How Much Does It Cost To Sell On Amazon?

Last Updated on November 11, 2024
Written by CPA Alec Pow | Content Reviewed by CFA Alexander Popinker

With over 310 million active customers worldwide, Amazon offers an immense opportunity for third-party sellers. But navigating the fees and costs involved with selling on Amazon requires thorough analysis to maximize profits.

Between monthly subscriptions, referrals fees, and fulfillment charges, expenses quickly add up. Whether you use Fulfillment by Amazon (FBA) or Fulfillment by Merchant (FBM), an in-depth look at the fee structure is essential.

This guide examines the core costs of selling on Amazon, how fees are calculated, tips for budgeting, and strategies to make the most of your investment. Let’s dive into the key considerations around profitability on Amazon’s marketplace.

How Much Does It Cost To Sell On Amazon?

The total cost to sell on Amazon can range from 15-25% of revenue, driven by monthly subscription fees, $39.99/month for Professional sellers, variable referral fees, 8-15% of each sale, advertising spend, and fulfillment fees for warehousing, shipping, storage, and other related services.

Amazon offers two primary account options for sellers:

Individual – $0.99 per item sold. No monthly fees. Best for low-volume sellers.

Professional – $39.99/month for unlimited products. Ideal for high-volume sellers.

The Individual plan saves money upfront through pay-per-item charges without recurring fees. But frequent sellers will benefit from the unlimited structure of a Professional account.

You’ll optimize costs by selecting the right plan for your sales volume:

• Less than 40 items/month – Individual plan most cost-effective
• More than 40 items/month – Professional plan maximizes savings

As your sales grow, re-evaluate switching from Individual to Professional pricing.

According to an article from Fit Small Business, the primary fees include sale-related fees, seller account fees, and shipping or fulfillment fees. Sale-related fees can range from 8% to 45% of each product’s selling price, with most sellers paying around 15%. Additionally, sellers can choose between an Individual account, which incurs a fee of $0.99 per item sold, or a Professional account, which has a monthly subscription fee of $39.99.

Another source, Jungle Scout, specifies that Individual sellers pay a flat fee of $0.99 per transaction, while Professional sellers avoid this per-item fee but pay the monthly subscription. Referral fees are generally deducted after a sale is made and vary by category; for example, referral fees for most categories hover around 15%. The article also notes that there are additional fulfillment fees if using Fulfillment by Amazon (FBA), which can start at around $3.22 per unit for standard-sized items.

A detailed overview from WebFX confirms that both Individual and Professional sellers incur variable closing fees—typically around $1.80 for media items sold. The referral fee percentage varies widely depending on the product category, ranging from as low as 6% to as high as 45%, with a minimum referral fee of about $0.30 per item.

According to another article by Link My Books, additional costs such as storage fees for FBA can range from approximately $0.69 to $2.40 per cubic foot per month, depending on whether the goods are classified as dangerous or non-dangerous. These storage costs add another layer to the overall expense of selling on Amazon.

Amazon Referral Fees

For each item sold, Amazon takes a referral fee percentage that varies by product category:

• Books – 15% referral fee
• Furniture – 15% referral fee
• Electronics – 8% referral fee
• Toys & Games – 15% referral fee

Referral fees range from 8% to 15% on most categories. These commissions directly reduce potential profits, so tracking category-specific referral rates is essential.

Pros and Cons of FBA vs FBM

Sellers must also select an order fulfillment approach:

FBA – Fulfillment by Amazon handles warehousing, picking & packing, shipping, returns, and customer service. Products get Prime eligibility. More convenient but higher fees.

FBM – Fulfillment by merchant means you store inventory and conduct shipping yourself. Lower fees but far more labor intensive. No Prime eligibility.

FBA Cost Considerations:

• Monthly storage fees based on volume
• Per order picking and packing charges
• Amazon’s discounted shipping rates
• Potential overage, return, and prep service fees

FBM Expense Factors:

• Your own warehouse space and utilities
• Internal labor or outsourced fulfillment
• Packaging materials and postage
• Shipping supplies bought at non-bulk rates

Evaluate sales volume, product type, size, and bandwidth to determine if FBA or FBM best optimizes your profitability.

You might also like our articles on the cost of Amazon Prime subscriptions, Kindle Unlimited, or website development.

Breaking Down FBA Fees

Common FBA fulfillment fees include:

• Storage – Between $0.48 to $2.40 per cubic foot monthly depending on inventory size
• Pick & pack – Around $1 to $4 per unit picked, packed and shipped
• Weight handling – Varies based on item weight, approx. $0.40 per pound
• Shipping – Carrier rates by box dimensions, weight, and destination

Additional potential FBA fees:

• Unplanned services like labeling, bagging, bubble wrapping – $0.20+ per unit
• Hazmat handling for dangerous goods – $100+ per shipment
• Long-term storage for over 365 days – $6+ per cubic foot monthly
• Returns processing – $0.50+ per return

While FBA removes fulfillment workload, fees impact margins significantly. Run cost scenarios to determine profitability against FBM.

FBM Cost Factors

With FBM, core costs include:

• Warehousing – Storage space, racks, utilities for inventory. Can outsource to 3PL.
• Labor – Internal staff or contracted third-party logistics (3PL) firms to process orders.
• Materials – Bags, tape, boxes, labels, bubble wrap, other packaging supplies.
• Shipping – USPS, UPS, FedEx or other carrier rates for postage and delivery.

While lower per order than FBA typically, FBM has substantial labor, materials, and shipping costs at higher volumes. Indexing against FBA can identify the better margin fulfillment option for your particular product.

Budgeting for PPC Advertising

Amazon PPC ads allow granular targeting but add expense:

• Sponsored Products – Pay-per-click ads displayed in search results. Most common option.
• Sponsored Brands – PPC ads that also showcase your brand logo and packaging.
• Sponsored Display – Banner ads on Amazon pages. Higher visibility than search ads.
• Headline Search Ads – PPC ads appearing at top of search when keywords are typed.

Create a clear PPC budget and monitor performance, adjusting bids to balance costs and conversions.

Additional Platform and Selling Costs

A few supplemental costs to factor into selling plans:

• Returns – For certain products, Amazon charges return processing fees around $5 per item. Budget for refunds too.
• Prep services – Optional labeling, bagging, bubble wrapping by Amazon add fees starting around $0.20 per unit.
• Research violations – Penalties for listing prohibited products incur fines around $50.
• Inventory reconciliation – Occasional charges if discrepancies found in FBA inventory audit.

Tools and Calculators

Amazon offers resources to model possible profits:

• Revenue Calculator – Estimates fees based on product information to calculate potential earnings.
• Business Calculator – Projects storage needs and recommends purchasing plans to meet demand.
• Seller Central Dashboard – Provides insight into sales, traffic, advertising expense, and fees.

Third-party calculators also available to predict Amazon fees and profitability.

Optimizing Your Business

Several tactics can improve profit margins:

• Leverage volume discounts on shipping and packaging rates to lower FBM costs.
• Analyze ads performance frequently, pausing inefficient campaigns to control paid advertising costs.
• Maintain lean inventory to minimize storage fees and avoid overstock.
• Use MCF (Multi-Channel Fulfillment) to utilize FBA for sales across multiple channels to maximize inventory.
• Negotiate supplier rates to lower COGS and boost margins.

The Math for Calculating Your Profits

The formula to calculate potential Amazon profit:

Total Revenue from Sales

• Cost of Goods Sold Per Item
• FBA or FBM Fulfillment Fees
• Amazon Referral Fee %
• Advertising Costs
• Other Applicable Fees

= Net Profit

Third-party calculators simplify projections. Crunching the numbers prevents profit pitfalls.

Typical Cost Examples

Cost considerations and profit potential vary significantly by product type:

• Small electronics – Low referral fees but high FBA pick & pack costs. Higher return rates also erode margins.
• Jewelry – High 20% referral fee but cheaper fulfillment costs due to smaller packaging.
• Fitness equipment – Large size increases FBA handling fees and shipping rates substantially.
• Apparel – Returns are very common, adding loss and refund processing expenses. Must account for when pricing.

Begin assessing each product category’s unique cost profile and recommended pricing strategies.

Ask the Experts

We asked experienced Amazon entrepreneurs to share their top tactics for improving profitability:

What are your best tips for reducing FBA costs?

“Review storage reports regularly and clear out slower-moving inventory to avoid excessive storage fees. Also ship LTL freight to consolidate inventory into fewer pallets to lower weight handling costs.” – Greg Sampson, Nutrabolt Supplements

“Carefully batch shipment requests to stay under the 70 lb average weight max for the lowest FBA weight handling tier. And take advantage of discounted prep services for labeling, bagging, etc. when shipping large batches.” – Michelle Perth, Kroma Beauty

“Negotiate with suppliers to ship inventory straight to Amazon fulfillment centers rather than double shipping to you first. This streamlines receiving and reduces transport fees.” – Derek Jain, Daily Harvest

What tips do you have for minimizing FBM costs?

“Secure volume discounts on packaging materials and shipping labels by consolidating orders for better rates. The small savings per box and label add up with larger volumes.” – Olivia Messina, ShopSweetly

“Weigh all your shipping package options including dimensions to optimize box sizing. Oversized boxes increase materials cost and drive up postage.” – James Garnett, Garnett Games

“Leverage 3PL order fulfillment during peak seasons to avoid hiring additional permanent headcount and reduce costs long-term. Also lets you scale up/down flexibly.” – Sandra Wiley, SW Textiles & Home

Any advice for controlling Amazon PPC costs?

“Set minimal budgets per campaign to force discipline, then fund incrementally only if performance merits. Also pause poor performing product targeting daily to avoid unnecessary ad spend.” – Tim Ng, BrainMD Health

“Create specific campaigns for your highest margin or new product launches only. Avoid spraying budget across your entire catalog. And leverage Amazon’s automated bidding tools.” – Audra Tang, Velox Insurance

“Analyze campaign performance every few days, not just monthly. Tweak targeting keywords or kill lagging product ads promptly to optimize costs. Letting poor ads run kills margins.” – Karina Patel, KP Botanicals

Final Words

Selling on Amazon presents immense opportunity to tap into millions of active customers globally. However, the platform also comes with substantial costs that can quickly reduce profit margins, from monthly subscription fees, to variable referral rates, to fulfillment and advertising charges. Success requires thoroughly understanding one’s specific cost structure, selecting the optimal account plan and fulfillment approach, efficiently managing inventory and cash flow, and diligently controlling advertising spend.

With careful analysis and preparation, significant profits are attainable on Amazon. But it is essential to model projected expenses against expected revenues to ensure your business model can sustain the required investment and generate returns over the long-term.

Answers to Common Questions

What percentage does Amazon charge for selling?

Amazon referral fees range from 8% to 15% of each item sale price, varying by product category. Additionally, sellers pay fulfillment fees, subscription costs, and other expenses that further reduce profit margins.

Can I start selling on Amazon with $100?

While possible to start very small on Amazon, a minimum budget of $500-$1000 is more realistic. Initial costs include inventory production/purchase, business license fees, and optional expenses like branding, packaging, and photography to stand out. Starting with adequate capital improves success odds.

Can I sell whatever I want on Amazon?

Amazon prohibits certain products like adult content, drugs, and weapons. Other regulated or trademarked products require pre-approval. Additionally, Amazon may limit sellers in categories deemed oversaturated. Check their selling policies thoroughly for category and product restrictions.