Is Selling On Amazon Worth It
At this point, you might be wondering if its worth it to sell products on Amazon.
The good news is with the right products, sophisticated marketing tactics, tools, and seller support brands selling on Amazon can absolutely be successful. Although the competition for almost every category on the marketplace is fierce, there are still plenty of opportunities for brands to thrive.
To be a successful Amazon seller, you should:
- Research potential niches before deciding on the products you want to sell.
- Understand pricing, costs, and fees. This can include manufacturing costs, shipping, packaging, selling fees, and more.
- Ensure your business operations including inventory management and forecasting are in good shape.
- Acquire expert knowledge of marketing, branding, and advertising. We recommend partnering with an that specializes in Amazon advertising.
- Leverage cross channel promotions. Thanks to recent tools like Amazon Attribution, brands can measure the impact of their marketing efforts across multiple platforms and channels.
- Avoid complacency. Brands who rest on their laurels will be crushed by emerging competitors.
And most importantly, be prepared for whatever Amazon throws your way. Changes can happen every single day. Looking for a partner to help you navigate these challenges? Read more about what it takes to
Overall Cost For Selling On Amazon
The cost to sell on Amazon depends on which selling plan you choose.
As we mentioned earlier, Amazon sellers can choose between a Professional or Individual selling plan. Individual sellers pay $0.99 for each item sold on Amazon, in addition to variable closing fees ranging from $0.45 to $1.35. Professional sellers pay variable closing fees and referral fee percentages ranging from 6% to 25% . Professional sellers also pay $39.99 per month but are exempt from the $0.99 per item fee.
Referral fees and variable closing fees are subtracted from the overall sale .
Note: Merchants who pay a monthly subscription fee of $39.99 to be a Pro Merchant Subscriber DO NOT have to pay the Amazon Marketplace $0.99 per item fee . If you sell more than 40 products a month then the Professional Seller Program is a no-brainer.
Amazon seller fees for a professional seller include:
- A monthly subscription fee of $39.99
- Referral fees on each item sold
- Variable closing fees
Amazon seller fees for an individual seller include:
- No monthly subscription fee
- USD$ 0.99 fee for each item sold
- Variable closing fees
Other fees, such as shipping and gift wrap, are paid for by the customer. Heres an example of those Amazon selling fees in action:
Take A Look At Your Amazon Fees
All Amazon fees can be pulled in one-to-two-week time frames out of Seller Central .
Keep in mind your FBA fees will be higher for heavy or large items.
Also be sure to monitor any slow-moving SKUs, as stale inventory can cause you to rack up additional fees.
Lastly, while some of your expenses may be SKU-specific, some are not.
Once expenses are calculated by individual SKU, the remaining costs should be allocated across all units sold.
This is a very simple approach to profitability calculations and will provide you the minimum amount of information you need to monitor your costs day-to-day, or month-by-month.
To summarize, lets review your costs:
- Wholesale cost.
- Overhead cost allocation.
- Returns-related costs.
Unfortunately, if you dont have a constant pulse on your profitability by SKU, it can be difficult to make the necessary changes to vendor negotiations, inventory management or product sourcing promptly.
This knowledge will help inform and educate future buying decisions.
If Kathys Cat Toys is selling a lightweight feather toy that is incurring minimal FBA fees, has low overhead costs and sells like hot cakes, Kathy knows to reorder that toy.
However, the Cozy Cat Castle that is heavy, large and slow-moving is a SKU that Kathy should consider no longer purchasing or even remove from FBA so as not to incur more fees.
A lot of smaller brands choose to track all of these calculations through spreadsheets, but this can be extremely inefficient and time-consuming.
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The Costs Involved With Fulfilment By Amazon
Having Amazon fulfil your orders will result in some costs. This is especially true for large, bulky or heavy items and items that stay in stock relatively long. Generally speaking, FBA fees always consist of a:
The fulfilment fee is a flat fee per unit and is based on the items dimensions and weight. The storage fee is calculated per cubic foot per month, prorata. You can calculate your FBA fees here.
Sell Your Amazon Products In Bundles
You may have noticed that customers may like to buy complementary items to one of your orders. The problem is that Amazon applies referral and shipping fees for each order, which ends up costing you money.
Instead, you can bundle multiple products in one, so Amazon only charges you once for one customer purchase. You may have to pay slightly more in referral and shipping fees due to the size, but it may be less expensive than the combined fees from separate orders.
On top of that, product bundles ensure that customers get the most out of their orders and your brand. A bundle can improve the customer experience by simplifying their purchase decision.
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Keep Track Of Any Abandoned Inventory
If youre on Amazons FBA program and leave your inventory stranded for far too long, youll start getting hit with additional warehousing fees. On top of that, it could also cause you to lose storage space for more products.
Make sure to take a look at your inventory each quarter to ensure that none of your products are stranded for too long. If an item doesnt sell within six months, be sure to take it out of your warehouse.
Start Selling Like An Amazon Pro With Webfx
Amazon offers immense potential for businesses, from established brands to growing SMBs. Getting started on Amazon.com, however, can pose a challenge. You must learn how to add your products to the platform, set your prices, fend off your competitors, and minimize your Amazon seller fees.
WebFX, however, can make the process hassle-free and profitable. With more than 450 experienced team members, we can help you launch your account, optimize your products, and gear your store for success. Just in the past five years, weve helped our clients companies earn more than $3 billion in revenue and manage more than nine million transactions.
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How To Create An Amazon Individual Seller Account
Registering to sell on Amazon is a straightforward process. It should not take you more than an hour, and you can streamline the process by keeping the following information and documents handy:
- Your legal name, business name, and address: Your legal name will not be made public while your business name is the one that customers will see when buying your product.
- Government-issued ID: Any proof of identity issued by your government.
- Contact information: We recommend setting up a separate email address for your Amazon business. This contact information will be used by Amazon and customers to get in touch with you directly. Have a working phone number ready as well. Amazon will verify your contact information during the registration process.
- A ship from address: In case you are shipping your products from an address that is not your business address.
- Bank Account Information: This account is where Amazon will send you the proceeds of your sales. You will usually get your money every 14 days.
- Tax identity information: In the United States, you can provide your Social Security number or your companys Federal Tax ID number. You have to submit your tax information and have it verified. Keep in mind that Amazon does not file your taxes. The retail giant is required by law to collect your tax ID information so that relevant authorities can be notified of taxable earnings you make as a seller. The responsibility of paying your taxes is yours.
What Is Amazon Fulfillment By Merchant
Amazon Fulfilled by Merchant makes you responsible for picking, packing, and shipping the products you sell on the Amazon Marketplace. FBM does not give you the option to list products as Prime.
FBM Pros and Cons
While youll avoid some of the fees that come with FBA, youll be required to abide by all of Amazon seller rules . Not easy, but doable if you already have the right infrastructure in place to handle all of the above.
Unfortunately, With FBM you will not have access to selling via Amazon Prime , which in turn will lead to less sales than a comparable FBA offering.
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How To Apply For The Amazon Brand Registry
To be a member of the Amazon Brand Registry you must:
- Step 1. Review eligibility requirements. Brands must have a registered and active text or image-based trademark.
- Step 2. Sign into Amazon Brand Registry. Brand Registry application must be submitted by the trademark owner. If you are an authorized agent, please have the trademark owner enroll the brand first, and add your account as an additional user. If you meet the eligibility requirements, sign in using your existing Seller or Vendor Central credentials. Or, if you dont yet have an Amazon account, create one for free.
- Step 3. Enroll your brand. Once you sign in, you will need to enroll your brand. After Amazon has verified the information you submit during enrollment, you will be able to access Brand Registrys features to help protect your brand.
More resources on the Amazon Brand Registry:
What Is Seller Fulfilled Prime
The Seller Fulfilled Prime option is a hybrid Amazon fulfillment option that gives you the ability to store, pack, and ship your own products while allowing your products to be listed as Prime.
Basically, Seller Fulfilled Prime is the best of both worlds if you have a solid fulfillment strategy. You would manage your products and listings the same way you would with FBM but youll get access to Prime customers.
However, you do need to qualify for SFP. And its not easy.
Youll need to go through a trial period that involves a minimum of 300 orders. During the trial period, youll need to satisfy all of Amazons requirements.
This includes a cancellation rate of less than 1%, an on-time shipment rating of at least 99%, and use Buy Shipping Services for a minimum of 95% of the orders.
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How New Sellers Could Start Making Nearly $30k/year On Amazon
SMB sellers are making an average* of $11,671 in sales each month or $140,052 in sales per year.
Considering the average profit margin of SMB sellers, 21%, new sellers are averaging $2,451 per month or $29,412 in annual profits.
And for the 29% of sellers with profit margins of 21% and higher, they could be taking home monthly profits upwards of five figures and beyond.
New Amazon sellers are earning anaverage profit of nearly $30K per year.
A handful of new sellers are fortunate enough to be raking in incredibly high sales upwards of $250,000 per month $3 million per year. While these super sellers are outliers from the average seller, theyre certainly aspirational.
*Weighted average calculated based on reported sales by midpoint of range, and capped at the high-end range to prevent arbitrary projection.
What Is A Referral Fee And How Much Do You Need To Pay
Any sale you make on Amazon comes with a referral fee , regardless of what type of seller account you have or shipping method youre using.
Commission fees are based on the TOTAL SALES price, which includes shipping charges .
For example, if you are an FBM seller and charge $5 for shipping, that $5 will be factored into the commission percentage Amazon takes. Make sure to keep this seller fee in mind when determining your sales prices.
Total sales also mean that, if you sell your item at a discount due to a coupon code, promotion, or other discount, your referral percentage will be based on that discounted price.
Referral fees generally depend on the product category, with a few caveats.
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Selling On Amazon With Fba
Amazon is a global leader in online selling because of its cutting-edge, worldwide order fulfillment networks. If you sign up for , you can store your products in their centers and scale your business reach by using FBA to pick, pack, ship, and provide customer service for your products.
Think about it: If youre just getting started in ecommerce, you need to take the time to market your business with digital ads, SEO, content, and PR. By selling on Amazon through FBA, you at least get to remove inventory management, shipping, the signature process, and returns from your plate.
Plus, Amazons customer service via email, phone, and live chat tools can save you from hiring employees to handle complaints and returns. Customer service and returns for any orders your customers place are handled directly by FBA and their knowledge base software database. This saves you time and frustration so you can focus on selling on Amazon to the best of your ability.
And there are more benefits:
- You can use Amazon FBA to quickly grow your business since its fulfillment centers have been designed with wide-ranging inventory in mind.
- There is no minimum number of products you must send in order to participate in this program.
- Storing your products in the Amazon fulfillment centers is cost-effective.
- You basically pay as you go.
- Amazon charges for storage space and the orders it fulfills for your customers. Shipping costs are included in your fees.
Is It Ridiculous For Amazon To Take 15% Of My Total Sales Price Every Time I Make A Sale
No. Let’s say you sell houses for a living and my friend, Bobby McGee, wants to buy a house. I tell Bobby you can help him, and Bobby buys a house from you. You pay me a âreferral feeâ because I referred Bobby to you. I brought you the sale. It’s sort of like my commission. Instead of you having to go out and spend hours of marketing before finding Bobby, I brought him straight to you and gave you the sale. Well, instead of houses, you’re selling products on Amazon.
Amazon’s platform is bringing you customers , so they have every right to charge a referral fee for referring the customer to you.
If you were selling products off of your own website, you would likely spend 10s of thousands of dollars in marketing or a minimum of six months content marketing before you started making serious money from your own store. Amazon lets you get results far faster than any ecommerce platform I have ever seen.
How is the Amazon referral fee calculated?
Amazon calculates the percentage of the price the customer pays. For example, if you are selling invisible socks for $100 but decided to run a sale for $80 then Amazon calculates the fee off of $80, not $100.
$80 x .15 = $12 referral fee.
If you are shipping the items yourself FBM , and the customer pays you $2.89 for shipping, then the fee is calculated like this:
x .15 = $12.43 in referral fees.
But the fee preview in Seller Central does not change when I run a sale!
Is there a minimum referral fee Amazon will charge me?
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What Does It Cost To Sell On Amazon
Amazon offers two selling plans: Professional and Individual. The Professional selling plan costs $39.99 per month, plus per-item selling fees, which vary by category. Alternatively, the Individual selling plan allows you to pay $0.99 per item sold plus other selling fees, which vary by category. The Individual selling plan doesn’t have a monthly subscription fee, so if you plan to sell less than 40 items, this is likely the smarter choice.
You’ll want to do your research on shipping costs and Amazon seller fees, so you know how much you’ll need to spend depending on your item. This information can help you narrow your decision for instance, a two-to-three pound item will be lightweight and easy to ship, which can help lower your shipping fees.
Along with weight, you’ll want to consider products that aren’t easily breakable when you’re transporting them.
Additionally, most products on Amazon vary between $10 and $50, so you’ll want to choose items you can sell for relatively cheap while still making a profit.
How Much Is The Amazon Seller Fee
All Amazon sellers must pay to sell on the marketplace. There are two plans for Amazon sellers to choose from based on monthly order volume: the Individual plan, at $0.99 per item sold, and the Professional plan, at $39.99 per month.
- No monthly seller fee
- $0.99 fee for each item sold
- Variable post-sale fees depending on category
- Monthly subscription fee of $39.99
- Referral fee for each item sold
- Variable post-sales fees based on shipping details
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Does The Fba Fee Preview Include The Referral Fee
The Amazon seller fee is a separate charge, but the FBA fee previewer does include both the Seller Fee and FBA estimated fee in your cost estimates. Here is what the Amazon Fee Preview page states:
The Fee Preview column showcases the core fees for Selling on Amazon and Fulfillment by Amazon for a given product. The Fee Preview is only an estimate and does not include all fees that may apply. The fees shown are based on the list price, estimated shipping cost , and available data for the product in our system. Actual fees may vary and are subject to change.