If you ever want to start an Amazon sales, this is the best time to do it: The world-renowned e-commerce platform has reached $ 386 billion in annual revenue by 2020 and its growth is expected to soar in the coming years.
One thing that confuses many first-time entrepreneurs on Amazon – and continues to confuse experienced sellers – is the long list of sales costs. Fees also vary depending on your product and the program you choose (such as FBA or FBM).
To start a successful business on Amazon you need to have a clear understanding of what sales costs are and what you can do to save more money. Otherwise, you may get bad surprises and throw away your budget unknowingly.
What affects your Amazon sales costs?
The prices you pay to sell on Amazon depend on a variety of factors. These include:
Monthly subscription fee
Amazon has monthly subscription fees for users depending on the size of its business. The Professional Vendor Plan, for example, is for companies that sell more than 40 items per month and costs $ 39.99 per month. If you are a personal seller who completes less than 40 orders each month, you do not have to pay any subscription fee. Instead, Amazon will charge $ 0.99 for a product sold.
If you are selling through Amazon FBA, the prices you pay will all depend on your order type. For example, if your order is large, you will have to pay a higher fee to Amazon to fulfill it. Because the FBA allows Amazon warehouses to manage your orders themselves, there is also a monthly savings fee that you must pay. You pay $ 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 has been in the FBA warehouse for more than a year, you will have to pay extra.
Unlike FBA, vendors are responsible for executing their products under Amazon’s Fulfilled by Merchant (FBM) program. One of its main advantages compared to FBA comes in the form of reduced fees.
Through FBM, Amazon sellers can choose their shipping rates in the professional sales plan. There is also the benefit of not having to worry about paying any warehouse or savings fees.
Every time you sell an item on Amazon you have to pay a referral fee of 6% to 20%. The referral fee all depends on the type of product you are selling in your Amazon store.
For example, if you sell any electronics in your store, expect an 8% charge. If you sell clothing items, on the other hand, you will spend about 17%.
Customer Returns Fees
It is very common for a customer to order one of your products and return it. As an Amazon seller, you will be responsible for the cost of any items that the customer returns to your warehouse.
How Much Money Do You Need for first Amazon sales?
Generally, it takes about $ 500- $ 3000 to start selling in the Amazon market. The money you invest should cover the following aspects of your business:
- Necessary expenses
- Inventory costs
- Shipping costs
- Product photoshoots
- Tools and materials
Your inventory costs are the most important pre-investment for your Amazon business. After all, it will be the product you sell to customers on the platform.
If you are completely new to selling on Amazon, you may be reluctant to spend more money on inventory because you still do not have a clear idea of which products will work with customers. To avoid running out of money quickly, we recommend investing $ 500- $ 1000 initially and testing which products will sell.
Since you are running your Amazon business, you will not be able to find solutions for Sapphire films. Quality product photos are essential to get the customer’s attention and get the best sales.
Part of your budget will be invested in professional photoshoots so you can make your online products stand out. Your images should show your product from different angles so that the customer can get a clear view of the product and see it in a professional light. Low-quality images do not convey a high-quality offer.
Just uploading beautiful pictures to your Amazon store is not enough. To maximize sales, you need to invest in advertising and increase your range as much as possible.
The good news is that advertising on Amazon is cheaper than other sites: the current average cost per click on Amazon is about $ 0.35. However, advertising campaigns take a lot of testing to see what works best for your audience.
Tools and materials
Outside of marketing your Amazon business online, you will spend most of your time packaging, scaling, and managing your orders (unless you are on Amazon FBA). As a result, you will have to invest in different tools and products.
For example, you need to invest in boxes to pack your orders, close them with packaging tape, and a scale to weigh them. A printer will also make it easy to print all of your Amazon shipping labels and documents.
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