How much money do I really need to sell on Amazon?
Now you must be looking forward to find answers to the question, how much costs to start selling on Amazon. There is no straightforward answer to this question. That’s because the exact amount of money that you will have to spend out of your pocket to start the business on Amazon varies depending on the products that you sell. This is the main reason why novice sellers on Amazon are strongly encouraged to look for the goods that are cheap and affordable.
If you are not manufacturing goods, you will need to purchase them. For that, you will have to spend money out of your pocket. Depending on the cost of goods, you can calculate how much money you will have to allocate for purchasing. Then you need to send them to the Amazon warehouse. The dimensions of the product and the weight of the product can contribute towards the expenses that you will have to spend in here. That’s because you will need to ship out the products to the Amazon warehouse.
These are two of the primary expenses that you will have to bear. In addition to that, you will have to spend your money on many other factors. We will examine them as we progress through this article.
What is the best approach to start selling on Amazon?
Initial restrictions to keep in mind
There are some initial restrictions, which you need to keep in mind at the time of selling the products on Amazon. When you are starting a new business, it is always a good idea to start small. The people who start selling on Amazon can also think about it. Then your business will not be negatively impacted by the costs of selling on Amazon. It should be of standard size without the features. It should be of small weight as well.
At the beginning, you can select a small good to sell on Amazon. It should be associated with a lower cost of production and delivery. In addition, the cost of sale should be a smaller value as well. It is better if you can select a product, where you can purchase for under $40. Then you will be able to build up your business along with time and start selling more sophisticated products out of it.
You need to make sure that the cost of purchase associated with one unit of the product should not be over $10. If you adhere to these restrictions, selling on Amazon will not be a difficult job for you.
Let's look at a specific example so that you can better understand how much money you will need to start.
- we want to sell our goods in the United States, which means that we do not need to deliver them additionally to warehouses in other regions;
- we want to sell goods under a private label, which we plan to develop in the future;
- we will sell a small product with a standard size (without clearly defined features), fairly light;
- product weight is 500 g;
- its purchase price is not more than $ 12;
- its price for Amazon is not higher than $ 40.
Now let's calculate how much it costs to start a business on Amazon.
Ordering the samples
While you take a look at answers to the question, how much does it cost to start a business on Amazon, you need to focus on ordering samples as well. If you are not collecting samples of the product at the beginning, you will have to experience a variety of negative consequences in the long run. That’s because you can easily mix up over the product quality and what is being mentioned in the product description.
In order to make sure that you don’t run into any such issues, you are strongly encouraged to think about ordering samples directly from the supplier. Then you will be able to see the things on your own. In addition to that, you are also encouraged to take a look at the traits in the supplier, which can help you to build up a long-term partnership along with the supplier.
The cost of the item you want to sell should be up to $ 12 per unit at the wholesale order. Well, if you manage to find a product for which the cost of production and packaging in the United States will be $ 3-5. In our case, we assume that we have found the item we need for $5. Now you can explain your initiative to the supplier and then proceed with ordering the first set of samples. Then you will be able to get the samples delivered to your home. Once you have the samples, it is possible to examine them in detail. This will help you to make sure that you are not running into any long-term issues.
But when ordering the first test samples, their cost can be up to $ 60. It will be great if you can find 2-3 suppliers and order samples from each of them. So you can appreciate the quality of the product, which will offer each supplier. And this will help in the future to avoid the many risks associated with the supply of low-quality products.
At this stage you will need up to $ 200. The exact amount depends on the specific supplier, the method and delivery time, the number of samples. Suppose for each unit you pay $60 and order samples from three suppliers. Then you need $ 60 x 3 = $ 180.
Ordering the Inventory
After you have found the right supplier, you should order your first batch of goods. Please note that it should be 450-600 units. This is important for several reasons:
- suppliers usually do not want to deal with small quantities of goods (at least 200 units);
- it is not profitable for you to order fewer units of goods, because shipping costs are high;
- some products will need to be distributed or sold at a reduced price to get customer reviews;
- this will help to calmly sell goods until the second batch arrives.
So, you need $ 5x 500 = $ 2500.
Today, for every product you want to import from China to the United States, you need to pay a customs duty of 10%. Therefore, these costs you should also consider.
In addition, in March 2019 the size of the duty may increase to 25%, so be prepared to revise your budget for starting a business on Amazon.
In our case, you pay $ 250.
When you are ordering the samples, you have two major options available to consider. You can order either by air or sea. When you order by air, you can get what you want within a short period of time (up to 1 month). However, you will have to pay a higher amount for it. But when you order by sea, the cost is low, and you will be able to bring down a bigger volume. This method will take some time (2 - 3 months).
When you are ordering product samples, you need to be aware about the shipping expenses as well. For example,If you get sample weighing 500 gr, you will have to pay around $1 to $2.5 for shipping, if delivered by sea. Choosing delivery by air, you pay at least $ 5 for each kg. Shipping cost depends on the weight of the goods. Keep in mind that when shipping by sea, the cost can be calculated based on the volume of goods you receive.
The exact amount depends on the size, weight of your product, the chosen delivery method (by sea or by air).
Another important point is the risks associated with customs. A consignment of goods can stand at customs for a very long time, waiting for the inspection to pass. Therefore, the cost of goods can grow significantly (up to $ 1000 +).
Suppose there is no problem with customs, and you just pay and we deliver goods by air, while paying $ 2 for each kg. Since the weight of our product is 500 g, a batch of 500 units will weight 500 g x 500 = 250000 g or 250 kg.
Therefore, your shipping costs will be $ 2 x 250 kg = $ 500.
Account registration and fees
When you create your account on Amazon, you have two options:
- choose an individual plan that allows you to sell no more than 40 units of goods per month; with this, the commission will be 0.99 cents from each unit sold;
- choose a professional account, where the number of goods sold is unlimited; however, the cost of such an account per month is $ 39.99.
If you seriously intend to grow your business, choose a Professional Amazon Account. It provides more opportunities for the seller. This is a good reason available for you to go ahead with Amazon FBA register.
Creating your own account in Amazon
To begin the Amazon FBA register process, you need to visit to https://services.amazon.com. Then you need to scroll down on the page, until you see the option, start selling on Amazon today. You can select it and determine the type of seller account you need to go ahead with. It is recommended for you to sign up as a professional and move forward. After that, you must provide your information as requested and complete the registration.
For now just keep in mind that you will have to pay $ 40 for using your account every month.
All the people who list their products on Amazon as Amazon sellers should bear a Global Trade Identification Number. Amazon will then use this ID number in order to create the UPC barcode. It is generating the FNSKU code, which is printed on the packaging for every single product that is sold via Amazon.
The marketplace terms and conditions with regards to this got changed in the recent past. As of now, the marketplace is recognizing only the barcodes that are generated through the best global provider. This has increased the cost of purchasing a barcode by a significant amount. However, you will still be able to purchase barcodes from the third-party service providers.
If you decide to get the UPC code in the GS1 system (an international organization that deals with bar coding), you will pay at least $ 250 for one code.
If you want to use codes purchased from third parties, you need to pay $ 5 for each. Although the legality of this procedure is questionable.
We will receive the UPC code for our product in the GS1 system. Therefore, you need to add $ 250 to your costs.
Once you complete listing your products on Amazon, you will need to pay your attention towards promotions as well. In fact, promotional incentives can be considered as one of the best and most ethical methods available for the sellers on Amazon to boost the sales volumes. You can refer to the Amazon FBA calculator and see how much return you will be able to get out of the promotional efforts. You are investing a lot on the promotions and Amazon calculator will help you to understand whether you will be able to get any return out of the promotions or not.
To create the initiative waves of selling your product on Amazon, you can think about going forward with promotional giveaways. You should allocate a budget for this as well. Otherwise, you will get stuck at a later stage and you will struggle to move forward. If you are not in a position to giveaway the products for free, you can at least think about selling them on Amazon at a reduced-price tag. If you can do that, you will have to bear a smaller cost and increase the sales that you make on Amazon in an effective manner.
Promotions are needed in order to get feedback about the product and about you as a seller. When a product has more than one positive feedback, customer confidence in it significantly increases. Therefore, sales will go faster.
Suppose you want to distribute 30 units of goods for free. Just keep in mind that the money spent on their purchase, delivery, packaging, you will not return.
If you want to take your advertising efforts to the next level, you are strongly encouraged to take a look at paid advertising. It has delivered amazing results to the Amazon sellers out there. In fact, the paid advertising campaigns that you run on Amazon will assist you to build up a strong customer base with minimum hassle. In addition, you can make sure that those customers contribute towards a massive percentage of the total number of sales you make. You just need to focus on paid advertising at the beginning. To begin with, you can take a look at Sponsored Ads, which are also known as Amazon PPC. It is one of the most effective methods available. When you follow Amazon PPC, you will be able to get positive results from the very first day.
In addition, if you use PPC, finding keywords for which people actually buy goods is much easier. How to do this, read this article.
The cost of an advertising campaign may be different and depends on your financial capabilities. You can campaign for $ 10 per day. But more effectively raise the budget slightly for this. Because a large-scale advertising campaign can really increase the number of sales, get new reviews. So, increase the organic rating.
It is better if you spend about $ 800 per month for this. Advertise goods need at least 2-3 months.
The additional costs that you have to bear
Now you have a basic understanding about the answer to the question, how much does it cost to start a business on Amazon. With that in mind, you should also understand what extra expenses you will have to bear, so that you can kick off your efforts to selling on Amazon in an effective manner.
The image is the first thing that the buyer sees, without even reading the description of your product. The amount of sales directly depends on how high the quality of the photo is, how successfully it shows your product.
This item is not required to start trading on Amazon. But keep in mind: the more successful the photo, the more sales. Therefore, at this stage it is better not to save.
You can get high-quality images for the complete presentation of your product for $ 20-25 for one shot. Suppose you need 6 such photos. Then you pay 25 x 6 = $ 150.
Private labeling is one of the areas that you should focus on. You can now apply and secure a trademark to sell your products on Amazon. Then you will be able to start selling the products under that trademark. When you do this, you will have to spend your money on logos and branding as well.
Do not underestimate this point of marketing. Brand design development is an important stage of branding. If you want to not only sell products, but also expand your business in the future, you will have to make sure that it is your brand that buyers can easily recognize among others. It is better to spend a small amount and pay for the services of a designer at the start of a business. Then, from the first day and from the first purchase, your private label will already compare favorably with the rest.
You can find a designer yourself. To do this, look at offers on special sites, for example, Fiverr or Upwork. Here, for a small fee, you will find someone who does the job exactly the way you want it.
For this you have to spend $ 40-50.
What else can help me with the calculations?
As soon as you complete the process of double checking the quality of the products, you will be able to purchase inventory. However, you need to use the Amazon revenue calculator and determine the profitability of the products as well. It will automatically calculate the commissions and then show you whether you are going to end up with a profitable venture or not. In fact, you will be able to get your hands-on accurate figures to the net profits. You can see the amount that you will be able to get to your hands after the deduction of the Amazon sellers fee through this Amazon calc. Therefore, you will find it as an easy task to make a quick decision with the assistance that you are getting from Amazon revenue calculator.
Understanding the figures
Now that you know the approximate cost of each of the stages of starting a business on Amazon, let's do the calculations.
Samples - $ 180.
Inventory - $ 2500.
Fee - $ 250.
Shipping Costs - $ 500.
Account - $ 120 (in three months).
UPC code - $ 250.
PPC - $ 2400 (in three months).
Photo - $ 150.
Logo - $ 50.
Total: $ 6400.
You will need this amount in the first three months if you decide to open your business on Amazon. In order for your product to sell well, you need to spend time (2-3 months). A large-scale advertising campaign helps you find the right keywords. And during this time there will be reviews about your product. Therefore, in the final calculation, we indicated an account fee of $ 120 and a PPC value of $ 2,400.
Because your goods must always be in stock at Amazon. In addition, to make a new batch, it takes time. Do not forget about the long time that is needed for the ordered goods to arrive.
In addition, you will have to pay a stock of money at least for making the second batch of $ 2500.
That’s all for today’s article on how much does it cost to start a business on Amazon. With the knowledge you have, you will be able to proceed to the next step and start selling on Amazon. As you are informed about the expenses, you will be able to reduce the overheads significantly and budget accordingly. Therefore, you can always end up with profitable business ventures.