Amazon is a massive platform that reaches literally billions of users. It can be one of the best ways for Amazon users to expand their reach to acquire more customers and more importantly to improve their brand recognition. For many businesses, launching an Amazon seller account is the first step toward building a successful ecommerce business that taps into one of the largest marketplaces in the world.
Unfortunately, there are costs associated with selling on Amazon, and depending on who you are, what you’re selling, your selling price, how many items sold, and most importantly, how much you’re making on that sale, will determine whether you can afford to sell on Amazon.
Amazon works for both large and small businesses, but the costs associated may be more than the smaller sellers can afford depending on profit margin. Before you decide whether it is worth it to sell on Amazon, we’ll break down how the whole process works and what you can expect to pay so that you have a better idea of what you’re getting into. It helps to understand the fee schedule, the different selling plan options, and the extra charges that can come from shipping, storage, and fulfillment.
We’ll also outline some of the benefits of using Amazon paid ads, besides the massive marketplace. One thing to note is that Amazon offers a number of services beyond just a platform for selling. Most sellers don’t realize at first, that Amazon offers resources for order fulfillment, advertising, affiliate sales linking, and other options. You can access advertising tools, affiliate partnerships, brand storefronts through Amazon stores, and even full logistics support through fulfillment by Amazon.
All of these features do increase the overall cost though, so we’ll dive into the benefits of each so that you understand what all you do and don’t need from Amazon before you ever start selling. Understanding which services you actually need can make a big difference in your net profit.
Becoming a Seller on Amazon
The actual setup process for becoming a seller on Amazon is fairly easy. Amazon will actually walk you through the process by making a few decisions and then setting up your Amazon seller account, selecting a selling plan, and completing the registration steps needed to begin selling.
Before you begin that process though, the key thing is to understand your finances, what you’re looking to do and the scale you’re trying to sell at. Some businesses sell casually, while others build a full-scale operation shipping inventory into Amazon fulfillment centers around the country. Amazon actually offers a marketing agency program to help sellers get to market and offer their goods, but this means additional account fees, marketing costs, or other miscellaneous fees.
If you’re not going this route and have your own marketing agency, or are doing your marketing yourself, then you would just sign up for a seller account. There are two business models that most sellers use.
Third-Party Seller: This is a person who sells goods that another person makes. This means you rely on the supply you are given by the third party and sell the goods accordingly. Many Amazon sellers start this way by sourcing products and listing them on the marketplace.
Brand Owner: You make and sell your own goods. This puts you in charge of the supply and sale process. You sell exactly what you are able to produce. Some businesses do both. For example, a brand may sell its own products while also reselling related items such as video game accessories, pet supplies, or gourmet food to broaden their catalog.
When setting up an account, you should consider whether you want to do one or the other, though some businesses do handle both ends of the process, selling their own goods as well as those provided by third-party suppliers.
Once you know what you want to do in terms of the types of selling you want to handle. Go to seller.amazon.com to register your Amazon seller account. Note that you should already have a standard Amazon account before you begin the process. You’ll also need several pieces of information to complete the actual sign-up process.
We’ll go ahead and bullet point the information you should have for clarity.
A valid business email address to receive communication from Amazon
Your standard Amazon account details. This helps link your account with your seller account
A valid Government Issued ID (This is for tax and payment verification purposes and is standard when financial transactions are involved.)
Your up-to-date tax information (again, this is for the purposes of legal financial transactions)
Contact number (a phone number, duh)
Bank Account (to receive payment deposits)
All of the information you have to provide is fairly standard for setting up any business type of account, so you shouldn’t have any issues with actually opening your seller account.
When you complete the process, you are given access to a platform called Amazon Seller Central. For informational purposes, we’ll break down Amazon Seller Central into its core components and explain what it does for sellers.
The Basics of Amazon Seller Central
Amazon Seller Central is essentially your eCommerce hub for selling on Amazon. It allows you to manage all aspects of the selling process, from sellers manage listings, tracking inventory, monitoring Amazon account balance, and overseeing orders. They even have tutorials on how to sell on Amazon and a fees calculator to help you see what you’ll be paying for selling your products.
The main benefit of the platform is that you can set up your sales pages, adjust product listings, descriptions, rules, prices, and anything else related to the actual products you sell. It also assists with order processing, monitoring shipping rates, and managing inventory stored in an Amazon warehouse. From here you can add and edit products as you like, adjust, improve, or remove listings and keep track of all your orders.
Amazon also provides tools for analyzing performance, including cost estimates for Amazon seller fees, referral fees, and other selling fees tied to each order.
Additionally, there are brand services. To access these services, you have to be a registered brand on Amazon. To do this, you must apply to the Amazon Brand Registry, which requires more paperwork.
What you’ll need:
A registered brand name with the U.S. Patent and Trademark Office (USPTO)
The serial number provided to your brand by the USPTO (to verify you are an approved brand)
List of countries you sell in
Your brand logo as it appears on all your products
This can be a time-consuming process, even if you have all your paperwork together. Amazon has a brand approval process that can take between 1 and 30 days to complete.
Why is this important? Recognized brands get a number of advantages. They get customized product pages with their brand logos attached, higher brand recognition through the seller platform, and a branded storefront. This level of recognition is invaluable to growing both your sales and your web presence in crowded product category pages. It guarantees that your brand name and logo will be seen by more people as they browse and buy products on Amazon and it improves your chances of winning the buy box, which often leads to higher conversion rates.
Setting up your Amazon Seller Central can be done manually or you can pay for a service through Amazon to have it done for you.
Building Your Store on Amazon
The last official step before you begin selling is the creation of your actual store on Amazon. This is fairly straightforward and is done through templates. Once you select your brand name and click create store, you’ll be directed to add your brand name and logo and select a pre-built template for your store.
There are a few different options, but select the one that presents your products in the way you want them seen and displays your brand in a way that is visible and identifiable. This comes down to personal taste but is an important part of the store setup process. Many brands use this space to highlight collections, seasonal promotions, or categories like personal care, amazon device accessories, or personal computers.
From there you move on to the inventory setup process where you can add products to your store. This can be done one at a time or all at once by uploading the products to your store. You can follow the instructions through Amazon’s helpful product upload guide to get the gist of how to do it.
At this stage, sellers also decide how products will be fulfilled. Your fulfillment method matters because it directly affects your costs and delivery speed. Many brands choose fulfillment by Amazon FBA, which sends inventory to an Amazon fulfillment center where Amazon handles packing, shipping, and customer service. Other sellers ship products themselves and manage their own shipping costs.
After you have all your product pages set up and you’re happy with everything, the last step before you launch the store so that it goes live is to submit it to Amazon for approval, which takes 72 hours. As you can see, beyond the cost, which we’ll discuss further in a moment, there is a significant type lapse between account creation and beginning the selling process.
Selling on Amazon is not nearly as simple as it may seem at first glance. To sum up the entire process, you need to think about the type of seller you want to be, gather all the important documents, create your seller account, choose their fulfillment method, get your brand name approved (if applicable), set up your store, and get it approved.
The True Cost of Selling on Amazon
Now that we’ve broken down the process of selling on Amazon, we’ll do a deep dive into the actual cost of selling on Amazon. This can get fairly complicated so we’ll try to break the fees down in a way that lets you figure out what you have to pay, what you may want to pay for, and what you have no use for.
Beyond just the storefront, there is a whole plethora of options and services that Amazon provides to sellers. The trouble is that each of these services has additional fees associated with them. Amazon charges a combination of Amazon seller fees, referral fees, logistics costs, and optional marketing expenses. These costs can really add up, especially if you go in for more than what you need. The total depends on your selling price, your product category, and whether you use fulfillment by Amazon or handle shipping yourself.
Mandatory Cost #1: The Selling Plan Subscription Fee
Before we begin, one quick thing to note is that the costs we are quoting are at the time of publishing and are subject to change. Use these costs as a guideline for what you can expect to pay.
There are two seller subscription plans and each has its own costs and features.
Individual Plan
The individual plan is free to set up and the fee is a flat $.99 per unit, at the point the item sells. You can create new product pages with an individual seller account, but you won’t have access to many of the customized reporting options and inventory management features. Sellers using the individual plan do not control their shipping rates, and Amazon standardizes shipping credits for orders. This account also cannot grant access to additional team members.
The shipping fees are standardized and set by Amazon instead of the seller. You will also not have access to gift cards and promotional sales options. The individual account is also a single account that belongs only to the account holder, permissions to alter the product pages and other services cannot be given to other users.
We can’t say whether this type of account will be right for you, but for individuals that do limited numbers of sales and just want a marketplace to host their products, the individual seller account is a good option to start with. If sales volume increases or you need access to other features, you can upgrade. Amazon also offers temporary suspension of sales for any reason to either plan holder. This is useful if you run out of stock or suffer a sudden emergency.
Professional Plan
The professional plan comes with a flat fee of $39.99 as a monthly fee. There is no per-product fee directly associated with the plan (though other fees may apply depending on services). You are also given access to all of the product management and reporting features that are offered through a seller account, unlike with an individual account.
One major difference is that with a professional selling plan, the seller is able to set the shipping rates instead of Amazon. Sellers are also given access to promotional offers, gift cards, and featured listings on products. You are also able to calculate U.S. sales and use taxes on your products through an available feature. Professional sellers can also create discounts, manage advertising, and adjust shipping rates directly. Lastly, a professional seller has the ability to grant access and use rights to other owners/users.
The professional plan is ideally suited for larger sellers that want more control over their products and reports and who do such a sales volume that the per-item fee would be an unnecessary expense. Starting sellers may choose to go with the professional account straight away or may choose to wait and upgrade to it.
Mandatory Cost #2: Seller Fees
The next major expense is Amazon seller fees charged on each transaction. These typically include referral fees, a variable closing fee in some media categories, and other selling fees tied to the sale. For individual plan owners, the fee ranges from $.45 to $1.35 per sale, on top of the standard $.99 fee. This means sellers can expect to pay between $1.44 and $2.34 per item sold. These fees are non-negotiable and are applied by Amazon.
Professional plan fees are percentage-based and can vary greatly. There are two types of fees assessed, closing fees, and referral fees which are paid on a referral fee percentage of sale basis and range between 6% and 25% depending on the product category, though the average is 13%. The referral fee is calculated based on the total sales price, which includes the item price plus shipping paid by the buyer. Professional plan holders can track fees with a fee calculator to determine the cost of fees associated with the sale of products.
Certain categories like books or other media item listings may also include variable closing fees. Sellers should always check the current fee schedule to see what applies to their specific category.
Mandatory Cost #3: Taxes
Depending on the place of origin, taxes can vary wildly so we can’t give you an accurate estimate of what taxes, if any, are applicable. Amazon does provide professional sellers a tax calculator for U.S.-based sales. For multinational sales, the taxes can be quite high, so it is best to do some research into these costs to determine what your product is going to cost you so that you can set your shipping costs accurately.
This is what marketers refer to as the “landed cost” of an item, you take the base price of making the item and include the cost to get it to the customer to determine how much it will cost you in total. If you’re planning on selling on Amazon, it’s important to understand the role taxes play in the sale of products.
Mandatory Cost #4: Global Trade Identification Number (GTIN)
The cost of a GTIN may vary depending on the size and scope of your product sales. A standard GTIN for just a few products is a one-time fee of $30. This number ensures products can be tracked through Amazon’s system and shipped properly through Amazon fulfillment centers. For large companies with many products and expectations to add more, there is an annual fee associated with your GTIN and multiple GTINs may be necessary.
You can get an exemption to this, but to be a legitimate brand you must have a GTIN on every product. This is mandatory and facilitates shipping around the world. You should figure out the monthly cost of your GTINs and factor that into the cost of products just like taxes.
Other Optional Fees That Are Recommended
The first thing we’ll talk about, and this is one that big business may want to invest in to protect their property, is a registered trademark. You should already have this if you are a branded company, but we’ll assume you’re just starting and need to know the cost. Depending on the level of protection you want, the cost ranges from $225 to $400. This is not mandatory but should be considered essential if you’re using Amazon to build your brand.
Second, and this is one that has to do with getting your products sold, is Amazon PPC Ads. Advertising is an important part of getting your products sold and investing in advertising through Amazon’s PPC ads can help you drive sales to your store. There are a number of ad types, some are directed at new customers and some are directed at marketing towards existing customers through remarketing ads.
Lastly, there are additional marketing costs for influencer marketing and marketing agency representation. These are associated with the marketing methods you choose and whether or not you employ help from Amazon or an outside marketing agency.
Fees Associated With Your Business
The last thing we’ll talk about in regards to fees and Amazon are the fees you pay as part of building your brand and marketing your products on Amazon. There are a number of things you can do from using Amazon’s marketing services to maximizing the SEO on your product pages to improve Google rank or running ads through the Google Ads program on outside sites or through SERP.
Brands using fulfillment by amazon also need to consider FBA fees, including FBA fulfillment fees, FBA storage fees, and monthly storage costs. Inventory stored in Amazon’s network is measured by cubic foot, and the longer products sit in storage, the more storage costs accumulate. Sellers may also face a long term storage fee for slow-moving inventory.
In addition, sellers using FBA fulfillment may pay for inbound shipping, inventory placement service, and occasionally an inflation surcharge applied to logistics operations.
Returns can also trigger a refund administration fee, which Amazon deducts from the refunded referral fee.
These costs are manageable when accounted for properly, but ignoring them can quickly eat into profits.
Using Google Ads and Ad Extensions can help you develop customer data, but these costs are based on each individual situation, like the optional fees above, these services aren’t necessary, but they may benefit your brand.
Marketing and SEO can get expensive but is one of the main ways to drive your sales up. If you’re looking to build brand exposure and sell more products quickly, then these are important steps to take.
Final Thoughts
These are the basics of many of the different fees associated with being a seller on Amazon. Between Amazon fees, referral fees, fulfillment fees, shipping costs, storage fee charges, and other account fees, the real cost of selling is determined by your full expense structure. The exact amounts and total costs will vary, but as we’ve discussed, the total cost versus profit on Amazon is calculated by adding in all of the associated fees, the cost of the product, and subtracting that from the sale price.
By knowing this, you can determine whether Amazon is the right platform for you. The best way to evaluate profitability is simple. Add up your product cost, Amazon seller fee charges, logistics costs, and marketing spend. Then subtract that from the total sales price. You may decide the benefits are worth the increased costs or you may decide that you don’t have the right procedures in place to make it worthwhile. The last tip we will give is to get help from a marketing agency or advertising firm to help you set up and run your online shop so that you can maximize the potential for profits.
