There's a lot of noise out there when it comes to Amazon FBA.
There are plenty of people saying you can build an Amazon FBA business and it’s just “passive income”. There are even some out there that’ll try and get you for 5-figures to manage an “automated Amazon store” for you.
Don’t fall for these.
The real question is, how much does it really cost to start an Amazon FBA business?
Well, the costs might surprise you. You really don't need a lot to start selling on Amazon.
Let's dive into this article and give you the full scoop on exactly how much it's going to cost for your Amazon FBA startup.
What is Amazon FBA?
I've gone pretty deep on this topic before so if you want to know how to start with Amazon FBA, there's another article for that. 🙂
In a nutshell, here's how Amazon FBA works:
You (the seller/vendor) buys goods that you want to sell on Amazon.
Products are listed on Amazon and when they sell...
Amazon picks, packs and fulfils your product (ships it to your customer).
You prep your products and ship to Amazon's FBA warehouse.
When it comes to sourcing products to sell on Amazon, there's many ways to do it. Scouring the web and sourcing your products online is called online arbitrage, whereas hitting physical retail stores to buy your inventory is called retail arbitrage.
Now let's take a look at what you need to start selling on Amazon, as well as the Amazon FBA startup costs.
What it Costs to Start Selling on Amazon FBA
There's various ways to sell on Amazon and depending on which route you take, the startup costs and requirements may differ a little. Let's start with a big ticket item, acquiring your inventory.
Ultimately, the biggest initial investment in your Amazon FBA business is going to be acquiring inventory, but you don't need to go crazy here initially.
Start with a small amount of products, even $100 worth is fine. This might be something like a bunch of low cost books.
An ideal starting budget, however, is going to be around $500. This is going to allow you to buy a variety of products so you can test how each one performs, before you start buying more units of one specific product.
On this note, it's always better to go "wide" and buy a variety of products, rather than go "deep" and buy a lot of units of one specific product initially. The reason being is that if something doesn't sell, you don't want to be stuck with a large amount of inventory.
I call this the Vanguard method of sourcing.
The only time you should buy a large amount of one product is once you have tested something, or you are confident in your product research skills (which comes with experience).
Inventory Startup Costs: $100 - $500
Amazon Software Tools
Software tools for Amazon FBA can start to run you a pretty penny, but you don't need to invest a huge amount right away.
If you're into retail arbitrage, you will need something called a seller scanner tool. This is a piece of software that you have on your mobile phone and you can scan barcodes of products to see various stats for that product on Amazon.
Something like SellerAmp is a great scanner tool, and it starts at $19.95 per month.
You can use the free Amazon seller app to scan as well if you want to save every penny.
One piece of software that I highly recommend starting with is Keepa. It is the holy grail of Amazon product research software, and you'll be pretty lost without it to be honest.
Keepa will only set you back around $20 per month, and you should be using this regardless if you're doing retail or online arbitrage.
When you start selling a lot more and you want to scale your business up, or if you want to hit it hard from day 1, then you will also need to consider a repricer tool and an advanced product sourcing tool.
Aura Repricer is a tool that automatically reprices your listings so you can win the buy box, and sell more. Aura Repricer starts at $97 per month.
Tactical Arbitrage is the best when it comes to sourcing products for online arbitrage sellers. This is another must-have, when your budget allows for it. Tactical Arbitrage will set you back $89 per month for their online arbitrage plan.
Amazon Software Tool Costs: $20 - $226 per month
Amazon Selling Fees
This is a huge topic that could warrant its own article, but I'm pretty confident we can cover it all here in this section.
The following costs relate specifically to the Amazon platform and as you'll see, not all of them are an upfront cost. Some are simply fees and charges that only occur once you sell a product on Amazon.
I've written an article comparing the differences between individual and professional Amazon selling plans, so this section will be brief.
If you are selling less than 40 units per month, the individual selling plan is only going to cost you $0.99c per sale. This fee only applies once an item is sold, so you need to consider it when working out your profit margins.
If you are selling more than 40 units per month, the professional selling plan makes more sense. This will cost you $39.99 per month.
There are some limitations to the individual plan, one being that you cannot win the buy box. This might impact on your sales, so I highly recommend you consider the professional plan. With the professional plan, you are also able to apply to sell in certain gated categories on Amazon.
Amazon Selling Plan Costs: $0 - $39.99 per month
A referral fee is a set percentage that you must pay to Amazon for every sale. These costs are applicable regardless of which selling plan you are on.
Referral fees will cost you anywhere from 8% to 20% of the sale price.
Because Amazon FBA handles the fulfillment for you, these costs are passed on to you as the seller. Like any sort of shipping costs, they are generally calculated based on size and weight.
Fulfillment might cost anywhere from $3.22 per item, up to $150+ per item for heavy and large items. Typically, these costs are going to be quite competitive if you are comparing them to fulfilling items yourself (which is called Amazon FBM).
FBA Warehouse Storage Costs
Amazon charges a small amount to store your products in their warehouse. This is charged by the cubic foot.
If you are storing products for less than 26 weeks during the months of January to September, you will pay around $0.87c per cubic foot.
If you are storing products in the months of October to December, this price increases to $2.40 per cubic foot.
These costs will increase if you are selling oversize items, if your products are considered dangerous goods, or if your products are in the warehouse for a prolonged period of time.
Here's an example storage fee breakdown from Amazon seller central:
Amazon FBA Storage Fee Costs: Anywhere from a few dollars per month, depending on your sales volumes.
Home Office Tools and Supplies
If you're buying products in physical retail stores, or sourcing them online, they are going to end up piled in your living room waiting for your to prep them for shipping to Amazon FBA.
Many of these items will already in your possession, and I have in fact written an article about tools and shipping supplies for Amazon FBA sellers, but here's a list of what you will need:
- A computer with internet connection
- A printer, or a thermal label printer if you want to get fancy.
- Basic scales for weighing boxes
- Amazon FBA boxes to ship your products into the warehouse
- Box packing materials
- Polybags for your products
- Packing tape
- Ruler or tape measure
- Box cutter and scissors
- Pens and sharpies
We're going to assume that most of these items are probably laying around your house, but if not, you really don't need to go all out and buy everything. Just make do with what you have, for now.
Tools and Supplies Cost: $20 - $200 depending on how fancy you feel like being.
Amazon Seller Training, Coaching, and Mentoring
YouTube has an endless supply of Amazon seller videos, but where do you start? Herein lies the problem.
Confusion and overwhelm sets in once you start searching "how to start selling on Amazon" on Google or YouTube. My YouTube channel or Podcast will probably show up in your search and while it's packed with awesome info, sometimes you need a bit of hand holding.
That's why it's worth looking at an Amazon FBA course. Here's some of the training that I provide, if you're interested:
Online Arbitrage Challenge
This guided training includes 14 days of detailed online arbitrage training. You'll learn how the business model works, how to do your product research and sourcing properly, an dhow you can build a long-term and successful Amazon FBA business with online arbitrage.
The OA Challenge covers how to read a Keepa chart, but this Keepa Academy goes deep into the software and covers everything I have learned in my 10+ years using Keepa.
Summary of Amazon FBA Startup Costs
If you skipped right to the end, which I do not recommend, I've done you the courtesy of summarizing all the approximate costs to start an Amazon FBA business.
- Inventory Costs: $100 - $500
- Software Costs: $20 - $226 per month
- Selling Fees: $39.99 for a professional account
- FBA Warehouse Fees: $5+ per month
- Home Office Costs: $20 - $200
- Training & Mentoring: $297 for the OA Challenge
Total one-off upfront costs: Approx. $140 to $1200.
Total recurring software, storage, and selling fees: $65 to $270 per month.
Before you say it, yes, these cost ranges are quite big. If you've read and understood the article then you will see that there's cheaper ways to do it, and there's high roller ways to do this.
My personal recommendation is to allow about $500 up front and an ongoing cost of around $120 per month. The aim is to start selling and profiting as fast as possible, just like we teach in the OA Challenge, so you should really be recouping your costs quite fast.
How to Reduce Amazon Business Startup Costs
It never pays to be reckless with your money, however, I do believe that in some cases you really need to spend money to make money.
Having said that, not everyone has endless funds when they first start their Amazon business.
Here's a few ways that you can reduce your expenditure and keep your head above water in the early stages of your Amazon FBA startup:
- Consider using low cost or free Amazon software tools
- Use as many items that you already have around your house
- Don't be tempted to pay for overpriced coaching and mentoring, or super high priced "done for you" Amazon stores.
- Take your time to learn how it all works and make decisions only after you have done your due diligence.
Conclusion - Amazon FBA Startup Costs
If you're starting an retail arbitrage or online arbitrage business, the above costs are going to be very realistic. If you want to start getting into wholesale or launching your own private label brand, the costs are going to be higher.
But you don't really want to dive into those Amazon business models right away. Retail or online arbitrage are the best ways to cut your teeth, and you may end up just sticking with those models because they are extremely lucrative if done correctly.