In this post, we’ll discuss in depth a very important question how much does it cost to start an Amazon FBA business?
If you plan to start your business with the biggest online selling platform, this article is for you!
Starting a business is a very risky move, and one of the biggest factors in determining whether or not a new business will be successful is the amount of money the business owner is willing to invest.
The great news is that Amazon FBA is a great business model for beginners and experienced business owners.
What is Fulfillment by Amazon (FBA)
With FBA, Amazon stores your products in one of their fulfillment centers and then handles the packing and shipping of your product to your customers. This means you don’t have to worry about keeping track of inventory, sourcing packing materials, or dealing with customer service questions.
FBA can be a great option for sellers who want to focus on growing their brand instead of managing logistics.
How much does it cost to start an Amazon FBA business?
To start Amazon Business, you’ll need $39.99 to purchase a Professional Amazon Seller account.
If you have an Individual selling plan, the fee structure is different. Amazon charges $0.99 per sale, but you don’t pay anything per month.
Basic costs involved to get started includes:
Product Inventory Cost
Product cost includes customization cost (if applicable), packaging, and logo cost.
Depending on the type of product you’re selling, you can start with as little as $1000 or less if you have a limited budget or don’t want to take too big of a risk.
Of course, the more inventory you have on hand, the more money you’ll need to invest. But, if you’re selling products that have a high turnover rate, you can quickly make up for the initial investment by selling through your inventory quickly. In addition, if you’re selling products that have a high margin, you’ll be able to make more money on each sale, which can also help offset the cost of inventory.
If you have a high-end product, the inventory cost will be higher. But, you can always start with a lower amount and see how it goes.
For customized products, production costs could be more expensive so you need to allocate more budget to the production of your inventory. Usually, suppliers will have additional charges for logo and packaging customization.
No matter what type of product you’re selling, though, it’s important to carefully consider the cost of inventory before you start your business. By doing so, you can ensure that you have the necessary funds to get your business off the ground and be successful in the long run.
Shipping cost
When you’re sourcing your products on Alibaba, the best way to get an accurate shipping quote is to ask them for one. This will include the cost of shipping to FBA or your preferred warehouse.
If the suppliers don’t offer shipping services, then the best option is to use Freight Forwarding services.
Shipping costs are a major concern for most sellers and it varies and changes every day. If you are sourcing your product on Alibaba which is what most sellers do, you can ask them for a product quotation that includes shipping costs to FBA or to your preferred warehouse.
However, if the suppliers don’t offer shipping services, the best option is to use Freight Forwarding services.
The freight forwarder will provide you with a shipment quote and schedule delivery accordingly. The freight forwarder will also collect all necessary documents such as customs clearance and tax stamps prior to shipping your inventory.
In moving your inventory to your desired location, you should consider looking into different Shipping methods as well.
UPC Codes
For each product you want to sell on Amazon, you will need a unique UPC code. This is needed in order to be able to place your products on Amazon.
Amazon will require sellers to use UPCs. UPC or Unique Product Codes are assigned to designated products on Amazon. You can buy UPC on the GS1 website.
The cost depends on the quantity of UPCs you need. The initial fee for a single UPC is $30, with no annual renewal fees. However, in order to save cost, I recommend you obtain 10 UPCs for $250 with a $50 annual renewal fee.
You can just save the other UPC for future use if you are if you would like to expand your business and launch more products.
Amazon Referral Fees
Amazon will charge a referral fee for every product being sold. Referral fees vary per product category. Most product has a referral fee of between 8%-15%.
Check Referral Fee Table to see the complete fees of the category you want to sell in.
Storage Fees
Storage fees are costs incurred when you decide to store your products in Amazon’s fulfillment centers.
These costs are calculated per cubic foot and depend on the size of the products being stored as well as the season they’re in. Depending on the type of products you’re selling, you will most likely want to plan for storage fees.
The fees start at $0.83 per unit but will vary depending on the size of your products and how much space they occupy in the fulfillment centers. You need to determine if your product falls to Dangerous Goods as well.
To determine if your inventory is considered dangerous goods, review the Dangerous Goods Identification Guide.
FBA Fees
Amazon fulfillment is a service that allows you to ship your inventory to an Amazon Fulfillment Center, and Amazon will pick, pack, and ship your orders for you. They will also provide customer service related to order fulfillment.
FBA fees are usually 15% of your product price. You can check your direct competitor to determine FBA fees. You can also use the Helium10 tool to check on your competitor’s FBA fees by using a Helium X-ray or Revenue Calculator to easily determine your estimated fees. See the sample below:
Using the Amazon Revenue Calculator, here’s an example of FBA costs involved in selling Aberlite beard shaper product:
Advertising Costs
The first step in creating an effective advertising campaign is setting a daily budget. If you’re just getting started on Amazon, we recommend setting your campaign budget at $30% of your selling price.
Once you have established that your products are selling well and generating positive feedback, you can increase your campaign budget.
Amazon has 3 different types of ads: Sponsored Product ads, Sponsored Brands, and Sponsored display ads.
Other Costs
Those are the basic costs you will spend on your product. When you start selling on Amazon, there will be more costs to consider. Such costs are:
1. Overhead Cost.
Every business must include a budget for its overhead costs, also referred to as indirect costs or operating expenses. Overhead costs can take many forms such as administrative costs, insurance, Rent for office space, employee perks & wages, or brand registration fees.
2. Taxes.
All sellers making money on Amazon are required to pay Income Tax and Amazon Sales Tax to avoid financial risk.
3. Miscellaneous Cost.
Miscellaneous costs are all costs that are related to your product but are not directly tied to your product’s manufacturing, packaging, or shipping costs. Common miscellaneous costs include the service fee for repacking your product when a customer returns it with damaged packaging; removal of products; or shipping to a third-party warehouse for repacking. If you consider professional photography for your product, you can consider it a miscellaneous cost, as well. The same goes for any advertising you decide to do outside of Amazon—for example, Google and Facebook ads—to generate traffic and drive sales.
4. Trademarks.
When you’re ready to sell on Amazon, you need to get the trademark registration. It will help in protecting your product and bringing more visibility to it. In order to register your product with the United States Patent and Trademark Office (USPTO), you need to pay a fee for an examination of your application. The fees vary depending on the type of trademark you want to register.
You should also consider using software such as Helium10 & Jungle Scout when starting out because these tools can help you make informed decisions about product research and keyword research (among other things).
6. Hiring Virtual Assistant.
This will help you stay on track and save on time management, which is very important for any business owner or entrepreneur. You can also hire a virtual assistant to handle all the tasks that are related to your product such as creating listings, uploading images, writing reviews, social media marketing, and more.
Ways to Save Amazon FBA Selling Costs
If you are planning to start an Amazon FBA business, you must find a way to save costs. There are several ways to do this:
1. Choose the right product.
2. Choose the right shipping method
3. Source right & reliable suppliers
4. Use Freight Forwarders & 3PL
5. Negotiate with your supplier and freight forwarders to get the most competitive pricing.
6. Calculate your estimated profit margin to make an informed decision.
7. Utilize free tools online that are important to your business growth such as FBA Revenu Calculator .
8. Don’t put much money on your first shipment.
9. Hire an experienced Virtual Assistant to help your Amazon journey grow in less span of time.
Stop Spending too much on Amazon FBA Costs Today
Did you know by hiring experts, you’ll save so much money and stress?
Amazon FBA is a genuinely awesome opportunity for everyone.
But, it can be a little overwhelming, there are so many costs involved, and it’s truly time-consuming.
That’s where we come in! We’re here to help you sell on Amazon, make money, and save costs!
We hope we have answered a very important question on how much does it cost to start an Amazon FBA business in 2022.
Get in touch with us and learn how much the costs would be to sell your own products on Amazon.
Our team of experts can help you from start to finish. From product research, managing shipments, seller central account setup, advertising, monitoring, & reporting.
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