When you want to start a business, sometimes it is hard to determine how much money you will need to start selling on Amazon. Well, it doesn’t mean that you will need tons of money to start your business on Amazon, but calculating the costs is essential to keep your business going and be successful. If you consider starting and enrolling in Amazon FBA, you should consider all the associated fees. Many sellers create a successful business with little starting capital ($1000-$2000), but it involves planning, extensive market research, and calculating all the costs.
Costs and Fees When starting on Amazon
The primary and most crucial question is: How much does it cost to sell on Amazon? When you start planning your venture on Amazon, it is vital to consider all the associated fees and include them in the product prices, but ensure that the prices are competitive.
Apart from the product buying price, there are some things that you should consider and include when starting your Amazon business:
- The product cost, including any taxes and delivery fees
- You should consider company set-up and creating a website and logo to sell on Amazon. If you decide to sell private label items, you will need a logo to become brand-registered on Amazon.
- Packaging costs for your products as well as design work for your labels
- As the product images are significant for customers, you should consider the image price if hiring a professional photographer. Customers will want to see the product from different angles, be able to zoom in, etc.
- To enroll in Amazon FBA, you should have an Amazon Professional account which costs $39.99 per month. It will pay off if you sell 40+ products per month. While Amazon charges $0.99 per sold item, the Professional account has a monthly cost.
- FBA shipping and fulfillment fees. Depending on the weight, Amazon will charge you fulfillment fees, storage fees, and optional service fees. Also, you need to take shipping supplies such as boxes and labels.
- Referral fees vary from 8% to 45% for each item sold, depending on the category. Amazon deducts the applicable referral fee percentage for all products on the total sales price, excluding any taxes calculated through Amazon tax calculation services.
- Refund and closing fees can vary depending on the unit.
- To become an Amazon seller, you must consider promotion and advertising. Amazon offers many promotional options, but they are not free of charge. So you will have to consider them.
Amazon can be a lucrative business that you can start, but you have to be very careful in planning it, and you should not go lightly into it.
The Way to Cut the Costs
If you have limited starting capital, you should be very careful at the beginning and find a way to cut and avoid some of the costs.
When starting, you should consider ten listings with carefully selected items. The products should be light and small to avoid huge handling fees. You should also consider buying and selling the items in your own country to avoid taxes and shipping fees. The Amazon fulfillment fees are based on the item weight and size, which will help you cut some expenses. Extensive market research before starting on Amazon will help you find items on demand, making it easier for you to start selling faster. You should also consider selling products that are not seasonal, at least in the beginning, so that you can sell them throughout the year. Selling some products like, for example, Christmas stuff will make you pay additional storage fees if they are not sold on time and you have them left in the storage.
Once you scale your business, it will be easier to list more products and cover all the costs from the profit that you have already made. Also, then it is time to think of expanding your business to foreign markets as well.
Final Thoughts
Starting an Amazon FBA business with a small capital is challenging but not impossible. All you have to do is calculate your costs. Many of the successful sellers on Amazon started the same way, scaling their business slowly. However, many saw a profit in the first six months. Even if you start with more significant capital, you should allow six months to grow your business.
Whatever the starting capital is – you will have to have the patience to scale your business. Of course, a lot of effort is included, and you have to put a lot of work hours into it.
