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How much does it cost to sell on Amazon? Is it profitable to sell on this marketplace?
In this article we will look at a number of points that are very important for any Amazon Seller:
- All the fees that Amazon charges you for selling on its marketplace.
- We work out how much money you need to sell on Amazon
- We explain how to calculate your margin
- With all this done, we carry out a final assessment: Is it profitable to sell on Amazon?
💡 A note before we continue: If you want to know more about how to sell on Amazon, read our complete guide.
How much it costs to sell on Amazon: The Fees
The first thing you need to know before you start selling on this marketplace is what its seller’s fees are and what determines the profitability of your strategy on Amazon.
When we talk about selling fees on Amazon we are talking about many different costs. There are costs for selling commission, services costs, campaign costs, advertising… Let’s take a look at them.
The costs for an Amazon Seller: Your seller plan
Right, first of all, we need to look at the fixed costs: to be able to sell on Amazon, you will need to choose a selling plan. There are two options available:
- Individual selling plan: You don’t pay a fixed monthly fee, but Amazon will charge you what they call a “closing fee”: or €0.99 for every product you sell, which is the same thing.
- Professional selling plan: The one we recommend if you want to sell professionally. This is €39.99/month. In what situation would this plan be suitable for you?
- If you sell more than 40 products a month (which, for a professional seller is a more than acceptable amount). Why is this? With an individual selling plan, if you sell 41 products,
you would have to pay €40.49 just in commissions. So it’s more profitable to get the Professional plan. - If you want to access APIs and advanced tools.
- If you want to create paid campaigns to promote your products on Amazon.
- If you want to choose to enable your products to be bought with one click (this function
notably increases the conversion rate). - And, basically, if you want to dedicate yourself to selling on Amazon in a professional way.
- If you sell more than 40 products a month (which, for a professional seller is a more than acceptable amount). Why is this? With an individual selling plan, if you sell 41 products,
If all this makes your head spin, you can always start off with an Individual Plan and extend your account to the Professional Plan later on.
Referral fees
When making a sale on Amazon, you will have to pay a “referral fee” for each product sold, regardless of whether you have an Individual or Professional Seller’s plan.
This referral fee is a percentage of the total sale price and includes both the cost of the product and any charge related to shipping or gift wrapping.
The percentage referral that you need to pay will vary depending on the category under which your product sells. If you look at the percentages table, you will see that it varies greatly depending on the product you are selling, but it tends to remain within a range of between 7% and 20%, with commissions up to 46%.
👉 Here are a few examples: electronics (7.21%), DIY (13.39%), health and personal care (8.24% for products priced below €10, and 15.45% for products priced above €10), sports and outdoors (15.45%). By far, the highest commissions are those for accessories for Amazon devices (such as Kindle), which is at 46.35%.
It is very important that you bear this point in mind when choosing which products to sell on Amazon.
Bear in mind that, in all cases (except for a few exceptions), Amazon charges a minimum fee of €0.30 per item. That is the minimum fee that you will pay, regardless of the sale price
of your item or its category.
Are these fees too high to make a profit?
If you do things properly, the answer is no. Those percentages may seem high but, in exchange for them, you will get all of the potential of Amazon.
This means that you will benefit from all of its traffic, its checkout which is super-optimised for conversion and its beyond-excellent brand reputation. That is no minor thing.
The importance of checking the commissions that Amazon charges you
This is a relevant point: Unfortunately, it is quite normal for Amazon to make a mistake and charge you more commissions than it should. You can view this in your seller panel by going to Reports / Payments / Transactions.
If this occurs, you need to send a claim to Amazon.
🙌 If you would like us to explain how to send a claim to Amazon, leave a message in the comments for us and we will prepare an article with step-by-step instructions.
The fees for sales of multimedia items
If you sell items in the Books, Music, Video and DVD, and Software and Videogames categories, you will need to pay a fixed cost for each sale. This fixed cost will be added to the referral percentage that we explained in the previous point, and it will vary according to the type of product (although, in these circumstances, the €0.30 fee will not be applied).
The fixed fees charged by Amazon for these product categories are as follows:
- Books: €1.01 (+ the referral fee of 15.45%)
- Music: €0.81 (+ the referral fee of 15.45%)
- Video and DVD: €0.81 (+ the referral fee of 15.45%)
- Software y videogames:
- Games and accessories: €0.81 (+ the referral fee of 15.45%)
- Consoles: €0.81 (+ the referral fee of 8.24%
Fees for logistics management
With this point, we need to make a distinction based on whether you work with Amazon FBA or opt for managing fulfilment yourself.
Fees for selling on Amazon FBA
Before going into how much it costs to sell with Amazon FBA, we will summarise what this consists of and what the service includes.
Amazon Logistics is a service through which Amazon Sellers can outsource the logistics management of their orders through this marketplace. How does it work?
- The seller sends their products to Amazon’s Fulfillment Centers (logistics centres).
- A customer makes a purchase.
- Amazon takes care of the whole process of packaging and shipping to the end customer.
In exchange for this service, it charges you a series of costs that we will describe below.
Now that we’ve looked at this, let’s move on to the prices:
To begin with, you will need to have a Professional seller’s plan (which, as we mentioned earlier, costs €39/month). If you already have this, let’s look at the following costs:
Storage fees
Storage fees are paid according to the average daily volume of your merchandise and are measured in cubic feet. The volume is measured based on the total size of the product once it is packaged and ready for shipping.
If the products you sell are hazardous goods, the storage fees will vary.
Bear in mind: Fees tend to be charged between the 7th and 15th of the month following the billing period.
And another thing: Amazon has a calculator that you can use to calculate the costs of using its logistics services.
Fees for extended storage
If you have products in Amazon’s logistic centres for more than 365 days (counting from the date that the product is received at the logistic centre), Amazon will begin to charge you an additional monthly fee (for products that are not multimedia). This is added to the storage fee.
The larger of the two fees below will be charged:
- A monthly fee of €170 per cubic metre
- A minimum fee of €0.10 or £0.10 per unit.
The date for evaluating the inventory will be the 15th of each month. Amazon will send you a prior notification so that you are up to date on which products are going to go over the 365-day limit.
This way, you can send a request for removal (which incurs a cost, of course, and which they call “Removal Fee”) before you reach the limit date. Sending the request is sufficient. If for whatever reason, the removal has not been fully completed when you reach the 365 days, you will not be charged the fee for extended storage.
Fees for logistics management (shipping costs)
Amazon calculates its shipping fees based on 10 package sizes.
For shipping, you will need to pay a flat fee per unit which varies depending on the type of product, its dimensions and the package weight (the total weight, which includes both the product and its
packaging). Shipping fees vary greatly depending on the type of product, which country you are selling in, etc. To consult the fees in more detail, we recommend checking the Prices page on the Amazon website.
Fees for returns
Try to avoid these wherever possible, but you will always have to manage returns. Amazon will charge you a return fee that is equivalent to the fee for logistics management.
Fees for Fulfillment by Merchant sales (FBM)
Do you manage your own fulfilment? If so, you are responsible for setting your shipping costs (except for Books, Music, Video and DVDs). When you make a sale, you receive an Amazon credit which is equal to the shipping fee you have set.
Important! Bear in mind that the percentage of the referral fee is applied to the total price of the sale, so if your shipping costs are high, you will need to pay a higher commission.
How much money do you need to start selling on Amazon?
As with everything, the money you will need depends on the type of business. If you are going to sell through dropshipping, the initial outlay is much lower (you will see this below). But for those that have their own private label, what is the cost of selling on Amazon?
Once again, it depends! We’re sorry that we can’t be more specific. It depends on your strategy, the type of product you want to sell, whether you are going to use FBA or FBM, which countries
you want to sell in…
💡 At BigBuy, we help brands and suppliers with stock to sell more on Amazon. Take a look at all the services we offer to boost your online sales.
With the fees we have given you throughout this article, you can calculate how much it would cost you to sell on Amazon (only at the level of commissions and the actual platform costs). To all of this, you should add the costs of purchasing the product, registering the brand, and many other aspects.
In a general sense, we would say that a minimal amount to start a business would be between €500-€1,000. However: always bear in mind that the money you invest will determine your rate of growth. The greater the investment, the greater the growth.
What happens if you sell through dropshipping?
If you do dropshipping on Amazon, the initial investment will be much lower. You won’t have to pay for the product until you have registered a sale. In this sense, the dropshipping supplier you choose is key.
BigBuy is a supplier that specialises in dropshipping on Amazon. Moreover, we are a leading dropshipper in Europe. How does BigBuy differ from other suppliers?
- 200,000+ products: We make products from all types of categories available to you.
- Stock in Europe: All our stock is in Europe, which allows us to ship faster, in 24/48 hours.
- Synchronisation technology: We have a solution for synchronising Amazon with the rest of your online sales channels, in real-time through a single platform.
What would it cost to do dropshipping on Amazon with BigBuy? You need to take out a contract on a Wholesaler Pack (our monthly subscription, which would give you
access to all our tools) and an Amazon connector that you use to synchronise your Amazon Seller account with BigBuy. This would allow you to synchronise your catalogue, prices, shipping costs and much more in real-time.
Contact us if you would like to do dropshipping on Amazon.
What margin do you need to sell on Amazon?
Okay, this is important. Before we go on to anything else, how do you calculate the margin for each sale?
You need to take:
- The total cost of the product: That is, specifically how much the product costs you.
- The referral fee: Find the percentage that Amazon charges you according to the product category, and calculate the amount the commission would cost. Remember that this referral fee is applied to the final product (including shipping costs and gift packaging).
- The cost of the shipping (without VAT).
- If you have an individual seller account, €0.99.
- If you sell multimedia products, the fixed cost applies to each category.
Add up these figures, and subtract them from the final product RRP (without VAT). The resulting amount is the net margin you have left.
What percentage margin should you aim for?
Before we state any amount, we want to specify something: this is not applicable to dropshipping. Dropshipping is a business model focusing on volume and with naturally low margins. If you do dropshipping, your aim should be on generating a lot of sales and not so much on achieving a high margin.
If you have your own private label, then you should set yourself a higher margin. You’re heading in the right direction if you are starting from around 15%. If you manage to reach around 18% (or more), your margin would be considered to be very good.
To conclude: Is it profitable to sell on Amazon?
There is no “Yes” or “No” answer to this. Is it profitable to sell on Amazon? Yes, it could be. Yes, if
you do things well. To do this, you will need to train, make mistakes and learn everything that you
need to learn about Amazon.
Whether your strategy is profitable or not will depend on many factors:
- How much the product costs you
- Who are your competitors
- How much money do you invest in advertising
- Whether you have good reviews (more reviews mean more sales, and less needs to be spent on advertising)
- Whether you manage shipping or you use FBA
- The product categories that you sell
- Your returns rate
And many more. In this sense, the margin you have is key.
That’s all for today!
If you have your own brand and want to sell on Amazon (or in other marketplaces on a European level), BigBuy can help you. If you are into dropshipping, we can help you too. Get in touch with us!
