode. It will cost you about $250 to get it from GS1 Company Prefix. You can also buy barcodes from companies like Barcodemania. Here, you can buy ten barcodes for $15. Then you have to print that out and stick it on every item you sell.
After Sales
After each sale, you have to pay fees to Amazon. You have to pay these fees even if you have a Professional Account.
Here are the fees you have to pay Amazon after the sale:
- Referral Fees: range from 6% to 45% of the price of the item you sold. The percentage depends on the price of the product plus the price of shipping.
- Media Item Fee: If you sell DVDs, books, video games, or software, Amazon will charge you a flat rate of $1.80 per item. This fee is in addition to the fee per item and the fee for a referral.
- Refund Fee: If your customer asks for a refund, Amazon will refund the full amount of the seller fees, but it will charge you a refund fee of either $5 or 20% of the cost of the item, whichever is higher.
- High Volume Fee: If you sell more than 100,000 non-media items on Amazon, you will be charged $0.005 per product per month, even if you don’t make a sale.
Now, let us use an example. Let’s say you’re asking $20 for a wristwatch. The cost to ship is $5. And let’s say you have a small business and chose the Individual account, which costs $0.99 per item sold.
How much will it cost all together?
- Referral fee: The referral fee for watches is 16%
- which is $25 times 16%, or $4. Sales fee: You would pay $0.99
The total will be $4.99.
Right away, $4.99 is taken off the selling price of $20, so you only get $15.01. Now you have to ask yourself if you still make a profit after paying these fees.
Now that you know what the fees are, you need to take them into account when setting the price of your products. Make sure you do not lose money. In our example, there is no media fee because a wristwatch is not in that category.
Amazon FBA
What is FBA by Amazon? It stands for “Ships from and Sold by Amazon.” In this business model, you send your products to Amazon, where they are cataloged and kept in a warehouse. Once the items are in the Amazon system, you can put them up for sale on Amazon.
When a buyer makes a purchase, Amazon will ship the item to the buyer, not you. This is how Amazon is able to ship items in one day. If you want to sell on Amazon FBA, you have to pay two kinds of fees:
- Packaging, Handling, and Shipping
- Storage Fees
Storage fees vary. The cost of “renting” the Amazon warehouse depends on how many cubic feet your product takes up. From January to September, you pay $0.69 per cubic foot for items that weigh less than 21 pounds. This price goes up to $2.40 per cubic foot per month from October to December, which is peak season.
During the slow season, you pay $0.48 per cubic foot for items that weigh more than 21 pounds. During the busy season, you pay $1.20 per cubic foot. Even if you didn’t sell anything, you still have to pay the storage fee every month.
The prices for the Amazon Fulfillment fees, which you pay for the work they do to package, handle, and ship your items, vary based on the size of the item. In general, packing, handling, and shipping will cost you between $2.41 and $137.32.
The Most Important Costs for Amazon
Whether you use Amazon FBA or ship your own items, these are the most important costs you need to plan for:
- Monthly membership fees are $39.99
- Inventory costs are different for each item.
- Logo cost – $15 one-time payment
- Barcode: At least $30 for 20 different things
On Amazon only, you need at least $84.99 to get started. This doesn’t include the cost of your stock, your marketing, or the packaging you do yourself. If you want to brand your products, you have to pay for brand stickers as well.
Other Costs You Can Choose
If you want to market your business seriously, you have to pay for other things to start an Amazon business. These costs have nothing to do with Amazon, but a lot of sellers do them to stand out from the crowd.
Photography of products
If you want to sell on Amazon, the photos of your products need to be clear and taken by a pro. You can put up to eight photos of a product on Amazon. You can buy a camera if you don’t have one. You can hire a professional photographer if you don’t want to.
Product photography can cost anywhere from $50 to $300. It really depends on how experienced the photographer is and what else you want him to do, like edit photos.
Marketing
There are a lot of sellers on Amazon, so you will have to compete with them. The sad truth is that almost every item on Amazon is sold more than once. So, how will you make yourself stand out?
You can advertise your products or give away free stuff with your main products. This means, of course, that you need to spend money on marketing.
If you sell watches, you could give away wristbands for free. Why not give away free phone cases if you sell smartphones?
This free stuff doesn’t have to keep coming for a long time. Maybe you can only do this for the first 100 people who buy from you. But you still have to pay for the things you get for free.
Set aside $100 if you want to go the advertising route. You can run ads on Facebook or Instagram, which are the best places to find people who want to buy physical goods.
Trying out a product
If you don’t make your own products, you shouldn’t sell them on Amazon without testing them first. If your supplier sells low-quality goods, you would have to return and refund a lot of them.
As you have seen, there is a cost to getting a refund. This is how Amazon keeps the quality high. They want the sellers to take responsibility for what they do, and the best way to do that is for bad sellers to lose money.
If the initial cost of your product is $20, it will cost you about $30 to have a sample sent to your home. Look at it and make sure it works. If it meets your requirements, you can start ordering more to add to your stock.
Summary
It’s great to sell on Amazon, but there are a lot of costs that come with it. Also, it takes a lot of work to get barcodes and put labels on each item. There are a lot of fees to pay, and you might want to get started in the online business world by using dropshipping or affiliate marketing.
On Amazon, you have to keep track of your stock. This means you’ll need at least $500 in savings to buy the items in bulk. If these products don’t sell, your money will be sitting in your basement or Amazon’s warehouse. Amazon dropshipping is the best thing to do instead of this.
