By Freedom Shark | June 7, 2018 | Amazon
How much do you exactly need to start selling on Amazon? This has always been one of the most pressing questions we encounter. The answer is simple, “it depends.” We know that this answer is very unsatisfying, that’s why in this article, we will review the upfront services and their respective costs you need to prepare to start selling on Amazon.
Why start sooner?
Starting early is an essential key towards achieving success, and this business proverb has always been proven to be true. The earlier you start, the more chances of getting bigger.
From a survey participated by more than 2500 sellers, a monthly profit of 66% and a monthly revenue of 50% has been observed after just 18 months. Aside from that, revenue of Amazon sellers grows by 14% in the first few years, that’s up to five times per year. This is all proof that the time to start is now!
The prerequisites for investment
Every Amazon seller has different goals and requirements. In short, they fall in different situations. At the same time, some requirements can be tailored and customized based on your needs. The following are prerequisites we would want you to consider:
- We are selling on the Amazon US store.
- Product retail cost is $20.
- Landed cost of our item is $4, which includes product manufacturing, packaging, and shipping.
- Size of the product can fit on a shoe box.
- The product is light and can be shipped via air.
- 500 units will be purchased and sold.
- 50 units will be given away for promotions.
- 100% ROI is the primary goal.
- Our product will be sold as a private label product using the FBA model for easier scalability in the future.
Just in case you are not in the US or you are planning to sell on a different marketplace, you can still use the above list to compute your investment costs for research based on your currency.
With the above prerequisites to this investment guide, what specific products can you think of? We made these assumptions and regarded “jumping ropes” as our concrete example. For a fact, we skipped the product research, an essential element to a successful launch. While at this stage, make sure to do your research to determine and to choose a high demand product that has the opportunity to grow.
Must Haves During Launch
Sourcing for Samples
When sourcing out for a product to sell using Amazon FBA such as private label products, samples are essential. The quality of products varies, and often, there are significant differences. Take for example products sourced out from Alibaba versus products from other manufacturing sources available online. So, the best way to evaluate and verify a product’s quality and determining the best suppliers is to order samples.
Aside from the quality of a product, choose a supplier who can provide a reasonable pricing range, easy to communicate with, and is willing to meet halfway or go beyond your expectations to meet your needs and build a long-lasting partnership.
Once you can find potential suppliers, list the top three and get samples from them. This will also keep the cost low. Some suppliers allow reimbursement of initial sample cost once you decide to order from them. This is something worth checking before making the final deal.
Assume that the sample will cost you $100 per supplier. That’s from the supplier to your delivery address. This would mean three samples would cost $300.
Total Sample Cost: $300
When that final selection has been made with your supplier, it’s time to purchase your items, which are typically in bulk. Most suppliers from Alibaba would usually have a Minimum Order Quantity (MOQ). This is something worth considering as well.
For this example, let’s assume that we have to purchase a total of 500 units that cost at $4 each including the shipping fee. Depending on your supplier, they may charge you more when you purchase below their MOQ. Generally, the more quantities you buy, the lower the total cost is. You can always negotiate this with your supplier. But remember that a low-cost product would also mean a lower price point, which may eventually result in a lower startup cost. Just make sure that whatever quantity you are getting, it MUST be profitable.
Assuming a cost of $4 per unit landed at Amazon, your cost would be $2,000.
Total Inventory Cost: $2,000 (Note this will greatly vary depending on the product you select)
Promotional giveaways would help you kickoff your much needed early sales. It will not just boost your initial sales, but it will also promote brand or product awareness. More likely, you’ll also benefit from word of mouth. There are various promotional sites which you can use such as Jump Send, Viral Launch, Six Leaf and others, but take note that this platforms should always conform to Amazon’s Terms of Service. If you remember, Amazon already removed incentivized reviews in the past year. However, early promotions are still within Amazon’s TOS if you do not incentivize it and these giveaways still help improve organic rankings and sales velocity.
Promotions can cost you anywhere from $30 – $400 depending on what service you use PLUS the cost of the goods you are giving away. We are also assuming a cost of 50 units during your give away at $4 per unit.
So your total for promotions would be $400 + $200 for a total of $600.
Total Promotion Cost: $600 (Note this will vary depending on the product you select and the total number of giveaways)
Professional Sellers Account
The Individual Seller’s Account would cost $1 per item sold while the Professional Sellers Account is $40 per month. Whether you have the former or the later, you will have to pay Amazon to list any of your products on their platform. Assuming that we can sell 40 units monthly then, then having the Professional Sellers Account is more practical and more economical.
Other perks you can enjoy under the Professional Sellers Account is the ability to generate promotional codes for your promotional giveaways. You should not worry about spending the costs upfront since it will be directly deducted not from your bank account but your Seller’s account.
Total Seller Account Cost: $40
Before selling on Amazon, a recognized barcode is required for sellers to generate an “FNSKU,” Amazon proprietary barcodes. These barcodes have to be printed on all packaging of your products. To get an FNSKU, you have to first get a GTIN (Global Trade Identification Number) in the form of a UPC code. This condition is under Amazon’s TOS.
Last year, Amazon changed their TOS stating that the leading global provider, GSI, must provide the barcodes. This initially cost $250 for registration and an annual renewal fee of $50 for up to 10 barcodes. However, you can also purchase UPCs from third parties, which typically cost around $10, but do this at your own risk. Even so, many Amazon Sellers reported that they are not experiencing any adverse effects as of the moment.
Total Barcode Cost: $10