How Much Should I Expect to Spend to Become an Amazon FBA Seller?

It’s important to understand that, if you wish to become an Amazon FBA (Fulfillment by Amazon) seller, you’ll need to pay startup costs and ongoing fees. This is because Amazon is a marketplace, hosting various sellers and handling the delivery of goods. As such, if you are thinking about becoming an Amazon seller, you might be wondering how much you should expect to sell on the platform. Unfortunately, many new sellers underestimate the costs associated with this process. However, working with a CPA can help you understand your expected cash flow as well as the potential tax implications associated with this option. Continue reading and speak with our experienced Amazon CPA today to learn more about the process.

Understanding Amazon Selling Plans and Subscription Costs

There are two types of selling plans that Amazon offers: Professional and Individual. This allows you to determine the best option for your specific business needs. It’s important to understand that this option will impact your e-commerce pricing structure, especially if you are just starting as a seller. It’s also necessary to note that many sellers move from individual to professional plans once they receive product validation from consumers.

Amazon Individual vs. Professional Selling Plan

• Individual Plan
  • No monthly subscription fees
  • Costs $0.99 per item sold
  • Generally ideal for sellers moving less than 40 units per month
  • Good for testing products or early validation of products
• Professional Plan
  • $39.99 per month subscription fee
  • No per-item sold fee
  • Typically required for bulk listing tools, APIs, advertising features, and certain approvals
  • Generally provides better value once business volume increases

Referral Fees and Platform Transaction Costs

Because you are operating on Amazon’s platform, in addition to the plan costs, you’ll need to pay referral fees to Amazon. This is a percentage of the sale price on each unit sold. The fees you can expect will vary based on the category your product falls into. While most new sellers assume that these are a “profit loss,” it’s necessary to understand that these are simply built-in marketplace distribution costs.

Typical Referral Fee Ranges

• Most categories range from 8% to 15%
• Some specialty categories may have different fees
• These fees apply per sale, not per month
• The fees should be considered in product margin analysis

Fulfillment Costs: FBA vs. Self-Fulfillment

Amazon offers those who sell on its platform the option to self-ship their products or have Amazon handle this process. Fulfillment by Amazon includes storage, picking, packing, and shipping the product on your behalf. While many sellers choose this option for cost efficiency and convenience, it can be costly.

Amazon FBA Fulfillment Cost Factors

The fees you pay will depend heavily on:

• Product size
• Product weight
• Shipping class

However, the costs of Amazon FBA include:

• Storage
• Picking and packing
• Shipping to the customer
• Processing returns (in some cases)

When FBA Is Financially Beneficial

• You have a high volume of light items
• Faster delivery with Amazon can improve competition
• Reduced burden of shipping logistics

When Self-Fulfillment May Make More Sense

• Oversized or specialty products
• You have existing warehouse capacity
• Low-volume early product testing

Additional Fees Commonly Overlooked by New Sellers

There will be certain additional costs as an Amazon seller that you should include when determining start-up costs, though they will depend on your type of business. Understanding these costs is critical to choosing the right plan options for your needs.

Other Platform or Inventory-Related Costs

• Monthly storage fees
• Long-term storage charges
• High-volume listing fees
• Return processing fees
• Refund administration fees
• Aging or slow-moving stock risks

Optional But Common Early-Stage Investments

• Product photography
• Branding and packaging
• Sample product test runs
• Advertising
• Promotional discounts

While these additional costs can seem overwhelming, making these investments early can help you scale your inventory. You should also understand that, unfortunately, many sellers do not pay themselves early on, as their profits are typically reinvested.

Expected Ongoing Operating Costs After Launching

When you launch your Amazon storefront, you may assume that you’ll simply start selling with no additional fees. However, it’s important to understand the potential fees you may incur as you continue selling on the platform.

Recurring Cost Categories

• Ongoing inventory replacement
• Advertising budget
• Storage and fulfillment fees
• Product improvement reinvestment
• Promotional discounts

Realistic Budget Range Estimates

Though each business is different, understanding the general costs that Amazon sellers can incur based on their circumstances is critical to planning before you launch.

Minimum-Viable Budget Scenario

• $1,500-$5,000
• Small first inventory order
• Basic product images
• Limited advertising
• Increased manual workload

Moderate and Strategically Prepared Launch

• $5,000-$15,000
• Mid-sized inventory
• Professional product listing
• Moderate PPC budget
• Access to research tools

Aggressive/Growth-Focused Launch

• $15,000-$30,000
• Higher-priced or larger-volume inventory
• Professional branding
• Significant advertising budget

It’s important to understand that, though you may have a plan in place, none of these options will guarantee success. You’ll need to remain flexible and resilient when selling your stock through Amazon. Additionally, budgeting is not only important for your income, but also for tax purposes.

Contact Our Dedicated CPA Team Today

If you are considering selling on Amazon, it’s important to discuss your options with an experienced CPA with eBiz Accounting. Our team understands how complicated navigating the Amazon seller platform can be, which is why we are committed to helping you understand all the potential benefits and risks associated with selling. Though we are based in White Plains, New York, we are proud to represent clients across the United States. When you need help, our dedicated team is here. Contact us today to learn more.