With the world turning into a global village as a result of technological advancements and improved communication, ecommerce businesses are thriving today and attracting entrepreneurs from all around the world.
You may have heard of one of the main platforms for e-commerce business, Amazon; but what does it cost to start selling on Amazon? Establishing a business here is perceived by many as being quite easy and quick, with little costs involved. “It’s just selling over the Internet, how much could it cost and require?”
On the contrary, it’s not a cheap process, both in terms of monetary and non-monetary aspects; money and time. Nevertheless, once established and operational, an Amazon-based business can prove to be worthy of the effort.
In this article, we will be discussing what Amazon Seller Fees an entrepreneur can expect to incur. Information about all the possibilities, essential costs will help you in constructing a comprehensive and relevant business plan, in setting the right prices for your products and also in making decisions regarding your product portfolios.
However, it is also important to note that specific cost figures cannot be relevant for every single business on Amazon. There exist the following differentiating factors which are why no single, precise total for the cost can be produced:
- Your product’s size
- Your product’s weight
- Your product’s category
- Your opening inventory
- Whether you opt for a tool to aid your business’ setup or not
- Whether you have registered yourself under a brand name
- The promotional budget available
- The costs of production
- The location you have chosen
In addition to these costs, as we have mentioned before, a lot of your effort and time will also go into the establishment of your business.
Moreover, to make more accurate financial calculations, we recommend you to use your figures in some equations to derive results for yourself-we have used estimated values at some places as well.
GET READY TO START SELLING ON AMAZON
Carrying Out Product Research: Identifying the greatest-selling products
You, being an Amazon Individual Seller (or an Amazon Professional Seller), should be well aware of the products you want to sell & the products you know will sell well. For this purpose, conducting detailed research, exploring different products and choosing the right one for yourself before starting up is extremely crucial as your product(s) will serve as the foundation of your Amazon business. This step cannot be neglected under any circumstances because carelessness here will directly affect the number of sales you will make.
There are two of the following research options for you to choose from.
1. The safer and speedier way of looking for the right product on Amazon
Many people out there may not prefer spending a lot of their time carrying out extensive product research on Amazon and basing crucial business decisions on mere instincts and their inexperienced manual research results. Therefore, to make things easier for Amazon Individual Sellers, there exist research tools that are quicker and provide more accurate results based on the filters applied; reviews, weight, sales, and ranking, etc. More often than ever, this tool will help you in listing products that attract the most buyers and sell well.
2. The low-budget way of looking for the right product on Amazon
For those would-be Amazon Individual Sellers who don’t have spare cash to spend on research but have lots of spare time, the option of conducting product research the traditional way exists. To go with this method, you will need a spreadsheet into which data about different products-rankings, prices, categories etcetera-will be entered manually by you. After making the entries, decisions and estimations can be drawn to assess and compare the profitability of various products.
THE PROCESS OF AMAZON SELLER REGISTRATION
After you have selected the product(s) you intend to sell, you have to register with Amazon as a seller. During the process of signing up, you are asked to choose either of the two account options on Amazon: the Professional Seller Account, or PSA, (Amazon Professional Seller) and the Individual Seller Account, or ISA (Amazon Individual Seller).
Both these accounts differ in terms of the limits set and facilities and tools provided by the Amazon team; prices, the quota of monthly sales, listing uploads, inventory management services, gift options and most importantly, the product categories accessible to each of the accounts.
Becoming an Amazon Professional Seller has greater incentives for the new seller as compared to the Amazon Individual Seller; unlimited sales vs 40 monthly sales, gifting options vs none, tools to aid inventory management vs none, all categories available vs limited, possible to make bulk uploads vs manual uploads, respectively (PSA vs ISA).
However, these perks also come with a greater initial price; Amazon Professional Seller Fees start at $39.99/month while Amazon Individual Seller Fees start at $0.99/item sold.
MAKING CALCULATIONS FOR AMAZON SELLING FEES
You will be required to clear a few other Amazon seller fees in addition to the monthly charges payable to the platform authorities.
Order Fulfillment: Fulfillment by Merchants (FBM) Vs Fulfillment by Amazon (FBA)
You have the option of fulfilling all your orders yourself (FBM) to manage them. Going for this will not involve burdening you with any extra expenses except for the usual customer service expenses, shipping, and packaging costs.
On the other hand, there is an option for you to leave your order management responsibilities for Amazon to deal with (FBA). However, this will require you to accommodate Amazon FBA fees labeled as Return Order, Weight Handling, Monthly Storage, Pick and Pack, Removal Order and Unplanned Service. These charges vary depending on the sizes and the months (for storage fees).
Amazon Referral Fee
The Amazon Referral Fee is payable on every active listing and is highly dependent on the category your product belongs to. The fee averages at about 15% of the product’s prices and ranges between 6-45% of it. The minimum value for this is set at a dollar or two. Moreover, a fixed fee of $1.8 is charged to sellers who deal in media products and are labeled as variable closing fees.
Selling On Amazon – Establishing Your Foundation
Suppliers
Finding the right suppliers is essential to your business as their reliability and commitment affect your order management directly. The platform, Alibaba, although requires extensive looking up but may just be the best source for you to get in touch with the most suitable supplier(s).
Sampling
After you’ve conducted your research on the suppliers in the market, you should choose the three or four top ones who are best suited to your business in every aspect. Thereafter, order samples from these shortlisted suppliers to give their quality, prices, and services a test.
Normally, a total cost of $100 is an adequate sample cost for unique products. (inclusive of production, materials as well as shipping costs)
Beginning Inventory
After finding the ideal supplier, you will be in a position to make investments in inventories. Your inventory costs are going to depend on the cost of your product and will vary according to the units you wish to start with. As Full Suite Amazon Experts, we recommend you to start your business with an inventory of 200-300 units.
Attaining Barcodes
The Amazon platform requires you to get your products registered under two of the two following barcodes. Yes, that means more Amazon Seller Fees…
FNSKU Label
This Label is specific to Amazon and enables your account to be credited after making sales over the platform. It binds the products and their sellers together.
The download of this label is free but has to be done manually by you or your manufacturer without error, making sure that each product has the barcode. On the other hand, a fee amounting to $0.2/item can be paid to Amazon to have them do the barcoding for you.
UPC Code
Having your products registered with this code is a universal requirement for every Amazon seller, (individual or professional). Your products will be identifiable worldwide under your company’s name as a result of the unique identification number assigned to your company.
The costs for registering with the GSI UPC include $250 for 10 barcodes and an annual fee paid for the renewal of these services.
Trademarks and Brand Development
Branding
For your business to be registered as a brand on Amazon, you will be required to develop your business’ brand identity; a website, a logo and packaging designs. This may seem to be time-consuming but in the longer run, it proves to be beneficial for serious business owners. You can design your brand identity yourself or invest in it by outsourcing these tasks to professionals or the Amazon marketing team for a fee. Charges are going to vary depending on your chosen option, but it would be safe to keep a total buffer of $200. Registering as a brand with Amazon also allows you to develop Enhanced Brand Content which is a sure-fire way to increase your brand visibility and sales!
Trademark
Trademarking your brand name with the brand registry of Amazon will reap several benefits for private label sellers. You will be charged around $350 while applying for the trademark and will be in a better position to protect your products in the market after acquiring one.
Now It’s Time To Start Selling on Amazon!
Sales & Ranking
The algorithm Amazon uses, A9, is designed to rank the search results based on the likelihood of purchases. Hence, you will need to consider the past performance of products you are selling and the relevance of keywords used in your product listing to make sure you are taking advantage of the Amazon keyword ranking system, the Amazon keyword optimization system and the Amazon listing services in the right manner.
Increased sales will have a positive effect on the ranking of your product. The resulting better rank will, in turn, lead to higher chances of making a sale.
Keyword research & Amazon Listing Optimization
It is imperative for your listed keywords to exactly match the words typed in the search bar by customers. That is so because only then will your product listing be displayed in front of your potential customer. Keeping up with amazon’s listing optimization system will help in improving your rank.
To choose the relevant keywords for your product listings, you can save time and get a paid plan from those who offer Amazon listing services or Amazon listing optimization services. This will add to your costs but will provide you with professional and experienced Amazon experts’ services.
Product Images
In addition to having written descriptions for your products, customers will also be expected to ‘see’ what the product looks like. Uploading clear, good quality, optimized pictures hold great importance as the quality will ultimately attract the customer and make them view your product.
You can photograph your product yourself or hire a professional; allow for $200-$400 for the latter’s services (8 images/product listing)
Pay Per Click Campaigns and Promotions
Amazon PPC Ads
Making use of this service will make it easier for you to continue to compete in a saturated environment. The concept behind this is related to ads of your products popping up in front of customers when they search for terms that are a part of your keywords list. The expenditure for your ad will be accumulated by the clicks it receives. You can control your spending here and we recommended to start at $10/day.
Discounts
During the initial stages, it can be difficult to attract customers and generate sales. However, discounts can be offered during this period to seek the customers’ attention and as a result, increase your brand awareness in the market.
The costs will depend on the percentage you are willing to let go of, but it is important to keep your break-even point in mind while drawing up discounted offers.
The costs will depend on the percentage you are willing to let go of, but it is important to keep your break-even point in mind while drawing up discounted offers.
Shipping Costs
You can handle this cost either by yourself (FBM) or let Amazon do it for you (thereby increasing your Amazon FBA fees). We have discussed this above previously. Both will incur costs and there will be some Amazon guidelines to follow, but you should go for the option that you think is best for your business.
What is essential here is the fact that you should be aware of the shipping costs related to the different destinations you plan on delivering to. The accuracy is important as you will be including these costs on your Amazon Seller Central for customers to view.
Pricing
After all the necessary costs related to your Amazon business have been laid out, it is time for you to determine a retail price for your products. Setting up the ideal price is crucial as it will affect both the sales volume and profit margins of your business. Hence, it is advised to use research and analysis tools to help you in getting a clear picture of the competitors in the market-their pricing strategies and profit margins. This will add to your costs but the services will help you in making sales and attracting customers at the right price.
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