If you’re worried about how much it costs to sell on Amazon then don’t be: it’s actually cheaper than many sellers anticipate.
The average spend is $3,836 (Amazon fees, product costs and other investments), but a lot of sellers manage to launch their product for under $500. Success doesn’t always have to be bought by a huge initial investment, and many products do well with relatively meagre initial investments.
This article will take an in-depth look at the costs of selling on Amazon, and we’ll look at how a variety of different investment approaches can affect your success.
The start-up costs
A recent survey reported the following when it came to how much sellers spent getting their products off the ground on Amazon.
The short answer is no, not really. Often sellers with a small budget have proved successful and lasted longer than those with deeper pockets.Sellers who started with $500 budget and under:
What’s the cost to start selling on Amazon?
We can broadly group the costs of selling on Amazon into three categories.
Required costs – You can’t ignore spending money on these essential things and fees. Recommended costs – These aren’t absolutely essential but best practice dictates this expenditure would be a good idea.
Extra costs – These costs might help you sell well in the early stages but are not necessary for rookie sellers.The process
‘Private label’ is the most common approach businesses take when selling on Amazon. This is when the seller manufactures and brands their own product.
It works in 4 steps.
Required selling costs on Amazon
What are you selling? How many units do you aim to sell? And how much will this cost?
An initial strategy might look like this…
Samples are essential if you plan to source a private label product using Amazon FBA.
This is because sometimes there’s a discrepancy between the actual product and the images you see on online manufacturing sources like Alibaba. Ordering samples will quickly let you know who the shoddy manufacturers are.
From your list of potential suppliers order samples from the top three only (this reduces costs). You will have to pay for the manufacturing and shipping of the samples.
The industry standard is $100 per sample. This $300 investment will get your products to you in 5 days or less. Carefully analyse the samples and choose the best one.
There are deals to be done with many suppliers. In order to attract your business some suppliers will reimburse your initial sample investment or give you the same outlay in credit if you choose them. If you have a small start-up budget this potential opportunity is worth exploring.Inventory - $2000
Now you’ve got your supplier it’s time to order. Minimum Order Quantity (MOQ) is usually around 500 units. Negotiating a lower amount might not be worth it as the supplier will probably charge a higher price to produce each unit.
If we take $4 as the cost to produce and ship each unit we end up with an initial inventory cost of $2000.
As a new seller ordering big quantities can be daunting. If this is the case consider Dropshipping as an alternative initial selling strategy.Promotional Giveaways - $200
In Amazon Seller Central it is possible to offer discount coupons and promotions to your buyers (50% or even more). In those important first few weeks of trading this could really boost sales and attract buyers. The Amazon discount site Jump Send will list your product and Amazon will respond to any higher sales by giving you a higher position in its search results. Reviews, hopefully good ones, will start to appear on your product page.
The cost of this is simply the costs (including any fees) of the units that you decide to giveaway.Amazon Professional Sellers Account - $40/month
How much you pay Amazon to list your product will depend on whether you choose an Individual Sellers Account or a Professional Sellers Account.
It’s $0.99 per item if you use the Individual Account and a flat $39.99 per month for the Professional Sellers Account.
The Professional Account is your best bet if you plan to sell more than 40 units per month. Additionally, the promotional codes needed for giveaways are only available using this more advanced option.
This won’t be an up-front investment for you – these fees are taken directly from your Seller’s account and not your bank account.UPC code - $30
A Fulfillment Network Stock Keeping Unit (FNSKU) is Amazon’s proprietary barcode that has to be printed on the packaging of all your products. To get this you will need a recognized barcode.
According to Amazon’s Terms and Conditions to acquire a FNSKU you must first get a Global Trade Identification Number (GTIN). This usually takes the form of a UPC code.
Because of a change made by Amazon in 2018 all seller barcodes must be from GS1, the top, world-wide provider. $30 is the standard cost for GTIN/barcode.TOTAL REQUIRED SELLING COSTS - $2570.
Recommended selling costs on Amazon
As we have seen there are also additional, recommended steps you can take to make your business a success on Amazon.Sponsored ads budget: $300 ($10/day for 30 days)
Giveaways and higher volume of reviews (remember to follow up via e-mail) should lead to more sales, and a better organic ranking for your main keywords.
To augment this you should consider using sponsored ads known as Amazon PPC’s.
Even with a small ad campaign budget of $10 per day (Amazon’s recommended default), AdBadger suggests you can expect approximately 20-30 daily hits on your product, leading to an average of 3-4 sales.
Learn more about running Amazon PPC campaigns by reading this article:
Private label brand owners will need a registered trademark if they want to be listed in Amazon’s brand registry.
Amazon created the Brand registry programme so that sellers can officially be labeled as owners of their brand trademark. This official green-light from Amazon gives you ‘official’ status on their platform and gives you supplemental benefits too.
However, a trademark has to be applied for and then approved before those special features can be accessed. Because this process can take many months you should initiate this lengthy process as soon as possible: if you are not registered, and you list your product without a trademark, rival sellers may well list similar products on your listing.
You’ll want to avoid infringing on any existing copyrights or brand names, so when you apply for a Trademark thorough research is essential. $350 for a local trademark (using the services of a local attorney) may sound expensive but it will help you avoid any nasty legal disputes from rival sellers.
A new feature recently launched by Amazon – the IP Accelerator Program – aims to fast-track the trademark registration process. Amazon-selected intellectual property attorneys will automatically register your brand even when it’s not yet to officially authorized by the US patent office. Understandably, this service costs extra – usually around $750-$1,000.TOTAL RECOMMENDED SELLING COSTS - $650.
Extra Amazon Selling costs
Although not necessary to get your business up and running these extra steps might give you the edge over rivals.Design work - $200
A professional logo and high-end packaging give products a sophisticated feel and customers might part more readily with their cash if they think they are buying something bona fide. Your quest for legitimacy will be aided by a good graphic designer. These skilled artists can also help with infographics, touch ups and product inserts. Rates vary of course, but freelancer hubs like Upwork and Fiverr should provide you with the right person for the job, whatever your budget.Product photography - $300
Photos that show your product in the best light help your product stand out from the crowd.
Of all the ‘extra’ expenses you can incur selling on Amazon this is probably the most important one. Having said that if you fancy yourself as an expert with your smartphone camera this can be a surprisingly effective tool if you don’t have the budget for a professional photographer.
Good lighting and a white background is a must. Amazon dictates a minimum 1000 pixels width for the longest side of the image. Variety is key as well – use a mix of close ups and some longer shots. Comparison shots and images of the product being used will all give the customer a feel of how the product looks and works in real-life.
If you go down the professional route, high-quality photos range from $25-$50 per image. 6-8 images seem to be the norm on most product pages. Good negotiating skills would put this expenditure at around $300.TOTAL EXTRA AMAZON SELLING COSTS - $500.
Reducing the costs of selling on AmazonChoose a different business model
Private label is not the only approach you can take. Selling used books and household items, making your own handicrafts and online arbitrage (buying from a store or other platform and selling on-line) are all potential routes to success. Once comfortable financially and with a surer knowledge of the basics of selling you could then switch to a private label model.Buy less inventory - or none at all!
Instead of Alibaba you might try using Aliexpress. Smaller quantities are allowed and this lower-risk approach reduces start-up costs. If you’re happy with what you’ve ordered you could go ahead with a bulk order.
The chief disadvantage of this is paying a higher per-unit cost, and a reduced likelihood of customizations and specifications further down the line.
So even though Alibaba is pricier it is probably worth the investment – getting your own private label brand just right is one of the most important things in the whole selling process.Sourcing products with a low cost-per-unit
500 units with a $4 production cost might be too much of an initial outlay for some businesses. On Alibaba it’s possible to source genuine, high-potential products for as little as $0.50. Even factoring in a $0.25 shipping fee per unit that’s a relatively low starting inventory cost of $325 (500 units multiplied by $0.75).
With the Amazon sellers fee of $40, the samples at $300 and launch service costing $50, the total upfront outlay is $715 – 80% cheaper than the average cost of creating a private label Amazon business.The DIY route
If selling on Amazon is not your main source of income you may not have the time for product research, design, photography and product listing setup.
New sellers should try and do as much of the pre-launch work themselves. Then when the product starts selling you can start outsourcing – a nice reward for all that effort in the early stages.
Don’t waste money on…Legal Fees
Despite lots of successful Amazon sellers creating a legal foundation for their business (like an LLC), this is not something you should consider until your business is well set and on a secure financial footing.Your own website
A nice, shiny website is a lovely thing to have when selling because if your business expands you have your own template to start selling new products. However, your time and resources are better spent on the things we’ve already covered – at least initially. Amazon PPC ads and product optimization will lead to better sales in the early days - don’t run before you can walk.Expensive training
Not all the courses which charge a fortune to teach you how to sell on Amazon are a waste of time - some of them know what they are talking about. However, many display all the hallmarks of quick fix, get-rich schemes. Learning the hard way by going it on your own is the best way to learn how to make a success of your business.
What’s the final bill?
$3,836 is the average price it takes to start selling on Amazon.
In terms of range, an outlay of $2,790 and $3,940 (including required, recommended and extra costs) is a good indicator of the average expenses required to get your private label business off the ground.
Fortunes are there to be made with a relatively small investment – so good luck and get selling!