Now that Amazon is getting more and more traction in the Nordic region and speculations on when they will enter new markets, the question is increasingly asked what exactly the costs are of selling on Amazon. In this article we will list the most important costs of a seller account.
Selling on Amazon involves the necessary costs. You have a seller account when you sell directly to the consumer. This is in contrast to a vendor account in which Amazon purchases the products from you and sells them to the consumer for their own account. You only get a vendor account if Amazon invites you.
Monthly subscription fee
This monthly fee costs € 39 per month. Amazon deducts this amount from your credit card, whether or not you sell something. The rest of the fees are all variable and depend on your sales.
The platform fees vary from 10 to 15 percent of the gross sales value of your product (excluding VAT).
Cheap products such as phone cases are close to 15% and more expensive products, such as furniture and jewelry, go in the direction of 10% or even below. These rates are flexible and are constantly adjusted by Amazon based on turnover, demand and competition. If you want to know exactly what it costs to sell a product on Amazon, it is best to use the FBA calculator.
In this calculator you can enter the ASIN (Amazon product number) of the product that you want to sell. You can easily get this from Amazon if the product is already offered there, because every product (EAN) on Amazon receives a unique ASIN, regardless of who sells it.
If your product is not yet sold on Amazon (which of course you hope) then it is best to find a product that looks a lot like it and enter this ASIN in the calculator. You must then enter the box sizes and the total weight.
Then enter the consumer price. Interestingly, you can enter both the price at the column where you send it yourself and at the column where Amazon sends it. Sending it yourself means that you have to handle the consumer's order via Amazon in terms of logistics. You therefore need a warehouse and good agreements with a carrier such as DPD to deliver the products to the end consumer.
If you choose to have Amazon handle the logistics, you must first send all products to an Amazon warehouse where they clear customs and deliver the order to the consumer as soon as the order is received.
In the column where you enter the price for sending yourself, you can also enter any additional costs that you want to pass on to your customer. You will also find the price that Amazon will charge you when they take on the logistics process. This is called FBA. This is often cheaper (especially with small numbers) than if you signed a contract with DPD yourself. In addition, you get the PRIME sticker with your product that gives the consumer confidence and will positively influence your sales. The costs that Amazon charges for sending via FBA are around 5% of the sales value.
When you have taken all these steps, you know exactly what it will cost to sell this specific product via Amazon. You know what it costs when you send it yourself and you know what Amazon charges you for it. If you choose the second option, Amazon will also charge you if the products remain in the warehouse for too long. These costs vary enormously per product and market.
A golden rule is that you do not want to have more than one month of stock at Amazon. When you have just started selling, we advise you to start delivering yourself and to put the runners in stock at Amazon over time.
If you choose FBA (Amazon sends), you can use pan-FBA for a small surcharge (5 percent). That way you can sell in all five EU markets of Amazon. Amazon arranges storage and distribution for this. You then send your products to a warehouse in Germany where Amazon will predict the following sale and anticipates internally with their distribution capacity. This way your product can be delivered within 2 hours in Madrid or London while you only send your stock to Germany. Amazon has an amazing distribution network that they use for this. Exemplary for this is the mega order from Mercedes Benz of 20,000 sprinters.
Have you rigged all this and your products are for sale on Amazon then there are the marketing costs. Unfortunately, Amazon has become pay to play, especially if you are a new seller. You start with a low seller ranking so you are somewhere on page 30 with your new product, where relatively few people come. To boost this seller ranking you need sales and reviews. The quickest way to get sales is by using Sponsored Products. This is the AdWords program within Amazon with which you place your product at the top of the search results of a certain keyword.
A rule that many sellers use is that you have to invest 10% of your turnover through Amazon back into Sponsored Products. Of course, this varies per category and market.
Amazon.com is by far the most expensive market with an average click price of 2 USD while in Germany, UK, France, and Spain you can still buy clicks on high traffic terms for 15 to 20 cents.
The last and largest investment in an Amazon seller account is time. A lot of time. Firstly, the proper setup of the account, the products, the fulfillment, and the sponsored products. And when it runs, answering customer questions and actively chasing reviews.
Directly to the consumer has its advantages (cut out the middle man) but it also has challenges: consumers who purchase from Amazon are quick to complain. And with a seller account, it is your responsibility to handle those questions and complaints. At Amazon, everything is aimed at the consumer and the seller is unimportant. At the slightest they will suspend your account and if you do not submit an adequate improvement plan (appeal procedure) then your account will close and you will never be able to access the platform again with this company name.
The golden rule is that you must handle all questions and complaints within 24 hours with an error margin below 1%. An account that sells in several countries and achieves reasonable volumes (30k + per month) will require maintenance, management, optimization, customer service and trouble-shooting around 20 hours a week. Larger accounts - certainly in the US - are a full-time job.
- 39 euro fixed
- 10 to 15% platform fee on sale
- 5% for FBA (Amazon ships within 1 country, depending on size and weight)
- 5% for pan-FBA (Amazon ships within Europe, depending on size and weight)
- 10% marketing costs
A good Amazon strategy therefore costs quite a lot of margin. That is why we always recommend doing this with your own products / brands on which unique ASINs can be made and with a good margin.
The advantage of selling via Amazon is that you can sell in multiple markets throughout Europe / world, so that the volumes make up the margin. In addition, costs of starting up are mainly variable and relatively small.
This is article was written by Tim van der Bilt