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E-commerce has seen an incredible surge in recent years, with Amazon at the forefront of this revolution. Entrepreneurs, both large and small, are capitalizing on this trend and leveraging Amazon’s platform to reach a global customer base. However, an important question that arises for many is – ‘How much does it cost to sell on Amazon?’
In this guide, we will break down the various costs associated with selling on Amazon in 2023, providing an in-depth understanding of the potential financial implications of becoming an Amazon seller. Whether you’re a seasoned seller looking for updated information or a novice considering jumping into the online selling bandwagon, this article is your comprehensive resource.
Amazon Seller Account Types and Their Costs
Before we delve into the specific costs of selling on Amazon, it is crucial to understand the different seller account types. Amazon offers two primary types of seller accounts: Individual and Professional.
Individual Seller Account
Ideal for sellers who plan to sell fewer than 40 items per month, the Individual Seller Account doesn’t come with a monthly subscription fee. However, Amazon charges a $0.99 fee for each item sold. This fee is in addition to other selling fees that we will discuss in the subsequent chapters.
| Pros | Cons |
|---|---|
| No monthly subscription fee | $0.99 fee per item sold |
| Ideal for small-scale sellers | Limited selling tools and capabilities |
Professional Seller Account
If you plan to sell more than 40 items per month, the Professional Seller Account is your go-to option. This account type comes with a monthly subscription fee of $39.99 but does not charge the $0.99 per-item fee like the Individual Seller Account. Moreover, Professional sellers have access to more robust selling tools and capabilities, making it a more suitable choice for larger businesses.
| Pros | Cons |
|---|---|
| Access to advanced selling tools | Monthly subscription fee of $39.99 |
| No per-item fee | Requires higher volume of sales for profitability |
3. Selling Fees
Upon deciding the type of seller account that suits your business model, the next step is understanding Amazon’s selling fees. These fees apply to both Individual and Professional Seller Accounts and vary based on the category of the product being sold.
Referral Fees
Referral fees are essentially a commission that Amazon takes for each item sold, and it varies depending on the product category. Most categories have a referral fee of 15%, but it can range from 6% to 45%. For instance, Amazon charges a 6% referral fee for personal computers, while a 45% referral fee applies to Amazon device accessories.
| Product Category | Referral Fee |
|---|---|
| Personal Computers | 6% |
| Amazon Device Accessories | 45% |
Closing Fees
For media items such as books, music, videos, DVDs, video games, consoles, and software (BMVD products), Amazon charges a closing fee. As of 2023, this fee is $1.80 per item sold.
High-Volume Listing Fee
If you list products in the media categories that do not result in a sale after a year, Amazon charges a High-Volume Listing Fee. This is $0.005 per eligible listing and applies to sellers with over 100,000 non-media ASINs that have not sold in the past 12 months.
Shipping Fees
Shipping fees are another significant cost of selling on Amazon. How much you pay for shipping largely depends on whether you opt for Fulfilled by Amazon (FBA) or handle shipping yourself.
Fulfilled by Amazon (FBA)
Under the FBA program, Amazon takes care of storage, packaging, and shipping of products. However, these services come at a price. FBA fees depend on the size and weight of the product, and the time of the year. For instance, the fee for a standard-sized item (weighing up to 1 lb) is $2.50 from January to September, and it increases to $3.31 from October to December.
| Time of Year | FBA Fee (Standard Size, up to 1 lb) |
|---|---|
| January – September | $2.50 |
| October – December | $3.31 |
Seller Fulfilled Prime (SFP)
If you choose to handle shipping yourself through Seller Fulfilled Prime, you have more control over your shipping costs. However, you must meet Amazon’s Prime delivery standards, which may require expedited shipping methods and can increase costs.
Amazon Advertising Costs
Beyond the realm of selling and shipping fees, Amazon offers advertising options that can help increase the visibility of your products. However, these services come with their own set of costs.
Amazon’s primary advertising platform is Amazon Advertising, which operates on a pay-per-click (PPC) model. This means you only pay when a shopper clicks on your ad. The cost per click (CPC) can vary based on the competitiveness of your product category and the keywords you’re targeting. As of 2023, the average CPC on Amazon ranges from $0.20 to $3.00.
| Amazon Advertising Model | Cost |
|---|---|
| Pay-Per-Click (PPC) | $0.20 – $3.00 per click |
Storage Costs
If you opt for the Fulfilled by Amazon (FBA) program, you will also need to account for storage costs. These are the fees Amazon charges for storing your products in their warehouses.
Monthly Inventory Storage Fees
Amazon charges a monthly fee based on the volume (in cubic feet) of your products stored in Amazon’s fulfillment centers. The fees are higher from October to December, a period known as the ‘high-volume season’. As of 2023, the fees are $0.75 per cubic foot for standard-size items from January to September and $2.40 per cubic foot from October to December.
| Time of Year | Monthly Inventory Storage Fee (Standard Size) |
|---|---|
| January – September | $0.75 per cubic foot |
| October – December | $2.40 per cubic foot |
Long-term Storage Fees
If your inventory stays in Amazon’s fulfillment centers for too long, you may also incur Long-term Storage Fees. Amazon assesses these fees on the 15th of each month. As of 2023, any unit that has been in a fulfillment center for more than 365 days incurs a long-term storage fee of $6.90 per cubic foot or $0.15 per unit, whichever is greater.
| Storage Duration | Long-term Storage Fee |
|---|---|
| More than 365 days | $6.90 per cubic foot or $0.15 per unit |
Additional Costs to Consider
While the above costs form the core of your Amazon selling expenses, other factors can impact your total cost of doing business on the platform. These include the Cost of Goods Sold (COGS), taxes, and return costs.
Cost of Goods Sold (COGS)
The Cost of Goods Sold refers to the direct costs of producing the goods sold by a company. This includes the cost of the materials used in creating the goods along with the direct labor costs used to produce them. It’s important to factor in these costs when calculating your overall profitability on Amazon.
Taxes
Depending on the legal structure of your business and where you are operating, you may be liable for various taxes, including sales tax, income tax, and VAT. It is recommended to consult with a tax professional to understand your tax obligations.
Return Costs
Returns are a part of doing business on Amazon. For FBA sellers, Amazon charges a returns processing fee for orders from categories that offer free Amazon returns. As of 2023, the fee equals your original fulfillment fee for each returned unit.
Case Study: Real-world Cost Analysis
To illustrate how these costs add up, let’s consider a hypothetical scenario:
John sells 100 units of a standard-sized product every month through a Professional Seller Account. His products fall into a category with a 15% referral fee, and he uses FBA for all his orders. His product costs him $10 per unit to manufacture (COGS), and he sells it on Amazon for $25.
Here is a breakdown of his costs:
| Cost Type | Cost Amount |
|---|---|
| Monthly subscription fee | $39.99 |
| COGS (100 units x $10) | $1,000 |
| Referral fees (100 units x $25 x 15%) | $375 |
| FBA fees (100 units x $2.50) | $250 |
| Storage fees (Assuming 10 cubic feet at $0.75 per cubic foot) | $7.50 |
| Total Costs | $1,672.49 |
John’s total revenue from selling 100 units would be $2,500 (100 units x $25), meaning his profit before taxes and any advertising costs would be $827.51 ($2,500 – $1,672.49).
Selling on Amazon provides a lucrative business opportunity, but it’s crucial to understand the associated costs to maximize your profitability. From account fees to selling, shipping, advertising, and storage fees, these costs can add up and significantly impact your bottom line.
By understanding these costs and strategically planning your selling approach, you can leverage the vast customer base that Amazon provides while maintaining a healthy profit margin. Whether you are a small business owner or run a larger operation, the key to success lies in understanding these dynamics and planning accordingly.
Frequently Asked Questions
- What is the cost to sell on Amazon?
- The cost to sell on Amazon varies based on several factors, including the type of seller account, the product category, whether you use FBA or not, advertising, and storage costs.
- What is the difference between an Individual and Professional Seller Account?
- An Individual Seller Account is suitable for sellers planning to sell fewer than 40 items per month and is free of monthly subscription fees. A Professional Seller Account, costing $39.99 per month, is better for sellers planning to sell more than 40 items monthly.
- What are Amazon’s referral fees?
- Referral fees are like a commission that Amazon takes for each item sold. These fees vary by product category, ranging from 6% to 45%.
- How much does Amazon FBA cost?
- Amazon FBA costs depend on the size and weight of the product and the time of the year. Fees include fulfillment fees and storage fees, both of which vary based on these factors.
- Are there any other costs to consider when selling on Amazon?
- Other costs include the Cost of Goods Sold (COGS), taxes, return costs, and any advertising costs if you choose to use Amazon’s advertising services.