Many people may have heard the success stories of Amazon sellers and wondered how much money it would cost to start an Amazon business. Is it tens of thousands, hundreds of thousands, or millions?There is no standard answer to this as it depends on a lot of factors, such as product category, market demand, level of competition, inventory management, marketing strategy, and so on. In this article, we will share how to estimate the amount of money needed to do Amazon, as well as how to reduce risks and improve profits.
The main cost of doing Amazon
The main costs of doing Amazon can be divided into four categories: product costs, shipping costs, platform fees, and marketing costs.
The cost of the product
Product cost refers to the cost of buying or manufacturing the product you want to sell on Amazon. This is usually the biggest cost and varies depending on the type, quality, quantity, and vendor of the product. Generally speaking, the higher the quality and quantity of the product, the lower the unit cost. However, you also need to consider the market demand and competition level of your product to avoid overstocking or running out of stock.
To estimate the cost of a product, you need to do some market research to find out the average selling price, sales volume, and profit margin in your niche. You can use a tool like [Jungle Scout] or [Helium 10] to get this data. Then, you need to find a reliable supplier who can provide the quality and quantity of products you need.
You can source products from platforms like Alibaba or find local merchants in your target market. You need to compare different suppliers, MOQ, production time, and quality to negotiate the best deal with them. You'll also need to consider the cost of product inspection, packaging, labeling, and other services you may need from a supplier.
Shipping costs
Shipping costs refer to the cost of shipping a product from a merchant to an Amazon warehouse, or directly to a customer. This cost depends on the shipping method, the weight and volume of the product, the distance and time of the shipment, and the customs and taxes involved. Generally speaking, the faster the shipping method, the higher the cost. You need to balance shipping costs and shipping times to choose the most suitable shipping method for your product and market.
There are three main shipping methods to do Amazon: air express, air freight and sea freight. Air express delivery is the quickest and most convenient way, but it is also the most expensive. It usually takes 3 to 7 days to deliver the product, and the cost is based on the actual weight or volumetric weight, whichever is greater. Air freight is a bit slower and less convenient than air express freight, but it is cheaper.
It usually takes 7 to 15 days to deliver the product, and the cost is based on the actual weight or billable weight, whichever is greater. Sea freight is the slowest and least convenient way, but it is also the cheapest. It usually takes 30 to 45 days to deliver the product, and the cost is calculated by volume or container size. You'll also want to consider customs clearance, import duties, VAT, and other fees that may involve your products and markets.
To estimate shipping costs, you need to know the weight and volume of your product, the shipping method, the destination, and the customs and taxes involved. You can use a tool like [freightos] or [flexport] to get instant**, compare**, transit time and quality of service from different shipping carriers.
You'll also want to check the customs and tax regulations of your target market to calculate import duties, VAT, and other fees that may be involved with your products. You can use a tool like [simplyduty] or [**alara] to get this data.
Platform fees
Platform fees are the fees that Amazon charges you for using its platform and services. This fee includes monthly store fees, platform commissions, storage and delivery fees, and other fees that may involve your account and products. Generally speaking, the larger the sales volume and the size of the product, the higher the cost.
To estimate platform fees, you need to know your seller account type, the category and size of your products, and the sales and revenue of your products. You can use a tool like Amazon Seller Central or Amazon Revenue Calculator to get this data. You also need to consider exchange rates, currency conversion fees, and transfer fees, which may involve fees on your account and products.
Marketing costs
Marketing costs refer to the cost of promoting your products and brand on Amazon and other platforms. This cost includes the cost of advertising, branding, social**, email marketing, and other marketing campaigns you may use to increase sales and awareness. Generally speaking, the higher the level of competition and the cost of customer acquisition, the higher the cost of marketing.
To estimate marketing costs, you need to know the type and goals of your marketing strategy, your target audience and market, as well as the performance and ROI of your marketing campaigns.
You can use tools like Amazon Advertising or Facebook Ads to create and manage your campaigns and measure cost per click, cost per acquisition, conversion rate, and ad cost of sales. You'll also want to consider the cost of branding, social**, email marketing, and other marketing campaigns you may use to build brand awareness, loyalty, and reputation.
How to reduce the cost of doing Amazon and increase profits
The cost of doing Amazon is not fixed, it can be reduced or increased by your decisions and actions. Here are some suggestions on how to reduce the cost of doing Amazon and improve your profits:
Choose a profitable product segment that has high demand, low competition, and good profit margins. You can use tools like [Jungle Scout] or [Helium 10] to find such niches and validate your product ideas with market research and testing.
Find a reliable and cost-effective supplier who can provide you with high-quality products in a reasonable amount of time and time. You can source from the Alibaba platform, and you can filter and compare the best merchants according to your needs and budget.
Optimize the weight and volume of your products to reduce shipping costs. You can experiment with lighter, smaller, and more compact materials and designs, or adjust the packaging of your products to reduce shipping space and weight. You can also choose a merchant that is closer to your target market to reduce shipping distances and time.
Choose a suitable shipping method to balance shipping costs and transit time. Depending on the type, size, and needs of your product, you can choose from air express, air freight, or sea freight. You can also use multi-channel fulfillment, which is to ship a portion of your products to an Amazon warehouse and another portion to a different warehouse or directly to your customers for more efficient and flexible shipping.
Optimize your product's category and size to reduce referral and fulfillment fees. You can choose a product category with a low referral fee, such as books, electronics, household items, etc., instead of a product category with a high referral fee, such as jewelry, clothing, shoes, etc. You can also choose a small standard-sized product instead of a large standard-sized or extra-large product to reduce fulfillment fees and storage fees.
Manage your inventory to reduce storage fees and long-term storage fees. You can use a tool like [inventorylab] or [forecastly] to monitor your inventory levels, your sales volume and demand, and avoid over-stocking or stock-outs. You can also regularly clear your inventory and dispose of your slow-moving products to reduce storage fees and long-term storage fees.
Develop an effective marketing strategy to reduce marketing costs and increase sales and profits. You can use tools like Amazon Advertising or Facebook Ads to create and manage your campaigns, optimize your ad keywords, bids, and budgets, and improve your ad ROI.
You can also use tools like Brand Registry or Amazon StoreFront to build your brand identity and increase your brand awareness, loyalty, and reputation. You can also use tools like [Feedback Genius] or [Jumpsend] to get more customer reviews and improve your product rankings and conversions.
The above are the main costs required to do Amazon. Depending on the situation, the amount of money required to do Amazon may vary. However, according to our experience, it is also possible to do a good job in Amazon by doing a good job in product selection + reasonable operation, and investing 3-50,000 yuan in the early stage. If you operate blindly, choose some products with fierce competition or no market, and you don't know how to operate, it is normal for you to invest 100,000, 200,000 or even hundreds of thousands.
In short, doing Amazon requires a certain amount of money, and the specific amount varies from person to person. Before starting Amazon, you need to understand your own strength and resources in order to better plan your startup costs. I hope this article can be helpful to you, and I wish you all the best in doing Amazon!