As tough as it is to launch an online business, it is even more challenging to maintain its profitability. Developing a successful eCommerce business is a complex process that involves meticulous planning and consistent financing.
According to market analysis, more than 20% of small businesses collapse during the first year, and 50% fail within the first five years. That’s massive if we consider the number of online merchants emerging on some of the largest eCommerce platforms.
The primary reasons why new businesses falter include the following:
- A lack of motivation, a need for more demand for their products, and a pricing war.
- Need for more funding.
Regarding Amazon, about 4000 new vendors register daily to sell their products in the USA alone. Despite the risk of failure, entrepreneurs prefer online business to traditional in-store business simply because it allows them to do more with less. Especially since the pandemic, people have a different outlook on online markets.
The bottom line is that Amazon, the world’s largest online marketplace, remains an excellent platform for entrepreneurs. That’s why the company continues to witness increased FBA and third-party sellers.
In this piece, I will talk about the opportunities up for grabs at Amazon. We will also go over the steps you can take as a seller to increase your chances of survival on the platform while also making enough profit to keep your business running in the early stages.
Introduction To Amazon E-commerce
Amazon is one of the best, if not the best, eCommerce marketplaces in the world. Every month, millions of buyers browse the Amazon website to buy their favorite products online.
Due to high traffic, it’s a lucrative place for entrepreneurs to list their products and expose them to millions of buyers from a single platform. Amazon has proved that the eCommerce business is a real career, and several merchants earn six figures just by selling their products online.
But what does it take to compete against the top vendors, and what are the chances of thriving? Let’s figure it out.
To be able to sell on Amazon, you need to pick one of their 2 seller agreements – FBA and FBM.
It’s relatively easier to start with FBA since Amazon processes the order, shipping, and delivery. Also, they provide customer support for your orders.
Sellers need to purchase the inventory and ship it to the Amazon warehouse, and from thereon, Amazon fulfillment teams take over. However, you can still keep an eye on your orders and inventory.
With FBM, you can list your items on Amazon’s website on your terms since you will fulfill the orders. However, the FBM agreement may prove costly for start-ups since you need your storage facility and a fulfillment facility with trained staff in order processing and customer service.
With FBA, your products fall under the Prime category, meaning faster deliveries and Amazon’s trusted service. From a customer’s point of view, FBA is better than FBM since a buyer is more likely to buy an item from the Prime category with premium services.
Here are some key features of the FBA seller agreement:
- Your products are listed with the Amazon Prime logo, influencing your stature as a seller.
- FBA is more suitable for merchants selling large-sized products as it’s convenient to store them at the Amazon warehouse.
- FBA can save you a lot of money that would be spent on packaging, label printing, and shipping.
- Your products are eligible for Prime service. That means faster delivery, easy returns, premium packaging, outstanding customer service, and so on.
- Since customers love these services, the chances of returning your products are higher, and you can establish yourself as a prominent and reliable seller.
Will selling on Amazon be profitable in 2023?
With the advancement of technology and the internet, online shopping has been at its peak for the last decade. And with the current trends, it’s not difficult to predict that eCommerce is and will still be a force in upcoming years.
But what about Amazon? Is it profitable? Let’s analyze some numbers from the past 2 years.
According to a report by Jungle Scout, in 2021, over 65% of online shopping was done on Amazon. This indicates that when major companies suffered huge losses in sales due to the ongoing pandemic, Amazon surprisingly showed upward trends.
In 2020, Amazon was ranked one of the most profitable establishments in the world, with a revenue of $386 billion, and its net income soared to $21.3 Billion from $11.6 Billion in 2019.
Given the figures, it’s a no-brainer to start with Amazon if you are looking to institute your eCommerce venture.
According to Freedom Ticket, a popular FBA online research and training program, Over 20% of Amazon sellers have earned a lifetime net profit of $50,000.
| Lifetime Net Profit | Percentage of Sellers (Approximately) |
| No profit | 6% |
| undefined | 9% |
| Below $25,000 | 58% |
| $25,000-$50,000 | 7% |
| $50,001-$1,00,000 | 7% |
| $100,001-$500,000 | 9% |
| $500,001-$1 Million | 3% |
| $1,000,001-$5 Million | 1% |
| $5 Million-$10 Million | 1% |
The Cost Of Selling
To determine whether Amazon is profitable, we need to go through the expenses and investments you need to start and run your business on Amazon.
To sell on Amazon, there are certain costs you must pay:
Seller Account Fee:
Based on your business type, you can register with one of the two seller accounts offered by Amazon – Individual or Professional.
An individual account is for sellers who are not ready to commit to long-term investment on Amazon. With this agreement, $0.99 must be paid for every item sold.
Moreover, you don’t get premium seller services such as monthly order and sale reports, inventory tools, promotional gifts, etc.
On the other hand, a professional account is perfect for long-term ventures. If you sell more than 40-50 items monthly, it’s better to get on with a professional account rather than an individual one.
A professional account costs $39.99 per month, and you can access all the premium seller tools and features you can use to manage your orders and inventory.
Fulfillment Charges:
As I stated, Amazon takes care of storage, order fulfillment, shipping, customer service, etc. Therefore, the sellers must pay a fulfillment fee to cover all these services.
The fulfillment fee includes the following:
- Storage Fee
- Long-Term Storage Cost (If applicable)
- Order Fulfillment Cost
The storage fee is the amount you pay Amazon to hold your inventory. It is calculated based on the space your products occupy in the warehouse. The monthly storage fee varies from $0.83/cubic foot to $2.40/cubic foot for standard-size items and $0.53/cubic foot to $1.20/cubic foot for oversized items.
At the time of the monthly inventory check, if any of your items are found to be stored for more than 365 days, you are liable to pay a long-term storage fee of $6.90/cubic foot on top of monthly costs.
To process and ship your orders, Amazon charges an order fulfillment fee. The amount largely depends on the size and weight of your product. The fee starts from $3.07 for products less than 6 oz and can go up to $158 for oversized products above 150 lbs.
Referral Costs:
You must also pay Amazon a small cut of the total order value as a referral fee. In addition, there is a high referral fee for sophisticated jewelry, computer, etc.
The average referral fee can vary between $2-15 per order depending on the item category and price.
Other Costs (Inventory removal, Refunds, and so on)
There are other fees, such as the Inventory removal fee, that you must pay if you want to remove/dispose of any of your items from the warehouse.
If a customer decides to return the item, the seller is charged a return fee that depends on the product category and the order amount.
How much do you need to start selling on Amazon?
Apart from all the planning, product research, and data analysis, there is some cash to start any business.
What is the appropriate amount you need to start an FBA business? You will be surprised to know that only 30% of all Amazon sellers have/had started their business with a capital of $1000.
Here are some interesting figures:
| Capital Amount | Percentage of Sellers |
| Unidentified | 2% |
| Below $500 | 17% |
| $500-$1,000 | 15% |
| $1,001-$2,500 | 19% |
| $2,501-$5,000 | 19% |
| $5,001-$10,000 | 16% |
| Above $10,000 | 13% |
How Much Money Do Amazon Sellers Make?
Coming to the big question – How much Do Amazon Sellers make?
Once you complete the initial period, You can earn a minimum of $1000/ month on Amazon without putting in any strenuous effort. Around 35% of new sellers make up to $1000 per month.
Here are some interesting numbers representing average monthly sales
| Monthly Sales (in Dollars) | Percentage of Sellers |
| Unidentified/ No sale | 3% |
| Below $500 | 22% |
| $501-$1,000 | 13% |
| $1,001-$5,000 | 27% |
| $5,001-$10,000 | 13% |
| $10,001-$25,000 | 10% |
| $25,001-$50,000 | 8% |
| $50,001-$100,000 | 4% |
| $100,001-$250,000 | 1% |
In 2021, over 65% of sellers registered significant growth in their sales and profits. With deep market research and a good product selection, a seller can make as much as $25,000 in a so-called ‘side hustle’ business.
On average, more than 60% of Amazon sellers can extract a profit margin of over 10%. From another perspective, around 32% of sellers record over a 20% profit margin which is way better than a conventional business model or even online business on any other eCommerce platform.
| Profit Margin | Percentage Of Sellers |
| Undefined | 8% |
| Not profitable | 8% |
| 6-10% | 9% |
| 11-15% | 10% |
| 16-20% | 15% |
| 21-25% | 13% |
| 26-50% | 16% |
| 51-100% | 3% |
How can you become a profitable Amazon seller?
Becoming a profitable Amazon seller is an achievable goal. First, you need to create an account and decide what type of products you want to sell. Once you have identified your product niche, research competitive prices and acquire your needed inventory.
Expand your product offerings with high-quality items that customers want. Focus on creating an attractive listing with accurate descriptions and good images of your products, as this will help boost sales.
Additionally, use effective marketing strategies to differentiate yourself from other sellers and attract more customers, such as SEO optimization and advertising on social media platforms.
Lastly, ensure top-notch customer service to build lasting relationships with buyers. Following these tips can help make you a successful Amazon seller.
Related Read:
Epilogue: Is Amazon Right For You?
This article helped you clear your thoughts regarding selling on Amazon. It is relatively easy to start, but your approach decides the longevity of your venture.
Here is an interesting fact, Amazon has over 1 million active sellers on Amazon who have registered a profit within the first 2.5 months after the start.
How can you do the same? It all starts with sheer determination and proper planning. You need a good product to sell that has a higher demand and ensures greater profit margins. You can use the Amazon Profitability calculator to evaluate all the expenses for a particular product before you make your final decisions.
For example, Automobile parts, Computers, smartphones, accessories, and books are not ideal products to start with since they don’t offer good profit and the competition is fierce.
Instead, pet supplies, stationery, and home decor items are ideal as they are always-in-demand products, have low selling costs, and promise a good payoff.
Building a brand on Amazon is a process rather than a get-rich-quick scheme. So make up your mind and prepare to devote some good hours every day if you want to say goodbye to your 9-5 job and start the process of “becoming your boss.”
- You can take Amazon FBA training programs to learn and understand the basics of Amazon entrepreneurship. For example, Helium 10’s Freedom Ticket, and Jungle Scout Academy, are the best FBA courses in the market.
- If your pocket allows, investing in FBA seller software is smart. This will save you a lot of time you would otherwise spend on product research, data analysis, listing optimization, etc.
FAQs About Amazon FBA
Can you make money on Amazon?
Yes, you can make money on Amazon. With the right strategies and techniques, anyone can start a business selling Amazon products and generate income. There are numerous ways to make money on Amazon, such as selling your products, becoming an Amazon Associate, or becoming an Amazon Seller.
Amazon FBA Calculator: How Many Items Can I Send to Amazon?
The Amazon FBA Calculator is an invaluable tool for anyone selling products on Amazon. It can help you estimate how many items you can send to Amazon from your inventory. This is important information as it will help you determine the number of items you need to purchase to meet customer demand. With the calculator, you can input numbers and perform basic mathematical operations such as addition, subtraction, multiplication, and division. You can also use the calculator to calculate percentages, square roots, exponents, and logarithms.
Why do people choose the Amazon FBA business model?
The Amazon FBA business model is a popular choice for many entrepreneurs, as it offers several benefits that make it attractive. Firstly, Amazon provides access to a large customer base – allowing businesses to reach more potential customers than if they were to sell their products on their website. In addition, San Bernardino’s fulfillment center has already implemented advanced robotics and automation technology, significantly increasing its order-fulfillment capacity.