April 22, 2022

How Much Money Do You Need To Start Selling on Amazon FBA

Does it cost money to sell on Amazon? The short answer is ‘yes’. Any serious business requires upfront financial investment and time and energy to get started. However, selling on Amazon FBA has a much lower startup cost in terms of both time and money than almost all other types of businesses.

This is because fulfillment by Amazon (FBA) is a service that allows businesses and companies access to the platform’s vast network of logistics and order fulfillment. You can use this network to delegate the bulk of tasks that a typical e-commerce operation requires, such as storing, packing, or shipping products, and save yourself hundreds of thousands of dollars in start-up costs.

Every business wishing to use FBA does require some capital for FBA fees, digital assets like product photos, software tools, and initial advertising costs. With a budget of about $10,000, you are almost guaranteed to succeed and see ROI far beyond your initial investment. You can also sell on Amazon with much lower savings. In fact, if you are on a tight budget, you can start with less than $500 and work your way upwards. Then, all you have to do is re-invest your profits back into the business until you can scale enough to earn from it!

This guide covers all the information you need for the financial planning of your FBA business.

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Brief statistics

A survey of several thousand Amazon sellers revealed that

  • 18% started with a capital of $500 or less
  • 10% started with a capital between $501 and $1,000
  • 12% started with a capital between $1,001 and $2,500
  • 18% started with a capital of $2500 and $5000
  • 22% started with capital over $10,000

Thus we can see that 40% of Amazon FBA businesses have been successfully launched with a budget of $1000 or less!

If your budget is $500 or less

With a budget as low as $500 (or less), your options are limited. While you can successfully source products from several categories like Beauty, Garden, Kitchen and Dining, or Stationary and Office Products, getting those first few sales can be challenging. Launching new products requires an ad budget to get those first few reviews and start ranking organically. You also cannot afford the cost of registering a brand trademark, limiting your access to the Amazon Brand Registry and several premium features that help your brand stand out.

However, the good news is that you could afford all this within three to six months with a little bit of smart planning. We recommend that brands with a budget of $500 or less start with retail arbitrage or wholesale and focus on flipping your investment as quickly as possible. Research carefully and try and find products with a substantial profit margin. You will also need to run promotional giveaways and discounts to boost sales, so remember to factor that in. Finally, try finding a mentor who can support you in investing every dollar wisely and making sure it counts. Here is a great free training video covering the basics for low-budget business owners.

If your budget is $10,000 or more

The best course of action for brands starting with a budget over $10,000 is to private label their products. You have to design your unique product ideas, get them manufactured by factories overseas and sell them at a significant profit margin within the USA. In addition, controlling your product manufacturing allows you to trademark your brand and get listed in ads. You can also subscribe to several premium Amazon services such as Advertising, Transparency, Project Zero, and IP Accelerator to protect your products from intellectual property infringement while boosting brand visibility.

A bigger budget gives you nearly infinite options. You can choose to invest in production, launch several product ideas, advance with more aggressive Amazon advertising campaigns, and quickly dominate your niche!

Minimal budget to start an Amazon FBA business

The minimal budget required to start a private label Amazon FBA business is approximately $3500. This budget will get you started with about 500 units of your unique product that costs about $4/unit to manufacture and source and gives a 100% return on investment. The cost breakdown is as below.

You’ll need $39.99 to purchase a Professional Amazon Seller account and additional fees for each sold item. You will also need at least $30 for one unique product code to enter Amazon Marketplace. The rest of your budget should cover other costs explained below.

Product samples ($500)

To launch a new product, you need to get product and package designs from a professional designer and order samples for testing. Samples cost more as they are shipped individually. A $500 budget will cover the costs of a mid-level designer and several product samples. You will need more money if you want to try out several ideas.

Inventory ($2000)

Inventory costs are variable and depend on your product idea. Smaller items like wristbands or paper cups cost much less than products like bags or electronic devices. In general, you should aim to lower your manufacturing cost and increase your selling price. You can get better deals by booking large volume orders and finding cost-efficient channels to get the manufactured products to Amazon Warehouses. To maintain product quality, you may also have to work in packing and inspection fees along with import fees, customs duty, and other taxes.  A $4/unit landing cost is on the lower end for small-size items. Most mid-level products cost $8-$12/unit in landing fees.

Promotional giveaways ($500)

Simply listing a product on Amazon is not going to get you sales. Instead, you need to drive traffic to your page by running targeted marketing campaigns on and off the platform. Sellers can run several types of promotions to increase brand awareness. These include buy one get one free and discount prices. You can set aside some existing inventory for promotions, but you require additional funds for running paid advertising. You can also use your advertising budget for running ads on other channels outside Amazon, such as social media, video ads, and influencer fees, and redirect that traffic to your Amazon product page.

Amazon Professional Sellers account ($40)

The Amazon Professional Sellers Account offers a range of unique benefits, including the ability to apply for selling products in more categories, bulk listings, optimized digital inventory management, API integrations, customizable shipping fees (only for non-media products), built-in advertising tools, free shipping on promotional giveaways, and the ability to set multiple admins on a single account.

While sellers that have opted for the Individual selling plan need to pay $0.99 per sold product, sellers with the Professional account only need to pay a flat monthly fee of $39.99. It is definitely a worthwhile investment for the serious entrepreneur.

UPC Code ($250)

UPC stands for Unique Product Code, which are codes assigned to all products on Amazon’s marketplace so that the system can differentiate between similar (or identical) products. UPCs can be obtained on GS1’s website. As of late, Amazon requires all sellers to use UPCs on Amazon Marketplace and will refuse to list products without one.

The costs of UPC codes depend on how many you want to purchase. The price scales with the number of products you wish to link their respective codes to. Annual renewal fees also apply for UPC purchases above 10:

  • The initial fee for a single UPC is $30, with no annual renewal fees
  • The initial fee for 10 UPC is $250, with a $50 annual renewal fee
  • The initial fee for 100 UPC is $750, with a $150 annual renewal fee

While you may not launch ten products at once, there is no harm in buying the ten code pack and storing the extra codes for future use.

Fees

Amazon FBA startup costs encompass numerous fees, including fees for inventory storage, fulfillment, unplanned services, fees for removal orders, return processing, and more. However, many of these fees are charged as a percentage of sales and do not require upfront costs. For instance, Amazon product listing is free and creates an Amazon business account. Referral fees are a percentage of the total sale price of the product. The only fees that you need to pay upfront are the $40 for your Professional Seller Plan.

Real budget to start Amazon FBA business

Since it is possible to start your Amazon FBA journey with a budget of less than $500, if you’re wondering ‘how much does it cost to sell on Amazon,’ the answer solely lies in your aspirations and financial means at your disposal.  Some of the areas you need to budget for are given below.

Amazon ads

Amazon Advertising is the brand’s service that can be likened to PPC. Amazon FBA users that decide to use this service only need to pay when Amazon shoppers actually click on these advertisements. Some facts about Amazon Ads:

This service is basically split between sponsored products and sponsored brands. Another sub-category encompasses self-service ads on various pages, as well as premium ads that are basically exquisite visual banners deployed on Amazon.com and Amazon partners. Several factors affect the fees of Amazon Advertising services, including automatic or manual targeting, campaign length, and keyword bid. Essentially, the minimum bid is below a dollar while the maximum bid (per keyword) is $20.

Brand Registry

Amazon Brand Registry (ABR) is one of Amazon’s services that was designed with a variety of advantages in mind, such as:

  • Top-quality content building
  • Brand sponsorship via customized ads
  • Unique multi-page Amazon stores free of charge
  • Big data analytics
  • Additional incentives for new sellers
  • Proactive protection from intellectual property infringement and ‘bad actors’

Amazon Brand Registry is free to use for all brands that have been trademarked in the United States. Trademark registration fees cost approximately $499. Trademarking lasts for a decade, after which it needs to be renewed, otherwise, the brand will no longer be eligible to remain in Amazon Brand Registry.  We highly recommend you sign up for Brand Registry as soon as possible.

Logo and store design

You can design a unique logo and store design yourself if you have the right skillset. There are dozens of free programs that can be used to do it, such as Tailor Brands Logo Mager, Canva Logo Maker, Wix, Logo Maker, Hatchful, Ucraft Logo Maker, and such. However, professional brands normally hire experts to create an attractive design, which can cost anywhere between $200 to $1,500 for the logo, and nearly twice as much for store banners and artwork.

Quality photos

If you already own a high-quality camera and have decent photography skills, you do not need to spend in this area. Otherwise, you will need to invest in professional product photos. According to Fash’s survey, the average cost of a professionally shot and edited photo is about $75. It may be prudent to buy a professional camera if you plan on expanding your production while selling on Amazon FBA. Remember to use Semrush's Listing Quality Check tool for Amazon to check your listing for accuracy and improve it for better ranking!

Train yourself

Even with the latest technology and equipment, you’ll still need to invest in your own skills to succeed on Amazon. By attending webinars, courses, or classes, you’ll increase your odds of beating your competition by becoming more knowledgeable and insightful. The training costs range from zero to tens of thousands of dollars, depending on your contacts and aspirations.

Spending more money = earning more on Amazon?

Spending more money on Amazon at the start equates to long-term investment, meaning that sellers may not see a significant ROI straight out of the gate. First of all, advertising strategies (whether using Amazon Ads or launching one’s own campaigns) take time to bear fruit. Secondly, brand recognition and awareness can’t be immediately achieved after the business enters Brand Registry.

Additionally, unified inventory services scale with the growing demand and customer base. At some point, sellers may want to modernize their stores with better banners and artwork or invest in personal skill improvements. The bottom line is that spending more money on Amazon by investing in products and the brand is almost certain to earn the company more.

How to save some money

The best way to save money without inhibiting your brand’s growth or sales is to prioritize. Focus on improvements that work in your favor by analyzing your unique situation:

  • Upgrade to a Professional account if you are selling in bulk. This way, you will pay a flat monthly fee instead of fees on every sold item
  • Buy one UPC and set competitive but fair prices for your best, most recognized product if your starting budget is low
  • Send product samples or create promotional giveaway events to boost brand awareness
  • Trademark your brand as soon as your monthly sales top the $1,000 mark. The Amazon Brand Registry program has everything you need to grow your business.
  • Use free software to design a compelling logo and store design; upgrade to more professional aesthetics when your budget allows you.
  • Use Semrush's PPC Optimizer tool to automatically manage your ad budgets efficiently and effectively.
Try Amazon PPC Optimizer

Conclusion

After reading this guide, you probably know how much to start amazon FBA costs. It can be done with a budget below $500, but needless to say, you’ll have far better odds with a stronger starting capital. If you have a reasonable starting budget, you can join numerous Amazon programs and approach various optional services that can increase the ranking of your products, ensure consistent shipping times, boost product visibility, and avoid IP infringement. We hope that this guide has helped you learn everything you needed to know about the costs of selling on Amazon FBA, and we wish you luck in all your business ventures!

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Read further:

To gain some real-life inspiration consider reading about how ImportYeti founder, David Applegate, launched his first Amazon e-commerce business. You will discover some product innovation ideas and several tips to accelerate your Amazon FBA success!