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Sell on Amazon
What are the costs of selling on Amazon?
Selling on Amazon can be profitable, but many new sellers underestimate the true costs involved. It’s not just about buying a product and listing it; multiple expenses can eat into your profits if not planned carefully.
From product sourcing and shipping fees to Amazon’s own charges, marketing, and returns, every cost adds up. Without a clear understanding of these expenses, you often face unexpected fees, lower profit margins, and cash flow issues that make it hard to grow.
In this guide, we’ll break down all the costs of selling on Amazon, how to calculate them, and tips to keep expenses low, so you can maximize profits and scale successfully.
What are the costs of selling on Amazon?
#1 Product sourcing cost
One of the highest costs is getting your products. You can either make them yourself or buy from suppliers.
Making your own products: If you create your own products, you need to buy raw materials, pay workers, and invest in tools or machines. For example, if you sell handmade candles, you will need wax, wicks, jars, and labels. These costs add up quickly, so you must plan your budget wisely.
Buying from suppliers: Many sellers buy ready-made products from manufacturers or wholesalers. The price depends on the product quality, order quantity, and supplier location. It’s always best to compare multiple suppliers to get the best deal.
Minimum order quantity (MOQ): Some suppliers require you to buy a certain number of units before they accept your order. For example, a supplier may only sell a product in batches of 500. This means you need more money upfront before you even start selling.
Quick tip: Some suppliers allow smaller orders, but they may charge higher prices per unit. Find a balance between cost and quantity.
#2: Shipping & import fees
After buying products, you need to ship them to Amazon’s warehouse or your storage location. This comes with extra costs.
Shipping costs (air or sea):
Air shipping is fast but expensive, costing around $4–$6 per kg.
Sea shipping is cheaper but takes longer, costing about $2 per kg.
Example: If you ship 100 kg of products from China, air shipping could cost $500, while sea shipping might be only $200.
Customs fees & taxes
When importing products from other countries, you must pay customs duties, import taxes, and VAT. These costs depend on the country and the type of product you are importing.
Inspection fees
Before shipping, some sellers pay for a product inspection service to check quality. This costs around $100–$300 per shipment. It helps avoid bad reviews and refunds caused by poor-quality products.
#3 Packaging costs
Packaging is important because it protects products and improves your brand image. But it also adds to your expenses.
If you want to use branded packaging with logos and high-quality materials. While this looks professional, it costs more than basic packaging. On the other hand, if you feel you need extras like thank-you notes. These thank-you cards, discount coupons, or small gifts can improve customer loyalty, but they come at an extra cost. These extras usually cost $0.05–$0.20 per piece.
#4 Warehousing & Storage (if not using FBA)
If you don’t use Amazon’s storage service (FBA), you need to store your inventory somewhere else.
Using third-party warehouses (3PL):
Many sellers use third-party logistics (3PL) companies to store, pack, and ship products. These warehouses charge based on storage size and order volume.
Local storage costs:
If you store inventory at home, you save money but need space. If you rent a storage unit or warehouse, it adds to your costs. You can manage your inventory and keep your stock updated with inventory and storage management that handles order status and refunds.
#5 Returns & replacements cost
Handling returns is a part of selling, and it costs money.
Refund cost:
Amazon sometimes charges a fee when a customer returns a product. If you use FBA, Amazon handles returns, but it may deduct some money from your earnings.
Restocking fees:
If a returned item is damaged or used, Amazon may charge a restocking fee, which can be up to 50% of the product price.
#6 Business operations cost
Running a successful Amazon store requires tools and services that also cost money.
Amazon seller tools:
Many sellers use software like Helium 10, Jungle Scout, or SellerBoard for keyword research, tracking sales, and managing inventory. These tools cost between $20 and $100 per month.
Virtual assistants/employees cost:
As your business grows, you may need help with customer service, listing optimization, or advertising. Many sellers hire virtual assistants, which adds to expenses but saves time.
Business registration fees:
To sell legally, you may need to register your business as an LLC or another type of company. This costs between $100 and $300, depending on your location.
#7 Marketing beyond Amazon
Marketing helps attract customers, but it requires spending money.
Social media ads:
If you want to use Facebook, Instagram, or Google ads to drive traffic to your Amazon listings. These ads start at $5 per day but require ongoing testing to find the best strategy. Here, you can opt for the professional SEO services that grow and optimize your social networking.
Influencer marketing:
Some sellers pay influencers on YouTube, TikTok, or Instagram to promote their products. Prices range from $50 to thousands of dollars per post.
Your own website:
Some sellers build their own Shopify or WooCommerce websites to reduce dependence on Amazon. A website costs at least $30 per month, plus additional costs for hosting and marketing.
How to calculate your costs
To stay profitable, you need to track your expenses carefully.
Formula to calculate costs: (Product Cost + Shipping + Amazon Fees + Marketing) = Break-even Price
On the other hand, you can also calculate your cost using the Amazon FBA calculator.
Example: If you sell an item for $50 but your total costs are $40, your profit per item is $10 (or 20%).
Is selling on Amazon profitable?
Yes, but only if you manage costs properly. Many sellers make 20–30% profit margins by controlling expenses. Tracking your spending and using cost-saving strategies will help you build a successful Amazon business.
Wrap up
Selling on Amazon can be profitable, but only if you understand and control your costs. Many sellers underestimate expenses like shipping fees, Amazon charges, storage costs, and marketing, which can quickly eat into profits. To succeed, you need a clear pricing strategy, cost-effective sourcing, and smart expense management.
If navigating these costs feels overwhelming, our Amazon consultants can help. We assist sellers in optimizing expenses, improving profit margins, and scaling their business the right way. From product sourcing to marketing strategies, we ensure you make the most out of every dollar.
