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Required and recommended costs to start selling on Amazon in 2020

JungleScout surveyed thousands of Amazon sellers to find out exactly how much money they spent when they got started on Amazon.

17% of Amazon sellers started with $500 or less 

12% of Amazon sellers started with $501 – $1,000

13% of Amazon sellers started with $1,001 – $2,500

17% of Amazon sellers started with $2,501 – $5,000

22% of Amazon sellers started with more than $10,000

Required costs to start selling on Amazon in 2020

Before we break down the start-up costs for an Amazon business, we want to establish the type and quantity of products we’re planning to offer for our initial investment.

  • We will sell on the Amazon U.S. store. (And we are based in the U.S.)
  • We will sell our product as a private label product, using the FBA model, as it allows for greater scalability in the future.
  • The total landed cost of our item is $4. (Your landed cost is the cost to manufacture the product plus per unit shipping costs, taxes, etc.)
  • We will aim for 100% Return on Investment.
  • The product will be standard size (fits in a shoebox) and will be light enough to ship by air.
  • We will purchase 500 units to sell.
  • We plan to give away 50 units for promotions.

Samples: $100

When sourcing a private label product to sell using Amazon FBA, samples are imperative.

As there can sometimes be a significant difference in the quality of the product and the specifications you see on Alibaba or other manufacturing sources online, the best way to verify quality and move forward with the best supplier is to order samples.

Once you find potential suppliers, we recommend getting a sample from the top three to keep costs low.

A rule of thumb here is that each sample will cost you $100.

Note: export is always charged less then import. This is a good reason to ask the manufacturer to send you the samples at his cost. The rates would be much more affordable and you can cover the supplier’s costs later.

It also makes sense to consolidate your samples into one shipment before sending abroad. This service can be provided by almost any shipping company in China.

Inventory: approx. $2,000

Suppliers on Alibaba generally have a Minimum Order Quantity (MOQ) around 500 units. So, for the purpose of our estimates, we’ll consider the cost to purchase 500 units. (You can order a lower quantity if you’re able to negotiate this with a supplier, but generally that means they will charge you more per item; in other words, it may not be worth it.)

We are also assuming our product will cost $4 per unit, including the product cost and shipping. At $4 per unit times 500 units, our expected initial inventory will amount to $2,000.

Quality control inspection – $200

Flawed items, lower quality materials, inappropriate packaging, incompliance with Amazon standards are among common problems when dealing with Chinese suppliers.

The idea of a quality-control inspection is to identify potential problems with the goods and to correct them before the shipment reaches Amazon warehouses.

Promotional giveaways: $200

When starting out on Amazon, many sellers choose to drastically reduce the price of their products in order to bring in much-needed early sales.

The best way to do this is by creating a promotion or coupon in Amazon Seller Central offering a discount of 50% or more.                                                                                                                 

As discount shoppers purchase your product, your quantity of sales climbs, helping Amazon better identify your product and give it a higher position in the search results.

Amazon Professional Sellers Account: $40/month

UPC code: $250

In order to start selling your product on Amazon, you will need a recognized barcode in order to generate an ‘FNSKU’ (Fulfillment Network Stock Keeping Unit), which is Amazon’s proprietary barcode that must be printed on the packaging of all of your products.

And to get your FNSKU, Amazon’s Terms of Service require you to get a GTIN (Global Trade Identification Number), usually in the form of a UPC code.

In 2018, Amazon changed its TOS to state that your barcodes must be from GS1, the leading global provider. The costs to do this include a $250 initial registration fee and a $50 annual renewal fee for up to 10 barcodes.

Recommended costs 

The following are expenses we recommend adding to your budget to help set your Amazon business up for success.

Sponsored ads budget: $300 ($10/day for 30 days)

As you generate sales with your promotional giveaways (and get more reviews with follow-up email campaigns), you will see an increase in the organic ranking for your main keywords. Another tactic to consider for your product launch is to run sponsored ads (also known as Amazon PPC).

This strategy can quickly improve your sales.

Let’s assume you’re running ad campaigns with a lower-end budget of $10 per day. (This is the default amount Amazon suggests.) According to AdBadger, with this budget, you can expect roughly 20-30 clicks on your product each day, resulting in 3-4 sales.

Registered trademark: $350

Private label brand owners are required to have a registered trademark in order to be listed in Amazon’s Brand Registry.

The Brand Registry is a program offered by Amazon where sellers can register as the trademark-holding owner of a brand. It helps Amazon identify your product as “official” and awards you additional benefits and selling privileges.

However, sellers need to apply for a trademark and wait for it to be approved before being able to access additional features of Brand Registry. And the trademark process can take several months.

But, if you launch your product without a trademark, other sellers could list similar products on your listing. Therefore, your best bet is to invest early and get the trademark process underway. That way, you can get your brand registered as soon as possible.

Note: If you wish to have your trademark registered faster, Amazon recently started an IP Accelerator Program. This program puts you in touch with Amazon-selected intellectual property attorneys and automatically approves your registered brand while you’re waiting for your trademark to be approved by the U.S. patent office. This option does cost a little more though — typically between $750 to $1,000.

Total for “Required costs” – $2,790

Total for “Recommended costs” – $650

 

Source: JungleScout

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