An Amazon FBA business is equivalent to any other business requiring financial investment, time, and energy. The good news is that it only requires a little money to start compared to other types of businesses. Research shows that most newbies spend almost $2,500 to $ 5,000 to start their FBA business. Notably, this cost includes Amazon fees, product costs, and other critical investments. In this post, we will walk you through the cost of starting an Amazon FBA business and the essential requirements to consider before you begin.
Cost Breakdown to Start an Amazon FBA Business
When starting an Amazon FBA business, start with a business plan to act as a road map to a successful business. When it comes to finances, here are several costs that you need to take into consideration; they include:
i) Product Cost
When starting an FBA business, you must have a product in mind that you will sell to people. Consider the price of obtaining the item and the availability and demand of the product before choosing it. Products have different prices; hence, ensure you get the exact price of the product you want to sell. Additionally, if you will be launching a new product, you need to have packaging designs from a professional designer. It would help if you had samples for testing; hence, you must invest more as samples are shipped individually. In this stage, have at least $ 500 that will cater to a designer and several product samples.
ii) Inventory
Your manufacturing cost mainly determines your inventory cost. Ensure that the manufacturing cost is less than the selling price for all the products you want to sell. Also, the inventory cost is affected by the product idea. For instance, smaller items like paper cups cost much less than bags. Always book for larger orders and use cost-effective methods to deliver products to Amazon warehouses for better deals. Also, to build your brand’s reputation, you may need to work on packaging, inspection fees, import fees, customs, and other taxes. All this process can cost you roughly $ 2000.
iii) Subscription to Amazon Professional Sellers Account
Suppose you want to enjoy a range of unique benefits like bulk listings, API integrations, customizable shipping fees, or even the ability to apply for selling products in many categories. In that case, you need an Amazon professional seller account. In addition, when you have a professional account, you pay a flat monthly fee of $ 39.99, while people with individual accounts pay $ 0.99 per sale. However, comparing the two options, the professional account is a worthwhile investment for serious business people.
iv) UPC Code
When you have products on Amazon, you must have a unique product code (UPC). These codes are assigned to a product so that the system can differentiate similar or identical products in Amazon’s marketplace. Notably, you can get your UPC on GS1’s website. The cost of these codes depends on how many codes you want to purchase. In addition, the annual renewal fee is applicable for UPC purchases above 10:
- A single UPC is $30 and pertains to no annual renewal fees
- 10UPC goes for $ 250 with an annual $ 50 renewal fee
- 100 UPC is $ 750, with $150 annual renewal fees
Advisably, you may not need to purchase ten products at once, but having ten products is more affordable than storing the extra codes for future use.
v) Accessories
For an Amazon business, you can start without many tools; however, here is a list of products you must have:
- Computer: Using a computer to work in your seller account will be helpful.
- Smartphone: Your phone will be adequate to help you search for products in the store
- Printer: This will come in handy when you start shipping to help print box shipping labels and products
- Scanning application: It will enable you to use the Amazon Seller app for free
- Tape: Looks small, but it comes in handy when it comes to sealing boxes to send to Amazon
- Boxes: pack your products before sending them to Amazon
- Scale: It is crucial to weigh the boxes before sending them to Amazon
If you already have a computer, smartphone, and printer, the remaining items could range below $100.
vi) Promotional Fees
For every business, you need to have a marketing budget. For Amazon FBA business, you need to have money set aside to drive traffic to your page. By running targeted campaigns, you increase your chances of getting customers and increasing awareness. Also, you can offer discounts and referral bonuses to attract people to your products for the first few months. You could also run ads on other channels like video ads, social media, and influencer fees and then redirect that traffic to your Amazon page.
vii) Photography
Anytime you deal with online products, you must showcase high-quality images. If you own a high-quality camera, you don’t need to spend in this area; just take professional photos. However, if you don’t, you must invest in product photography. On average, photography and photo editing costs about $75. It highly depends on your photographer.
Other applicable charges when dealing with Amazon FBA business
i) Training
Well, training is not compulsory, but it is highly recommended. We have beginner FBA training courses that offer step-by-step procedures to get you started. These trainings will help you from being in the concept zone to making sales on Amazon. You can use the different resources available online or choose to pay someone with experience to teach you.
ii) Amazon Fees
Well, there is some money you need to pay before starting your Amazon business. It includes inventory storage fees, unplanned services, fulfillment, return processing, and removal order fees. Luckily, these charges are charged as a percentage of sales and do not require upfront fees. In addition, amazon’s product listings are free. The only fee that you should consider paying upfront is the $ 40.
Can I start an Amazon FBA Business with a $500 or less budget?
Notably, with a budget of $ 500 or less, you can still start your FBA business; however, your options will be limited. With the amount, you can successfully get products from several categories like garden, kitchen, beauty, office products, or dining. However, selling those products at first can take time and effort. To launch a new product, you need an ad budget to help you get the first reviews before you start to rank organically. Unfortunately, you won’t be able to register for a brand trademark with this budget. Hence, you limit your access to the Amazon brand registry and other premium features that help you to stand out.
However, you can afford more features if you start with less than $500 with thoughtful planning within three to six months. You could start with wholesale and change your business strategy quickly into the business. Also, you need to conduct thorough research and find products with a good profit margin. In addition, run promotions to boost your sales. Lastly, find a mentor to help you invest wisely.
How to start an Amazon FBA Business
Now that you know the cost requirements, knowing the steps to start an Amazon FBA business is crucial. They include:
- First, have a clear strategy.
- Secondly, you need to create an Amazon seller account.
- Then, you need to create an Amazon FBA account to send inventory to Amazon fulfillment centers.
- Also, ensure that you research a winning product and determine a budget.
- Advertise and grow your business.
- Afterward, manage and process all orders for products enrolled in FBA.
Notably, when you have an FBA account, you can add one of your products or the entire catalog. Once you start your Amazon FBA business, you need the following resources to grow your business.
- Brand management
- Brand analytics
- Service provider network
Conclusion
Most people view starting an Amazon FBA business as a lot of work, but it is worth it. You must thoroughly research the products you want to sell and understand the costs. With a clear goal in mind, planning, and sound money management, launch your own Amazon FBS store and start earning. Remember, if you have a reasonable budget, you can join Amazon’s numerous programs and utilize various promotional methods to increase your products’ ranking. In addition, ensure that once you begin, you are consistent in shipping and avoid IP infringement. Now that you know the costs of starting an Amazon FBA business, why don’t you try it?
Frequently Asked Questions
Is Amazon’s FBA business profitable?
Yes, it is very profitable. Remember, like any other business, you need a plan plus capital to begin. Most people have an average of 20 to 25% more sales after investing in FBA. You must consistently deliver to your clients and promote your business online to reach potential clients.
Is it necessary to use Amazon FBA?
If you want to outsource fulfillment tasks and grow your sales, you need FBA. In addition, Amazon FBA is 70% less expensive than the two-day shipping alternative. Also, regarding standard shipping, FBA is 30% less expensive than standard shipping methods. Also, FBA has an FBA revenue calculator that helps to determine whether Amazon’s fulfillment services are more cost-effective.
