How Much do You Need to Start an Amazon Business?

amazon-business

Share This Post

Share on facebook
Share on linkedin
Share on twitter
Share on email

Amazon, the world’s largest online eCommerce platform has reached annual revenue of $386 billion in 2020. E-retail sales of the company are projected to reach 468.78 billion dollars in 2021. Meanwhile, worldwide there are over 200 million Amazon Prime members. Given these numbers, no wonder more and more people want to start their business on Amazon. But how much do you need to get your business started?

Different products, different costs. If you want to sell the tablet, that means you need to prepare more money than selling drinkware. If you’re entirely new and have no idea what products will work with customers, I suggest you don’t spend too much money in the beginning. Investing around $500-$3000 is safe for starters.

The money you’ll invest will have to cover the following aspects of your business.

Sourcing Fees

Most Amazon sellers usually go to Alibaba to find products and suppliers.

Let me show you how.

If you have never used Alibaba, the first thing is to register. And then search for the product you want to sell. There will be tons of them for you to choose from. The information of each item is very clear, like capacity, samples, customization, and so on. Remember, don’t rush to place your order, spend more time talking to different suppliers and compare product price, MOQ, and more among them.

Shipping Fees

Shipping is always a big concern for most Amazon sellers. But the good news is that some suppliers on Alibaba provide shipping services. It helps save your money and time.

Like us, Union Source. If your order is small, we offer a door-to-door shipping service. And if you are a wholesaler, you can get not only sophisticated logistical service but also advanced warehouse management, inbound fright coordination, order fulfillment, and outbound shipping and delivery. You don’t need to worry about tracking, insurance, customs clearance, and other problems anymore.

FBA or FBM Fees

Fulfillment by Amazon (FBA) is a service that helps businesses grow by providing access to Amazon’s logistics network. Businesses send products to Amazon fulfillment centers and when a customer makes a purchase, they handle receiving, packing, shipping, customer service, and returns for those orders. Effective, reliable eCommerce fulfillment delights customers.

Fee per unit includes picking and packing your orders, shipping and handling, customer service, and product returns. Fees are based on the weights and dimensions of your product. The larger your order is, the more you’ll have to pay Amazon to fulfill it. For example,

If your size tier is in small standard, let’s say your package length is 15 centimeters, height is 12 centimeters, width is 0.75 centimeter or less than the above numbers, the shipping weight is 6 ounces or less, the fulfillment fee per unit is 2.16$.

If your size tier is in large standard, for instance, your package length is 18 centimeters, height is 14 centimeters, width is 8 centimeters, the shipping weight is 6 ounces or less, the fulfillment fee per unit is 3.47$.

Since FBA allows you to let Amazon’s warehouses manage your orders themselves, there’s also a monthly storage fee that you’ll have to pay. You’ll be paying $0.69 per cubic foot from January to September and $2.40 per cubic foot from October to December.

Keep in mind that if your product stays in the FBA warehouse for longer than one year, you’ll have to cover additional charges.

Unlike FBA, FBM is when sellers list their products on Amazon and choose to ship products to each buyer by themselves. In other words, sellers are responsible for fulfilling their orders and do not rely on Amazon for the same. It is a rather advantageous method for products with lower margins. There is also the benefit of not worrying about paying any warehouse or storage fees.

Referral Fees

Each time you sell a product on Amazon, you have to pay a referral fee between 6% to 20%. The referral fee depends on what type of product you’re selling on Amazon. For example, if you’re selling electronic products, you can expect to pay a fee of 8%. If you’re selling clothing items, then you’ll be spending around 17%.

Monthly Subscription Fees on Amazon

Amazon has monthly subscription fees for users depending on the size of its business. The professional seller plan, for example, is for companies selling more than 40 items sold per month and costs $39.99 monthly.

If you’re an individual seller with less than 40 orders fulfillment each month, you won’t have to pay any subscription fees. Instead, Amazon will charge you $0.99 per product sold.

For beginners, 40 orders each month is a quite good achievement. A big business starts small.

For example, one of our clients from Russia, at first, sold ladies’ underwear on Amazon, her first order quantity is only 60 PCS, but look at her now, after 3 years, she has already had her offline underwear retail store. Not only underwear, but you can also find various other products in the store such as accessories, drinkware, kitchenware, and more.

We helped find her a factory, which provides high-quality custom products at low prices. It greatly reduced the cost and built the brand for her. Look, if she can do it, then you can do it!

Customer Returns Fees

It’s pretty common for a customer to order one of your products only to return it later. As an Amazon seller, you’ll be in charge of covering costs for any item that the customer returns to your warehouse. 

Want to know more specific costs on Amazon? Do go to the website:

https://sell.amazon.com/pricing#fulfillment-fees

Product photoshoots Fees & Advertising Costs

If you have more money on the budget, part of your budget will be investing in professional photoshoots so you can make your online products stand out. Your pictures must showcase your product from different angles so the customer can get a clear view of the item and see it in a professional light.

Advertising on Amazon is less expensive than other platforms: the current average cost per click on Amazon hovers around $0.35. However, advertising campaigns will take a lot of testing to see what works the best with your audience.

Subscribe and Stay Updated

We write new blogs and share our insights on China sourcing and manufacturing regularly.

Share:

Share on facebook
Facebook
Share on twitter
Twitter
Share on pinterest
Pinterest
Share on linkedin
LinkedIn

Related Blogs

Related Blogs

Top

Tell us What You Need

No upfront charges, no experience needed. We will guide you step by step.