I hear it all the time: It costs too much to start an Amazon FBA business. It’s too expensive. It takes too much time. There’s too much competition. And so on and so forth. It’s easy to psych yourself out of an opportunity before you can even dive in. That’s your good-old brain protecting you from potential failure.
But here’s the truth. Starting an Amazon store is not that expensive. Sure, you need some money to get it off the ground. You obviously need to create your FBA (Fulfilled-by-Amazon) brand, buy inventory, spend some money on ads, and so on and so forth.
Yet, when you look at things in perspective, launching an Amazon store is not expensive at all. And it’s nothing compared to launching and building a business in other aspects. You certainly don’t have to worry about many of the logistics you normally would with a business.
So how exactly does this work and exactly how much money does it cost to launch an Amazon FBA business?
What Is Amazon FBA?
Before getting into the costs of launching your own Amazon business, let’s review what Amazon FBA really is. As mentioned already, FBA stands for Fulfilled-by-Amazon. Meaning that Amazon uses its pre-existing supply chain and logistics network to fulfill your order.
This also means that you don’t need to invest in costly expenditures to get a logistics system up and running. You literally tap into a company that has invested tens of billions of dollars in creating and refining their own. In fact, you can’t beat Amazon’s logistics and fulfillment system.
What does this include? Effectively, what you’re doing is sourcing a pre-existing product, potentially making a few adjustments to it, then selling it on Amazon’s platform. You pay a small percentage of each sale to Amazon and it covers just about everything.
Amazon picks, packs, ships, deals with customer service, refunds, and all other order-related issues, then pays you out on a weekly basis. That’s it. You don’t need to recreate anything that’s already been created. All you need to do is find a product you can sell and start selling it.
Can You Sell On Amazon If…?
Before we dive into the cost of selling on Amazon, many people have other hang ups. I get these questions all the time and they almost always begin with, ‘can you sell on Amazon if?’ Many people think they can’t sell on Amazon because of something that holds them back.
They say things like…
- I don’t live in the USA, can I still sell on Amazon?
- I work a full time job, will I still have time to sell on Amazon as a side business?
- I’m not good at sales, can I still sell on Amazon?
- I’m not tech savvy, is it still possible to succeed with an Amazon FBA business?
- There’s too many sellers on Amazon, can you still sell on Amazon if there’s too much competition?
- I tried something like this in the past and failed, can you still sell on Amazon and be successful without any experience selling online?
- And many others…
The answer to these questions is a resounding yes!
The beauty is that you can sell on Amazon regardless of where you live. You can do it part-time. You don’t need to be a salesperson or skilled in sales whatsoever. Plus, you don’t need to be tech savvy. There’s no programming involved. No coding. Nothing like that.
You can use intuitive interfaces to list your products and manage your inventory. And you don’t need to speak to anyone to make a sale. There is still plenty of opportunity to sell countless products, and you don’t need to have any experience at all.
Of course, the truth is that it’s not a walk in the park. You actually have to put in the time and the work and the energy if you want to succeed. It’s very much similar to success in anything else. But the beauty about this is that you’re partnering up with the largest store in the world. Literally. And you can do it from just about anywhere.
If you’re anything like me, that’s probably pretty attractive to you. I’m a complete introvert and don’t enjoy doing sales calls whatsoever. And that’s why Amazon FBA is such an attractive option. Not only that, but it’s highly lucrative if you play your cards right. Obviously, there’s no guarantees and if you don’t do the work you won’t get the results.
How Much Does It Cost To Launch An Amazon FBA Business?
So how much does it take? If you’ve been racking your brain trying to figure it out, I’m going to break the entire thing down for you from beginning to end. While there are other posts and videos out there detailing costs, many leave out so many of the little costs here and there. That’s why I knew I needed to really break this down in meticulous detail.
In order to understand the costs, you need to understand the process of launching an Amazon FBA business from start to finish. Keep in mind that there are a number of steps involved. Each of the steps has a cost associated with it. Not just a money cost. But also a time cost.
Some things are relatively time-intensive. Others are not. Where you can afford to, it’s best to farm out some work to freelancers. Don’t try to do everything yourself. You simply won’t have the time for it. Find others who can help you along on this journey by using sites like Freelancer, Upwork and 99Designs.
Outsourcing is crucial to getting things done in a timely manner. And the intrinsic cost of your time is far higher, especially when it comes to tackling things that you have no experience with. Oftentimes, these freelancers charge very little money and are incredibly skilled at what they do. So don’t discount getting help if you’re on a limited budget.
1. Identify A Profitable Product ($39 per month)
The first thing you need to do before you dive into selling on Amazon is to actually find a profitable product that you can sell. This is at the core of your potential for success. If you invest into the wrong product, you could lose countless thousands of dollars. On the other hand, find the right product and you could literally have yourself a profitable business on your hands.
The beauty about this stage is that it doesn’t require much of an investment. What you’re doing here is setting up what’s called a private label brand. That effectively means that you’re finding a manufacturer who’s already created a product, and you’re private labeling it to your own brand identity.
That means you’re slapping your logo and packaging on an existing product. Sometimes, you’re making improvements to that product. It’s not a crucial step but certainly a recommended one. Keep in mind that just about any part of an OEM (original equipment manufacturer) product can be improved or amended, from the color to the functionality of it.
Finding Profitable Products to Sell…
But before we get ahead of ourselves, we have to figure out how to find that profitable product. It’s not just a matter of searching Amazon’s platform. You have to use the right tools to do it. Plus, you have to understand the mechanics of how it works. Clearly, this is based in classic supply-and-demand economics.
Your goal is to sell a product that’s in high demand but not one that you’ll be ineffective at competing for. Meaning, if there are countless sellers selling the same exact product, especially ones that have hundreds or thousands of reviews, you’ll find it hard to get your product off the ground.
Now, to gain real x-ray vision into the Amazon ecosphere, you need to use a tool called Jungle Scout. They offer a Chrome extension that will help you determine just how much money any product is making on the Amazon platform. Plus, you can identify all the costs associated with that product. And, this will only run you $39 per month.
2. Carefully Scrutinize Negative Reviews ($0)
The next step you need to take, once you find a product that works for you, is to take a look at the negative reviews of that product. What are people saying about it? What type of feedback is out there? Sure, it might be a best-seller, but how can you differentiate yourself from others?
The goal is not to become a copy-cat seller. Doing that won’t help you build a sustainable Amazon FBA business. Your goal is to set yourself apart from others. Differentiate. Innovate. Improve. That’s how your brand apart from other sellers on Amazon.
So how do you do this? Simple, look at all the negative feedback from others out there. What are the one-star reviews saying? You have to sift through these and really take a close look at the critical feedback. Because, this truly is a gold mine when it comes to making the product better.
This doesn’t have to be a complicate improvement. It could be a matter of changing the packaging or the color or the material to make it better. It all depends on the negative feedback. Once again, this truly is a gold mine and once you learn how to leverage these critical reviews, you’ll discover the secret behind building a highly profitable Amazon private label brand.
3. Find Product Suppliers & Order Air-Shipped Samples (~$250)
Your next step is to find multiple suppliers who can supply your product and order air-shipped samples. You need to get samples from at least three different suppliers. The more the better. Why? You want to judge and gauge the effectiveness of the supplier. Not only in their communication, but also what the end-product looks like when it arrives to you.
You’ll need to get these samples air-shipped, meaning you’re going to have to spend some money. But this is money well worth it. Budget around $250 on average for this. Why? Because you’re getting multiple samples from multiple vendors.
You can find these vendors on a website like Alibaba.com. The samples will be coming to you from China. Also, this is not where you are discussing modifications to the product. You simply want a sample of their standard product. The modifications are for a later discussion. Not now.
4. Negotiate Terms & Purchase Initial Inventory (~$3,000 to $5,000)
Once you’ve reviewed the samples, you can negotiate terms and order your initial inventory. You should budget for at least 1,000 units of the product to start. Not less. Why? Because you need inventory to get things off the ground. Not just for selling on Amazon, but also to use in a review funnel to get product reviews.
I won’t get into all the mechanics of a review funnel here, but essentially what a review funnel is is a systemized way for gaining authentic product reviews from existing customers. These are customers who purchase your product and receive an insert or see a sticker that allows them to get another free copy, bottle, or unit of your product.
Now, I know what you might be thinking. Why would you give away a product for free to someone who’s already bought it. Once you understand how difficult it is to get authentic reviews, you’ll completely get why this is so important to do. With that said, you need at least 1,000 units. You’ll be sending 700 units into Amazon and keeping 300 units on hand.
Also, keep in mind that you’re not paying for everything upfront. You want to ensure that you negotiate an initial payment of roughly 30% and the balance upon inspection of the final production of the goods. Do not pay all of it upfront. Again, I repeat. DO NOT PAY FOR EVERYTHING UPFRONT. That is simply a recipe for disaster.
5. Create Company, Brand Name & Check Trademarks (~$150 to $250)
Next, you’ll want to setup your company and brand. You’ll also want to check trademarks. You can do most of this yourself. But if you want to incorporate your company, for example, expect to pay a few bucks to do it. And, trust me, you don’t want to operate this in your personal name. You’re literally exposing yourself to liability by doing that.
Get an LLC or incorporate a standard corporation before you move forward. Obviously, this depends on your location. If you’re in the US, setting up a company to do business under is fairly easy. Use BizFilings or LegalZoom and others to do this. Expect to pay in the range of $150 to $250 to set this up. More if you’re outside the US.
You’ll want to pick a company name that’s indicative of what you’re selling, for the most part. That name is generally going to be in the title of your product. So pick a name that makes sense. Potentially one that is keyword-rich for higher discovery. But at the end of the day, this is going to be your brand. So choose wisely.
Trademark Searches on USPTO
You should also use USPTO.gov to search for potential trademark conflicts. This is free and you won’t have to spend any money to do it. You could hire someone to do this for you. But you can also do it yourself. It doesn’t take much to do a trademark search. As long as you don’t choose a highly generic name, you should be okay.
However, don’t take this as legal advice. It’s always best to consult with professionals when it comes to anything legal or tax related.
6. Work on Logo & Brand Imaging (~$300)
Your logo is probably one of the least important elements when considering the costs involved with starting an Amazon FBA business. Yet, it’s still something that should have a professional touch to it. That’s why this doesn’t have to break the bank and you can turn to numerous online resources to get it done.
Ultimately, your logo and brand imagery will be present on the packaging that you devise for your product. So it does still matter. But when we’re talking about the order of importance, it certainly isn’t high on the list. Still, it is something you need to address.
Again, you should turn to sites like Upwork, Freelancer and 99Designs to address your logo and brand imaging needs. You should budget roughly $300 for this for a fairly decent graphic designer.
7. Purchase UPC Codes ($5-$250 per UPC Code)
You’ll need to purchase a UPC code for every single product that you’re selling on Amazon’s platform. This is an unavoidable fee. So why is there such a big range of $5 to $250 for a UPC code? Simply this. Amazon wants you to purchase what’s called a GS1 UPC Code. And those are expensive. Very expensive.
You’re looking at roughly $250 per GS1 code. However, you could opt for the cheaper UPC codes. You can score those for as low as $5 per code. However, you can’t sell full retail in that case. But if you’re only selling on Amazon, then a cheaper UPC code is feasible. Yet, Amazon recommends going with the GS1 code.
Keep in mind that you’ll need a UPC code for every variation of a product that you sell as well. That means that if you’re selling 3 sizes of a shirt, you’ll need 3 codes. Keep that in mind when considering your budget as it can certainly add significantly to your costs.
8. Design Product Packaging & Inserts (~$800)
Next, you need to work on the product packing and any potential inserts. That means you have to design the packaging and what it’s going to look like. You’ll need a professional designer to assist you here. This is crucial because you need to brand the product to you and your company.
So, if you’re selling consumables, that means you need labels for your bottles and potentially the box packaging as well. Not only will you need to design these first and foremost, but you’ll also have to pay the per-unit printing price later on.
9. Per-Unit Printing Cost Of Packaging, Labels, Insert, etc. (~$350-$500 per 1,000 units)
That means, if you’re ordering 1,000 units from the supplier, be prepared to pay 35 cents to 50 cents or more per unit. That’s going to tack on an additional $350 to $500 for every 1,000 units that you order. It’s not just the design price. So, keep that in mind before you go and order a massive quantity of say 10,000 units from your supplier.
Clearly, if you’re ordering more units, printing prices drop. If you’re ordering 10,000 units or more, your prices could even be cut by 50% to 75% or more! But, you’re paying for far more units. If you’re selling a lot on Amazon, this cost will be a drop in the bucket. But keep this in mind when considering your initial budget.
10. Secure Professional Product Photos (~$500)
Once you’ve handled all the product related costs and have something viable and sellable in your hands, you need great photos of it. Do not try to cheap out here. A picture is literally worth a 1,000 words. Sorry, I know. It’s a massive cliche. But also so very true.
Yes, people do read the copy and the descriptions in your listing. But oftentimes, the first thing that pops out to people, is your photo. Not just the main photo. But also the secondary images as well. Amazon has a slew of guidelines for these pictures and I would recommend that you read all of them right here.
Find a local photographer who can help you out here. This is imminently important. So don’t discount this or try to do it yourself. Sure, if you’re a professional photographer with a decade of experience in Photoshop, go for it. Otherwise, let the pros handle it.
Other Costs Related To Creating A Thriving Amazon FBA Business
Okay, there’s more to it than these 10 items. You have to consider other things like freight forwarders, freebies, copywriting and pay-per-click ads. But if all this sounds overwhelming to you right now, don’t let it. Once you’ve done this one time, it will feel like a walk in the park.
If you need more help, I’d suggest grabbing my free cheatsheet that will give you a step-by-step overview to launching your Amazon FBA business. Click here to claim it right now while it’s still free. Also, be sure to like and share this article if you’ve found it useful.