Before becoming an Amazon seller, you must keep in mind that there are some key factors that play a major role in determining the success of a business–and they come at a price.
Selling on Amazon fees apply, depending on the type and size of business you have. Therefore, it is smart to have an idea of the cash you’ll have to put up front.
How much money do you need to start selling on Amazon?
Based on a survey carried out by Jungle Scout, new Amazon sellers are expected to spend around $3,836 to start selling on Amazon. This number includes Amazon fees, product costs, and other necessary initial investments.
Remember, this is on average. Many Amazon sellers start with $500 or less and others spend twice as much. This doesn’t mean that one seller will be more successful than the others.
Seller Account Monthly Subscription Fees
When you become an Amazon seller you have two options to choose from:
- Amazon Professional Seller Account
It’s only $40/month. It’s for sellers that expect to sell more than 40 units per month. A professional seller account includes a set of tools to manage your business more effectively. This is not available for individual accounts.
- The Individual Sellers Account
You don’t have to pay a monthly subscription fee. Every time you sell an item, Amazon charges a $0.99 fee. However, you must keep in mind that, with this seller account, you won’t be able to sell more than 40 items.
Amazon charges a fee to grant you access to their millions of buyers. The referral fee can range between 8 or 20%, depending on the category you sell.
Selling in the Extended Warranties, Protection Plans & Service Contracts category means a 96% referral fee, while Amazon Device Accessories has a 45% referral fee.
All other categories are way cheaper.
The closing fee is only applicable to DVDs, music, video games, consoles, software, and computers. There’s ab extra fee of $1.80 per item sold in one of these categories.
Refund Administration Fees
Whenever a customer returns an item, you’ll be refunded the referral fee, if you paid one. In exchange, you’ll have to pay an applicable refund administration fee, which is either $5.00 or 20% of the applicable referral fee, whichever is less.
Amazon is very serious about customer service; therefore, it provides its sellers with two fulfillment strategies to meet their customer needs: Amazon FBA and FBM.
Amazon FBA (Fulfillment By Amazon) is one of the most popular options since it allows sellers to focus on other aspects of their business while Amazon takes care of picking, packing, and shipping their products. But not only that, but it also handles any situation related to customer satisfaction.
For Amazon FBA, the fulfillment fee is based on the dimensions and weight of your product. The amount you pay can go from $2.41 for a standard-size small package (10 oz or less) to $6.00 for a standard-size large package (3 lb. to 21 lb.).
Monthly Storage Fee
The monthly storage fee also depends on the dimensions of your product. It’s calculated depending on the space you use in the Amazon warehouse.
This fee varies depending on the season. January to September you can expect to pay $0.69 per cubic foot and from October to December, the price is $2.40 per cubic foot.
Long-Term Storage Fee
Amazon runs an inventory cleanup on the 15th of every month. When your inventory has been stored in a fulfillment center based in the US for more than 365 days, you’ll have to pay a long-term storage fee. The amount can be of $6.90 per cubic foot or a $0.15 per-unit long-term storage fee, whichever is greater.
If you’re fulfilling orders yourself, though FBM (Fulfillment By Merchant), the shipping fees will vary depending on the carrier you choose. This will also have an impact on the shipping rate you set up for your customers.
Each carrier has different prices. However, once you have a shipping plan, you can have access to Amazon partnered carriers’ fees.
Other Amazon Costs
Besides the fees you’ll need to cover to kickstart your Amazon business, you’ll also need to invest in the following:
Samples: around$100 each
Samples are imperative when choosing a supplier for your inventory to check the quality of the product
A rule of thumb is that each sample will cost you around $100. This is to cover the manufacturing and shipping costs. That’s from the supplier to your doorstep in five days or less.
Most suppliers have a Minimum Order Quantity (MOQ), which is usually 500 units.
If we assume our product will cost about $4 per unit, including the product cost and shipping. Then you can expect to pay $2,000 for the 500 units of your initial inventory.
Starting a business is pretty exciting, especially one that you can manage from the comfort of your home. However, you must keep in mind all the Amazon fees we mentioned above before making any hasty decision. Plan ahead of time, come up with a specific budget and stick to it, create a list of all the possible setbacks you will encounter along the way, and don’t forget to establish realistic expectations. Good luck with your selling journey!