When starting any type of business, budgeting is essential. This applies to becoming an Amazon seller too. If you’re considering joining one of the biggest marketplaces in the world, you want to make sure the opportunity is viable and lucrative.
So, how much does it cost to sell on Amazon?
Amazon seller fees are dependent on several factors. The type of product you want to sell, whether you want to be a seller or vendor, and the fulfillment option you decide on all matter.
In this guide, I’m going to cover the costs associated with selling on Amazon.
As a side note, if you ever want to expand your knowledge on Amazon and how to be a better seller, you might want to explore the Freedom Ticket course.
How Much Does It Cost to Sell on Amazon?
The costs associated with selling on Amazon starts with the plan you choose.
Both US and UK Amazon sellers can choose between an Individual and a Professional selling plan.
At the time of writing this guide, the selling plan prices are as follows:
- Individual Plan: $0.99 per item sold
- Professional Plan: $39.99 per month
- Individual Plan: £0.75 per item sold
- Professional Plan: £25 per month
These are just the basic fees though. There are several additional fees attached to these prices, variable closing and referral fees being some of the extra costs. The percentage of this ranges from 6% to 25%.
These additional fees are subtracted from the overall sale. Professional sellers won’t need to worry about paying the per-item fee though, just the monthly subscription and any additional seller fees. Shipping and gift wrap fees are covered by the customer.
The variable closing and referral fees vary by category. Let’s take a closer look at these.
Amazon Referral Fees
A referral fee is charged as a percentage of the total item price as collected by Amazon based on its CPA model. The percentage that’s charged is dependant on the category that product falls into. Click here to see what referral percentage you will be charged based on product category in the US.
UK referral fees can be accessed here.
Amazon Variable Closing Fees
Variable closing fees are fixed for media products and vary for all other products. A variable closing fee is linked to the shipping details for the products that you sell. The average fee in the US is between $0.45 to $1.35 per item sold. In the UK, most items cost £0.40. Media items are £0.50.
Another tool that I highly recommend if you want to keep a close eye on fees and profits once you get going is Sellerboard – read my review here.
Amazon Shipping and Fulfillment Costs
Another cost that you need to factor into your budget is whether you want Amazon to fulfill your order or if you want to handle it yourself.
Both individual and professional sellers can decide whether they want Amazon to stock, pack and ship their orders. Fulfillment by Amazon (FBA) does come with additional fees though.
FBA fees will include product picking, packing and shipping. The fees also cover monthly storage fees (As long as your items don’t end up with long term storage fees, these are separate). Amazon will even handle any returns on your behalf too.
Fees are dependent on the size of the products you’re storing, selling and shipping.
Initially, going down the FBA route might seem like an expensive option but it does take care of a lot of the hassle associated with packaging and shipping orders.
If it wasn’t for Amazon FBA, we wouldn’t of been able to build the business that allowed us to each quit our full time 9 – 5 jobs.
Let’s take a quick look at some pros and cons of fulfillment by Amazon vs fulfillment by merchant.
FBA Pros and Cons
- More selling time. When you pass off tasks such as warehouse management, packaging, and shipping to Amazon, you have more time to focus on marketing and selling.
- Better exposure. When you choose FBA, your products feature Prime shipping. They will also show up for Prime-related searches.
- Returns are taken care of. Returns can be very time-consuming. In fact, this is probably one of the main reasons why you should go the FBA route.
- Faster deliveries. Since FBA products are sent directly from the retailer, customers receive their good faster. Plus, customers get to track their order directly through Amazon, who is known for great customer service.
- Benefit from the branding. Amazon has spent many years growing their brand. It’s a brand customers trust, so why not use this opportunity to benefit from their credibility.
Honestly, the fact that FBA increases the costs of being an Amazon seller is really the only con. Personally for me, the convenience of FBA outweighs the cost.
If you are interested in reading about two of the best tools sellers use, you might want to have a read through this Helium 10 vs Viral Launch review.
FBM Pros and Cons
So, what are the benefits of fulfilling the Amazon orders yourself? For one, you’re going to save on costs. If you have the manpower and time to take care of orders yourself, why not.
With that being said, you’re still going to need to abide by a few seller rules, including providing tracking information and dealing with order issues within 24 hours.
I’m not saying don’t go the FBM route, but you do need to have the right processes in place and have the time to implement them.
Another downside for me is the fact that you don’t get access to selling via Amazon Prime, well not without using a slightly different fulfillment method which i’ll talk about shortly.
Here is the third fulfillment option that’s not mentioned as often.
Seller Fulfilled Prime (SFP) – The Other Option
This fulfillment option gives sellers the option to store, pack, and ship products themselves but still take advantage of Amazon Prime. It’s a good middle ground for those who want to handle things in-house, while still getting some of the FBA perks.
Unfortunately, you can’t just sign up for this, you need to qualify. It starts with a trial period that requires a minimum of 300 orders. Along with fulfilling a specific number of orders, you’re also going to need to satisfy other requirements, including:
- Offer Premium Shipping Options
- Ship over 99% of your orders on time
- Have an order cancellation rate of less than 0.5%
- Use Amazon Buy Shipping Services for at least 99% of orders
- Deliver orders with supported Seller Fulfilled Prime carriers
- Seller must agree to the Amazon Returns Policy
- Allow for all customer service inquiries to be dealt with by Amazon
While there are no additional fees associated with SFP, you will need to pay for all shipping and packaging.
Budgeting is an essential step in planning, researching, and starting an Amazon business.
Remember to start with you could opt for FBM or SFP, there’s nothing stopping you from moving over to a the FBA fulfillment model later on.
For us we only ever thought about FBA, we were all working full time jobs and this model was crucial to earning our freedom as full time Amazon sellers. The video below might be useful if you too are looking to achieve this freedom.