An Amazon business is no different from setting up a store. Knowing what you will spend where assists you in determining the best products to list on Amazon, amount of listings, type of seller account you’ll need, overall cost, and so forth.
Table of Contents
- So, how much does it cost to sell on Amazon?
- Should You Choose Amazon Seller Plans or Pay Per Listing?
- Amazon Seller Fees Explained
- Common Business Fees
- Cost to Sell vs. Item Price
- How Does Amazon Pay Seller Profits?
- Closing Thoughts
So, how much does it cost to sell on Amazon?
We see this question asked frequently, but there’s no one-size-fits-all answer. Your upfront costs will depend on many factors.
Like most industries, sometimes you have to spend money to make it. Before you start selling, you should understand the various fees, options, and terms available to you. Remember that Amazon might change these fees at any time.
Budgeting for Your Amazon Business
- Total item cost
- Seller fees
- Shipping costs
- Advertising costs
- Other business fees/overhead
This is an idea of what an Amazon seller’s budget would look like. Your goal is a profit after you subtract 2-5 from your total item cost.
Some costs will be mandatory investments due to Amazon’s terms of service and/or law. Other fees depend solely on your product and category.
Common Amazon Fees
- Fulfillment by Amazon (FBA): optional
- UPC code: $250 for 10 and $50/yearly
- FNSKU Label: $0.20 per item or free if you do it yourself
- Trademark: $350, but it’s optional
- Amazon fees: $0.99 per product listing + additional fees
- Amazon plans: $39.99/mo. plan + additional fees
- Referral fees
- Variable closing fees if you’re selling media such as video games, books, or movies
Keep in mind that this isn’t an inclusive list. Amazon offers many services to its individual and business sellers, but some are situational at best. The fees listed above are common when starting up and apply to general charged fees Amazon sellers can expect on their product listings.
Many services have additional fees, which we break down further, but they won’t apply to your total costs to sell if you don’t use them.
What is Amazon FBA?
Amazon becomes your inventory management system. They warehouse, ship, and handle returns. The service isn’t free, and you will incur additional fees should you choose to use their service.
Fees associated with FBA:
- Returns: Only applies to certain categories
- Customer service: as needed
- Packing, handling, storage, and shipping: costs depend on the weight of your item and increase if oversized or oddly shaped
Amazon charges per cubic foot of space your product uses. The longer your items hang around their warehouse, the more those fees will add up.
Standard fees start at $0.64 per cubic foot for non-peak months. It’s more expensive to use FBA during the winter holidays than the rest of the year. Expect to pay $2.35 per cubic foot from October to December.
If your item is oversized or an odd shape that requires special packaging, you’ll pay more too.
- No trips to the post office or shipping providers
- No worrying about meeting Amazon’s ship by deadlines
- No filling out customs forms for international sales
- No housing inventory, packing, and shipping materials
- No worrying about charging the correct postage or not having enough shipping credit to cover it
What is FBM?
Your other option is fulfillment by merchant (FBM), which is you.
Of course, you still have additional costs with shipping and packaging. You might have storage expenses, depending on the size of your item.
Is FBA Right for Your Amazon Product Listing?
Think of FBA as an automation for the backend of every sale you make. While the fees might be a little shocking, you should understand that Amazon becomes your middleman and allows you more freedom, far less worry, and little to no hassle.
Does that mean it’s right for every item or Amazon business? No.
If you’re not making sales, using FBA won’t be cost effective.
Amazon charges the storage fees whether your product sells or not. Don’t use it if you can’t afford it.
Are There Cons to FBA Aside from the Fees?
Few people bring up this one negative. Your inventory control via Amazon stops there. Third-party inventory control companies can span multiple selling platforms.
So, what does that mean? If you want to sell your product elsewhere, you’ll need to either hire another fulfillment company or do it yourself.
Should You Choose Amazon Seller Plans or Pay Per Listing?
Professional Amazon Seller Plan
- $39.99 each month regardless of sale volume
- No selling limits or per listing fees
- Sell to three countries: US, CA, and Mexico
- Bulk uploads available
- No category blackouts except those that require preapproval/currently closed to all
- FBA eligible
- Run promotions, offer coupons, and sales in some categories
- Gift wrap available
- Customized shipping fees
- Eligible for top placement
- Inventory management tools
- Pays variable closing fees and referral fees
- And more
Source: Amazon Seller Central
If you regularly sell more than 40 items, it’s cost effective to choose the professional seller plan.
It costs $39.60 to sell 40 items without the professional plan. Instead, the $0.99 fee per sold item from the individual plan folds into your monthly payment. Anything product sold over 40 is essentially free of the listing fee.
On top of the savings, you unlock more access to categories and other useful tools like promotions, larger market reach with Canada and Mexico, and much more.
Individual Plan or Pay Per Listing
- $0.99 per item sold and no monthly subscription fee
- Limit of 40 sales each month
- No bulk upload
- No inventory management tools
- Category exclusions limit what you sell
- No gift wrap for your customers
- Eligible for FBA
- Not eligible for top placement
- Pays variable closing fees and referral fees
If you have less than 40 monthly sales and you aren’t selling in an excluded category, the individual Amazon seller plan might be a better fit for your budget.
Remember, you don’t pay that $0.99 fee unless you sell an item. If you have slower months, you should consider this option too. Otherwise, both plans are close in value up to 40 listings.
Amazon Seller Fees Explained
Like other selling platforms, Amazon charges fees. Some Amazon seller fees go the wayside if you pay for the seller plan.
What is a Variable Closing Fee?
Closing fees are a flat rate of $1.80 per media item. Amazon defines a media item as items listed in their media categories.
- Video games, accessories, and consoles
What are Referral Fees?
Each time you sell an item, Amazon charges a referral fee from the total. The total includes shipping and gift-wrapping, if applicable. The percentage also depends on the category, and they apply a minimum referral fee of $0.30 for most categories. Source: Seller Central
Please note, if you’re a registered Amazon business or plan to be one, the referral fees will be different.
What is a Refund Administration Fee?
First, understand you won’t see this fee on a regular basis unless you issue customer refunds. Amazon charges you either $5.00 or 20% of your referral fee. They refund you the remaining amount of the referral fee.
What is a Rental Book Service Fee?
If your niche happens to be textbook rentals, Amazon will charge you a flat $5.00 fee for each product listing‘s sale.
Common Business Fees
- Product samples
- Product inventory creation
- Company branding
- Graphic design
- Promotion and advertising
Finding Your Niche
Selling on Amazon might seem like tossing a product into a sea of everything in the universe. You might have grandiose ideas of being an eclectic shop. Perhaps you have one killer idea or category you wish to dominate.
Finding Product Samples Will Cost Money
Before you delve into selling on Amazon, you’ll need a product or two to start. Ideas can range from custom t-shirt to a physical product of your invention. These costs vary greatly, and part of your job is to locate a high-quality product, ingredients, or parts that suit your needs and budget.
Imagine you find an awesome deal on white t-shirts that appear perfect for your screen printing business. Of course, the site doesn’t accept returns or issue refunds. You take a gamble and order a few cases in various sizes.
When they arrive, they’re thin and almost see through. They’re worthless. There goes your sample budget.
The lesson is simple.
If you’d ordered a sample, you would’ve realized the t-shirt wouldn’t work for your business, and you would be out a few dollars.
Don’t rush this step. No amount of savings is worth choosing the wrong product or vendor.
Do your research before committing to large orders, and always understand return policies before exchanging money for goods. Also, don’t forget to check local sources.
Samples of Your Product Will Cost Money Too
For example, if you decide to sell custom t-shirts, you’ll buy a small test run to ensure they’re up to par.
How does this save you money (and a headache)?
Mistakes happen. Custom print jobs (if you’re not printing at home) can have disparities that range from minor to massive. Colors might look one shade on your monitor, but they print out wrong. Sometimes graphics appear offset or wonky.
A minimal run can spot and fix mistakes quickly and for less cost than a full product run. Now, once you’ve perfected your design or product, you’re ready for the next step.
Branding Your Company
If you have an established store elsewhere that you have successfully branded, you can skip this step. Otherwise, you need a company name, logo, and a catchy overall design for every listing.
Unless you’re an artist or you have experience in business design, you should hire out for this service.
Photography and Graphic Design
The average attention span of an online customer is short. You need to create rich images and professional photos to catch their attention.
Infographics are excellent for your listings provided they are small and scan-able. Check out other items selling in your category. Compare listings in the middle to the best-selling lists. What makes them different?
Emulate but don’t plagiarize. Please, unless you’re willing to learn or have the experience, hire out for this service.
We can’t tell you how many high-quality products fail to sell because a seller didn’t proofread their listing. We can tell you that shoppers do pay attention to grammar and spelling mistakes.
Marketing Your Product
Want to expand your market and increase products sold? Consider advertising via social media, mailing lists, or right on Amazon with ads or a giveaway. Source: Amazon Seller Central
Finding free and low-cost exposure can take a lot of legwork. Of course, your goal shouldn’t be to convert sales, but you do want to get your product and company name out there for brand recognition.
Amazon offers additional marketing tools to its FBA members. If you choose this route, use it to your advantage.
Cost to Sell vs. Item Price
We chose to discuss the various charged fees and additional business costs first for a good reason. You need to account for them in your item’s price without overcharging customers.
To check your pricing, compare your item price to another item selling in your category. Can you meet that price and still have a profit after Amazon takes their cut?
This is why it’s essential to find high-quality merchandise at the lowest possible cost. Do the math before you order (or create) your bulk merchandise.
Consumers vary. Many are looking for the best possible deal, so unless you have a one-of-a-kind item, you’re unlikely to receive sales if you’re more expensive than your competitors are.
Look for ways to cut down your costs for item production and Amazon programs or fees. If you absolutely can’t, then you might need more capital or to start with a less expensive item.
How Does Amazon Pay Seller Profits?
According to Amazon, they pay every 14 days via direct deposit to your bank account. However, depending on your bank, you might not see the funds for up to five days after they initiate the transfer.
What are Shipping Credits?
Individual seller and professional seller account holders without FBA will need access to liquid assets to cover shipping and handling costs, especially if a category has a shipping time requirement.
Amazon has base rates to cover their shipping, and they pass these to you once a buyer pays and selects their shipping method. Individual and professional sellers have different credit rates.
They do offer tools for calculating shipping and handling costs for professional sellers. You should ensure the information is correct. If your shipping credit isn’t enough to cover the costs, you’re responsible for covering the remaining money.
Closing Thoughts on the Cost of Starting Your Amazon Business in 2019
How much does it cost to sell on Amazon? Remember, it varies greatly or every item listing you create. The upside is that some fees only apply when you make a sale, which keeps your start costs lower.
You also have options with FBA and FBM that can make it easier or more cost effective to open an Amazon business.
Also published on Medium.