How much does it cost to Start Amazon FBA? | Passive Income League (2024)

So you have decided you want to start selling on Amazon and would like to know how much its costs to start an Amazon FBA business.

Firstly, I would like to commend you for taking the initiative to better your life and look for opportunities to create an additional income.

Amazon FBA is a great business model that can help you create an additional income stream, however as with any business there are some initial start up costs and ongoing costs.

In this post we try and break down all the possible costs you need to consider and account for so you can setup your business the right way from the start and maximise your chances to succeed.

Amazon FBA Costs can be broken down into two broad categories

• Start Up costs
• Ongoing costs

Amazon FBA Start Up Costs

Product Sample costs – $ 100 – 300 including shipping costs

• Order samples from at least 3 suppliers and test all of them thoroughly for quality, durability.
• Look for improvement opportunities
• Select a supplier with the best product and the one that has been the most responsive

Logo Design – $50 – $100

• You can use services like fiverr, 99 designs or upworks
• Request for you logo in psd, pdf and png format

Product Labelling – $50 – $150

• You can use services like fiverr, 99 designs or upworks
• Request for you logo in psd, pdf and png format

Product Photography – $100 – $300

• You can use services like fiverr
• Images must be on a white background and must be high resolution

Initial Inventory Costs – $500 – $2000

• Depending on your product type, the price of the product and Minimum Order Quantity (MOQ) you will need anywhere between $500-$2000 for your initial inventory
• Recommendation is to try and stick with smaller, light weight products especially when starting out because this will help to keep your initial inventory costs lower and a good way to test and learn

Barcodes cost – Approx $250* and upwards

• You will need a unique barcode for your product(s), Amazon policy requires you to buy the barcodes from GS1. It is also one of the most trusted services to obtain barcodes.
• *The cost depends on your country of residence and the number of different products you have also known as SKU’s
• Please refer to the link below for more information about GS1 barcodes and how to obtain them

Need a Barcode to Sell in Stores or Online? Start here

Shipping Costs – $300 – $1000

• There are 2 ways to ship your products into Amazon

1. By Sea – This is a cheaper option but takes longer can take upto 60 days to arrive into Amazon’s warehouse
2. By Air – This is more expensive but it a lot quicker, your products could arrive into Amazon warehouse within 10 days.

• When starting out you may choose to ship a small amount by air so you can start selling quickly and then have a larger order sent by sea freight.

Note – its is important not to run out of stock as this could hurt your listing so plan you inventory accordingly. Tools like Jungle Scout can help estimate the number of sales and help with inventory planning

Customs Bond – $100 – $500

• A customs bond is required when importing goods for commercial purposes.
• If you are importing goods, you will need to pay a Customs bond .
• The main purpose of a customs bond is to guarantee the payment of import duties and taxes.
• Pricing depends on the bond value and whether it is a single-entry or a continuous bond.
• If you plan on sending multiple shipments throughout the year a continuous bond might be a better option
• You can purchase a customs bond through a Customs Broker. A Customer broker is essentially an agent for a surety licensed and approved by the US Department of the Treasury.

Freight Forwarder – $200 – $400

• Some suppliers may offer shipping directly to you final point of distribution and this may be a good option when starting out but they can charge a higher price.
• A freight forwarder is another option, a freight forwarder can handle all the logistics for you i.e. transporting the goods from the manufacturer to the docks and then to a market, customer or final point of distribution.

Optional Amazon FBA Start Up Costs

Quality Control costs – $ 50 – $500

There are several inspection services pre production and post production are the most common one.

Final Inspection (post production) is very important – if you can only afford one inspection this is the one inspection you should definitely do

Options to do final inspection

• Using an agency – use independent experienced and validated agency not a supplier recommended one
• Yourself –
  • You could, get your products shipped to youself so you can inspect it and then ship it to Amazon
  • If you can get to the manufactures and know what you are doing you can use this option

Company Set Up (LLC) – $50 – $500

There are several advantages of incorporating a small business such as Personal asset protection. Corporations and LLCs allow owners to separate and protect their personal assets.

Properly structured and managed corporations or LLCs should limit the owner’s liability for business debts and obligations.

Trademark registration – $350 – $1500

Most of us have limited budgets when starting out so registering for a trademark may not be an immediate priority, however it is something you should consider especially if you want to grow your brand and increase its value.

The video below provides some Basic Facts About Trademarks

Taking a training course – $1000 – $5000

There is a lot of free information out there and it’s quite possible to learn on your own but taking a quality training course will

• Help you learn quicker
• Prevent you from making costly mistakes
• Help you stay on track
• Provide you with a forum to raise questions and discuss any issues you are facing
• Keep you motivated and give you confidence because you are working with like minded people who share the same views as you.

Ongoing Amazon FBA Costs

How are Amazon FBA fees calculated?

Amazon FBA fees can be broken down into the following main categories:

Subscription fees

• Individual seller fees – If you create an individual seller account then you will pay a flat fee of USD $0.99 on every Amazon FBA product that you sell.
• If you create a professional seller account on Amazon, you will pay a monthly fee USD $39.99 per month for the US marketplace. This fee varies from marketplace to marketplace.
  • Tip – if you are selling more than 40 products per month, opting for a professional seller account might be more logical.

Referral fees

Fees that you pay after you sell a product on Amazon.

Typically, it’s a percentage of the price the product is sold for.

The actual fee you pay depends on the category your product is listed in, but it’s generally 15% or less.

Here is a another good guide to refer to for all Amazon Seller Fees – Amazon Seller Fees: The ultimate guide for 2020

Variable closing fees

Product in certain categories such as books, DVDs, and other forms of media, attract a flat fee too.

Fulfillment fees

When you send your product at an Amazon FBA fulfillment center, your products are picked, packed, and shipped by Amazon’s fulfillment team.

These fees cover the total costs to do all that work and ship it.

Since these fees are usually only a few dollars, it ends up being much less expensive than doing the work and shipping it yourself!

Storage fees

Amazon has large fulfillment centers all over the world, these are essentially large warehouses built to hold your products.

Inorder to discourage slow-moving products from sitting too long and sellers from taking advantage of the system, Amazon charges storage fees.

Returns processing fee

Amazon’s provides “free returns” to customers however the return processing fee is passed onto you as the seller.

Therefore you be liable for a returns processing fee for any items returned by customers are only free to the customer.

Amazon Ads (PPC)

PPC – Amazon offers an advertising service called Pay-per-click (PPC) advertising .

This is important especially when starting out to get more views on your listing.

Seller’s only pay for the advertisem*nt when a potential buyer clicks and views their product.

Its is a good iead to budget atleast $200 per month for PPC

Summary

Now I know what you are thinking! Wow there are a lot of costs and fees to run an Amazon FBA business!

Rest assured, I was in the same boat as you and completely understand all these costs and fees might seem a little discouraging, however, Amazon FBA has its benefits

1. It’s a lot cheaper than hiring a customer service team to process orders, returns etc.
2. Amazon already has an established platform, global marketplaces, logistics and warehouse processes
3. Amazon has a very large customer base actively looking to buy products
4. They provides us with the opportunity to leverage it all and take advantage of their economies of scale for a fraction of the price than what it would cost you to do it all your own.

If you still find it daunting, fear not, there are a lot of tools that can help you estimate your potential profits before you even start selling.

Amazon has its own FBA calculator

Jungle Scout is another great tool that can help you estimate potential Amazon sales and profits. This will help you decide on whether or not you should carry a particular product.

Note – Calculators dont take into account start up costs as these are general business expenses associated with starting a business.

Taking a proven Amazon FBA training course might be another great option to help you negotiate the learning curve quickly and start making money ASAP.