You want to start your own Amazon business and start selling products on Amazon today. The only problem is: you don’t know how much it will cost upfront to start selling. The cost of starting your own Amazon business depends on a couple of things: the selling plan, what products you plan on selling, which fulfillment method you want, and a couple of other variables. While the options are flexible, these choices and costs are going to determine the profitability and success of your business.
We’ll be covering all of these decisions right now and to determine the best strategy for your Amazon business.
Seller Account Pricing Plans
The first cost factor to consider is your Amazon selling plan. There are currently two plans to choose from: the individual plan and the professional plan.
The individual plan is the cheapest plan and charges sellers $0.99 per item sold on Amazon. The professional plan is a bit more expensive, and charges $39.99 per month, regardless of how many items you sell.
How do you know which plan is right for you?
Pick the Individual Plan if:
You sell less than 40 products per month.
You don’t know what to sell yet
Pick the Professional Plan if:
You sell more than 40 products per month
If you sell restricted products that need to be ungated
For beginner sellers, we highly recommend you start with the individual plan. The Individual plan is perfect for sellers who don’t have any sales history or products to sell. When starting, you will likely have low sales and low inventory. With the individual plan, you will only pay the $0.99 fee for each item you sell. With less than 40 sales a month, this will end up being a lot cheaper than paying for the Professional plan ($40 flat fee per month).
The Professional Plan is recommended to any seller who sells more than 40 products per month and has an established inventory with profitable, replenishable, and high-demand products. Once you start selling more than 40 products a month, it’ll be cheaper than the Individual plan since you won’t be paying the fee per item sold. You can sell an unlimited amount of products and only pay $39.99 for the month. The Professional plan also unlocks different tools that can increase your sales and product visibility such as the PPC campaigns (sponsored ads) and API selling tools and reports.
With the Professional plan, you can also start selling gated or restricted products on Amazon that have less competition and higher sales potential. We cover selling restricted products in our previous article, How to Get Ungated on Amazon in 2021.
Remember that you can always upgrade your selling plan later on. So, start small with the Individual plan. Once you start building your sales and have a set product catalog, upgrade to the Professional Plan.
The second cost factor to consider when selling on Amazon is referral fees. Referral fees are a percentage of the total sales price or a fee minimum that the seller pays Amazon. The costs of the referral fees change depending on the type of product. This is why we suggest the Individual plan for new sellers without established inventories. Every product has a different referral fee percentage or referral fee minimum. Amazon will charge you whichever is higher. Here are some of the most common categories and their respective referral fees:
- Appliances (15% up to $300, or 8% for sales greater than $300 or a $0.30 referral minimum fee)
- Automotive (12%, 10% for tires and wheel products or a $0.30 referral minimum fee)
- Beauty (8% up to $10, 15% for sales greater than $10 or a $0.30 referral minimum fee)
- Books (15% + $1.80 closing fee)
- Camera & Photo (8% or a $0.30 referral minimum fee))
- Clothing & Accessories (17% or a $0.30 referral minimum fee))
- Electronics Accessories (15% up to $100, or 8% for sales greater than $100, or a $0.30 referral minimum fee)
- Home & Garden (15% or a $0.30 referral minimum fee)
- Kitchen (15% or a $0.30 referral minimum fee)
- Music (15% + $1.80 closing fee)
- Personal Computers (8% or a $0.30 referral minimum fee)
- Toys & Games (15% or a $0.30 referral minimum fee)
*Note: This is not a complete list of all the referral fees for all of Amazon’s categories. For other product categories and their referral fees, please refer to Amazon’s Pricing web page.
As a reminder, Amazon will charge you whichever fee is higher. For our new sellers, make sure to keep this in mind when you source products to sell on Amazon. You may note that a once profitable product can become unprofitable and even cost you money to sell after accounting for referral fees
The third cost factor to sell on Amazon is fulfillment fees. Fulfillment fees include two primary costs: the cost to ship and the cost to store.
Fulfillment by Amazon (FBA)
If your products are shipped through Amazon or “Fulfillment by Amazon” (FBA), Amazon charges you a fulfillment fee per unit sold which included picking and packing your orders, shipping and handling, customer service, and product returns. These fulfillment fees are dependent on the type, weight, and dimensions of your product. Depending on your shipping weight, your fulfillment fees can be as low as $2.16 for small and light products and as high as $138.11 or more for special overside products weighing more than 90lbs.
FBA also charges for storage fees. From January to September, storage fees cost $0.75 per cubic foot ($0.48 per cubic foot for oversized products). In October through December, these storage fees increase to $2.40 per cubic foot and $1.20 per cubic foot for oversized products. This increase is to account for the holiday and seasonal demand during Quarter 4 of the year.
Fulfillment by Merchant (FBM)
For sellers who ship and store their products, known as “Fulfillment by Merchant” (FBM), Amazon charges a separate fulfillment/shipping rate depending on the product category, shipping speed, and selling plan. Products under the category of books, music, videos, and DVDs, Amazon charges a shipping rate depending on the shipping speed and shipping address. For domestic standard shipping, Amazon charges $3.99 per item. For faster shipping, Merchants can pay $6.99 for domestic expedited shipping and $14.95 for domestic two-day shipping. International shipping costs up to $46.50 for international expedited shipping.
In all other categories not mentioned, merchants will have to pay $3.99 per unit for domestic standard and up to $6.99 or more for domestic expedited. 2 Day shipping and international shipping are not available for other categories. Because FBM sellers store their inventory, Amazon’s storage fees do not apply.
For more information on Amazon’s fulfillment fees and which may apply to your business, check out Amazon’s Pricing web page.
Other Costs and Fees
By now, we’ve touched on the selling plan, referral fees, and fulfillment fees. These three factors account for a majority of the cost to sell on Amazon (not including product sourcing). If you have decided to use Amazon FBA, you will have access to additional services that Amazon provides to its sellers for an additional fee. This includes:
- FBA Label Service: Amazon will create and apply barcodes to any of your products, fee charges per item.
- FBA Prep Service: Amazon will prepare your products for shipping, fee charges per item.
Along with services, Amazon also charges additional fees to unplanned services they provide if there is any error with your products, packaging, and/or labels.
- Long-term storage fees: for products that have been in Amazon’s FBA centers for over a year
- Removal order fees: for products you want to be removed from Amazon’s FBA centers, Amazon will dispose of unsold merchandise for a per-item removal fee
- Returns fees: for products returned by a customer, Amazon will process a free return for the customer and charge your account a fee for the cost of return shipping
- Unplanned service fees: for products with incorrect or missing labeling, packaging, or preparation, Amazon will fix your products for a per-item fee
If you need more information on these other costs and fees, head over to Amazon’s pricing web page.
Keeping these Costs in Mind
If you just started selling or want to start selling on Amazon, it is vital to account for these potential costs when selling products on Amazon. More importantly, it is important to consider these costs before you source any product.
A general rule of thumb we recommend to all beginner sellers, pick products that are:
- Small and lightweight: By selling small and lightweight products, you’ll notice the shipping and fulfillment fees will be a lot cheaper!
- High demand: Products in high demand will be easier to sell and will acquire fewer storage fees long term.
- High quality: Sourcing only high-quality products, you can reduce the number of returns and unplanned service fees.
Before you start sourcing make sure to calculate the potential profit margins and account for any applicable costs and fees! This can be easily calculated with Amazon’s Revenue Calculator. If you need any additional help, check out our blog on the Profit Calculator.
And lastly, if you are a new seller and aren’t sure where to start sourcing products, we highly recommend using Amazon seller tools like Sellgo’s Profit Finder and Product Tracker. Using seller tools can save you a ton of time finding high-demand and profitable products you can start selling now! Our tools will account for all of these fees and highlight the best products that are guaranteed to make you profit. So before you start your Amazon business, explore Sellgo and our tools that can help you jumpstart your Amazon sales journey!