Selling goods on Amazon comes with a price for online businesses. Your expenses will vary depending on what kind of selling you are looking to do, and what kind of insights you are looking to receive from Amazon. This price can vary depending on the type of selling plan a seller purchases, along with different types of fees and charges. This guide will outlines what expenses Amazon sellers have.
Amazon sellers guide to expenses and costs
Of course, the right Amazon seller tools make a huge difference, too, so you can track everything about your online business. Read below to find out what kind of expenses Amazon sellers have.
Selling Plans
In order to sell items on the platform, Amazon sellers must choose between two selling plans that Amazon offers. The Individual plan costs $0.99 per item sold in addition to extra selling fees. This plan is for the more casual Amazon sellers. The website recommends the Individual plan to sellers who might only sell fewer than 40 units per month, don’t plan on advertising or using advanced selling tools, and are still deciding what to sell.
The second plan that Amazon sellers can access is the Professional plan. This plan costs $39.99 per month in addition to extra selling fees. This plan is for those who plan on selling more than 40 units per month and have the funds necessary to advertise their products. By purchasing the Professional plan, the seller will qualify for top placement on product detail pages, and allows the seller to sell their products in restricted categories.
Referral Fees
For every item sold, the Amazon sellers pay what is known as a referral fee. This fee pays Amazon a percentage of the total price (item price, shipping price, etc). Depending on the classification of the product being sold, the referral fee percentage can vary. For example, beauty products carry an 8% referral fee for products with a total sales price of $10.00 or less.
Books carry a 15% referral fee, along with an additional charge for a closing fee. Almost every kind of item category carries a fee specific to that category.
Fulfillment Fees
Amazon’s Fulfillment fees depend on what the Amazon sellers want to do in terms of shipping products. If the seller intends on using Amazon’s fulfillment services, the cost of shipping will change depending on the size and classification of the product being sold. Classifications of products include size, dimensions, weight, and packaging size.
A small standard product that weighs 10 oz. or less with a packing weight of 4 oz. carries a $2.50 fee. If the Amazon sellers choose to ship the product themselves, Amazon will charge shipping rates based on the product category and shipping service selected by the customer.
The Amazon sellers will receive a credit based on the shipping fee that Amazon charges the customer. The shipping fee will change depending on the type of selling plan that Amazon sellers purchase. Those Amazon sellers with the Professional plan can set their own shipping rates, while those Amazon sellers with the Individual plan are forced to use Amazon’s set shipping rates.
Advantages and disadvantages to selling in Amazon
Selling on Amazon has various advantages and disadvantages. In addition, it is important to make decisions about various options for Amazon sellers. Amazon or your own online shop – what are the advantages and disadvantages?
As an online retailer, you will at some point ask yourself this question: should I sell on Amazon or should I run my own online shop? In principle, we can only recommend that you use both. So that you know what advantages and disadvantages you can expect, we have put together an overview in this article. As an online retailer, you will always find yourself in one of the following situations :
- You are just starting out with online trading and are wondering: Do I need my own online shop right now? Or should I sell on Amazon first? or
- You are already selling very well on Amazon and are now wondering: Is it worth running your own online shop alongside Amazon? or
- You sell very well in your own online shop and ask yourself: Can it be worthwhile for me to sell on Amazon? or
- You are already selling in your own online shop and on Amazon and are wondering which of the two platforms should I further expand?
No matter what phase you are in. Our recommendation is always: If you have the opportunity, always sell on Amazon . Use the platform to learn what can work well. And then transfer this knowledge to your own online shop.
You should be aware of the advantages Amazon offers you at all times. But of course you also know what dangers the platform poses. Always approach the matter in an entrepreneurial manner in all measures. And above all, keep an eye on the numbers .
5 advantages for Amazon sellers
1st advantage: You don’t have to worry about visitors.
This is a key advantage of Amazon. Because the visitors are already there. You can compare the whole thing with an established marketplace. They have tons of audiences, but no guarantee that this one will buy. In your own online shop you would first have to start building up the visitors. It’s a lengthy and costly process.
2nd advantage: The conversion rate is good and continues to improve.
Another great advantage is that Amazon knows that the checkout process is working. Amazon is always busy testing here to get one or the other percentage behind the decimal point.
In contrast, you have to deal with all of these things yourself in your own online shop. This means you have to integrate the different payment providers. As well as testing whether the customer can actually make a purchase using all devices.
3rd advantage: Low costs to just try it out
You should also always pay attention to the low costs at Amazon compared to your own online shop. As a beginner, you can just go ahead and try it out. You can of course also use all of this if you want to internationalize yourself. And of course also when you are planning a 2nd or 3rd project.
It is almost impossible to map this quickly with your own online shop. For this you would have to spend more resources to get a statistically significant result.
4th advantage: logistics can be completely outsourced
The fact that Amazon also relieves you of the logistics is another advantage, especially when you start your own project. You don’t have to worry about things like storing, packing and shipping parcels.
Of course, you can also use similar providers for your own online shop. Only then do you have the problem that you have to check in advance that everything is working as desired. And so that anything can be sent, you first need visitors.
5th advantage: Good learning platform to become better as an online retailer
When you start selling on Amazon, you’ll get loads of tools to hand right away. In addition, Amazon gives you a lot of information on how you can present your products better. These tips will help you when you are working on your own online store. Because always keep in mind, Amazon tests everything before it becomes standard.
If you look at the advantages of Amazon, you can quickly get the impression that there is nothing better. But where there is light, there is also shadow. And you should know that Amazon has some very strong downsides.
5 disadvantages for Amazon sellers
1. Disadvantage: The customers belong to Amazon
You should always be aware that the customers belong to Amazon. This means you will never be able to build your own customer base with Amazon. You can forget about other measures such as lucrative newsletter marketing. The long-term goal should therefore always be to build up your own customer base using your own system.
2. Disadvantage: Sales cannot be calculated
You can also forget about calculable sales. Amazon can only ever be an entry point or an addition to your online business. We strongly advise against relying on Amazon alone. Amazon is in control of how their products are presented to users. If the factors change here, sales can drop overnight. The problem is, they don’t find out about it until it has already happened.
3. Disadvantage: high risk of warning
As a reseller, you also have a high risk of warnings at Amazon. This is due to the system of how Amazon assigns the products. Amazon has a unique ID for each item. If you want to sell a product that is already available on Amazon, you have to switch to it.
The advantage is that you no longer have to store any informative data and you can start selling straight away. The disadvantage, however, is that you are also liable for what is in the item description, even if you have not created it.
4. Disadvantage: Strong competition
Since almost everyone tries to sell on Amazon, you also have stiff competition. This continues to rise due to Amazon’s own products and sales. Amazon also evaluates your data for this purpose. And when they see that something is worthwhile, they procure the products themselves.
Another competitor comes from China. These dealers simply switch to existing products and try to penetrate the market with price dumping. In addition, these dealers rigorously exploit tax loopholes to gain a price advantage.
And you mustn’t forget that you also provide your competitors with important data via Amazon. Because they can use reviews and a few other tricks to see what you are selling well on Amazon. You can then offer these products yourself.
5. Disadvantage: Financial risk is higher
Finally, you should always plan the financial risk. Amazon will always pay you too, the only question is when. Because in certain cases Amazon always has the right to withhold payment. In any case, you should always calculate with a payment term of at least 90 days at Amazon. If you do not have the liquid funds to bridge this period, you can quickly face bankruptcy.
Another risk that you need to be aware of is from the tax side. Amazon is a global company, which can cause you tax problems. At the latest when Amazon stores your products in a third country, or simply sends products from a third country, you suddenly have to consider different tax statements.
Options at a glance
- Do you want to ship yourself or outsource shipping to Amazon (“Fulfillment by Amazon” / FBA)?
- In which marketplaces or in which countries would you like to offer your products? The following Amazon marketplaces are currently available: Germany / Austria , Great Britain , France , Italy , Spain , USA, Canada, Mexico , Brazil , India , China , Japan and Australia . However, not all product categories are offered on all marketplaces – for example, clothing cannot be sold in Italy or Spain.
- Within the EU you can – if you wish – deliver to all countries from a single warehouse, or store your products separately in each country. Both have advantages and disadvantages.
- An Amazon advertising campaign gives you the opportunity to differentiate your sales from your competitors.
