Do you want more eyes on your products? Who wouldn’t? If you’re looking for exposure, Amazon is the way to go. As of September 2017, Amazon is the largest online retailer in the world. Its net worth is valued at 90 BILLION and the combined space of its warehouses could fit more than 500 Sydney Opera Houses!
So how do you change your business model to sell on Amazon? Can you afford it? Probably. It depends on your profit margin. Either way, the online retailer has a plan to help you. Continue below to learn the two that let businesses sell on Amazon.
It depends on your profit margin. Either way, the online retailer has a plan to help you. Continue below to learn the two that let businesses sell on Amazon.
Why List on Amazon
Before we go into Amazon pricing plans, let’s look at what happens when you list your products to sell on Amazon.
Amazon Prime has an estimated 68 million members. These are the people who pay subscription fees to access Amazon’s 2-day free shipping. The two-day shipping itself is a huge selling point for buyers.
Fulfillment By Amazon
What Amazon sellers love most about the site is its FBA programme. Instead of having to rent warehouse space for yourself, hire people to ship and package products, Amazon will do that for you. You’ll have to pay a fee-per-item but it’s less than it would cost to hire someone to do the same work.
Some people who successfully use FBA describe their selling business as passive income, since all they do is list their product. More on FBA later.
Plans to Sell on Amazon
Amazon offers two types of selling plans, professional and individual. A business plan runs $39.99 USD per month and individual plans charge $0.99 per item.
The Amazon website suggests the latter if you plan to sell less than 40 items a month.
These plans only cover the cost of listing the products on Amazon and using their selling tools. Using their fulfillment programme costs an extra fee per item.
When you sign up for the $39.99 a month professional plan here’s what you’re getting:
- Access to Amazon’s tools
- Inventory loading software
- Order reports and feeds
- Chance to earn top placement
- 10+ category applications
- Free Amazon Prime eligibility
- Custom shipping rates
This does not include Amazon’s fulfillment programme fees, though you’ll get a higher discount on shipping with a professional plan.
Amazon markets it’s individual plans to people that sell on Amazon less than 40 times a month. Why? Anything more than that would exceed the cost of a monthly membership.
Individual plans don’t come with any of the tools and benefits professional members pay for, but for some businesses, it’s the best place to start out.
Fulfillment By Amazon
Amazon’s FBA programme is by far their most attractive tool, after exposing your listing. It saves sellers time and money while getting consumers their products quickly. Learn how it works below.
Step 1: Ship Product
You, the seller, creates an online listing for your product on Amazon. You decide your prices, write descriptions and list your product. Then you prepare your shipment and send all of your product to one of Amazon’s warehouses.
Step 2: Pay FBA Fees
Part of Amazon’s FBA charge is for storage space in their warehouse. These costs depend on the size of the space you need. Standard sized spaces are sold for $0.64 cents per cubic foot and oversized goes for $.43 per cubic foot.
This is especially helpful if you are shipping in products from overseas. You only pay international shipping one way, which reduces costs for you and the buyer.
Step 3: Let Amazon Handle Sales
You wait. Amazon will hold all of your products for you until someone buys them.
When a consumer makes a purchase, Amazon employees prepare, pack and ship that item. To handle all this, Amazon charges a per-unit fee. Fees range depending on the size and weight of products.
These fulfillment fees include shipping and handling, return shipping, and customer service costs for each product. For example, a package weighing exactly one pound might cost the buyer $2.39. Buyers will receive an email each time they sell a product.
Step 4: Get Paid
Once your items have shipped, Amazon takes the costs out of your profit and deposits the rest into your bank account. Sellers are paid every two weeks.
Amazon FBA Calculator
If you’re not sure about the profitability of using Amazon’s fulfillment programme, you can calculate the costs using their calculator. On their calculator, you can compare your current methods with Amazon’s costs.
In the spirit of learning, let’s do an example. Say you are a business that sells regularly sized rubber ducks. Your wholesale cost price per unit is 3 cents. You sell a dozen for $10.
The ducks come in boxes of 4 dozen and you have enough duck boxes to fill 12 cubic feet. When someone orders one duck, you have to pay an employee the same amount to pick, address, package and ship one vs twelve. An order of 12 ducks for $10 would run you $4.51 in Amazon fees (including shipping and customer service).
Taking out the wholesale price (3 cents * 12 ducks), your profit would be $5.13. That’s five dollars and thirteen cents you didn’t do any work for. Can you say that about your current profit?
There are some situations where it’s more expensive to sell on Amazon with their fulfillment programme. Use their calculator to see if you’re one of the cheaper than FBA exceptions.
Note: All calculations in this article were done with the current Amazon FBA pricing. Amazon announced a change in their prices for October – December in preparation for the holiday shopping season.
If you’re selling products on Amazon and your private business site, keeping track of inventory can be hard. A good e-commerce optimisation strategy can fix that. An optimization company will help you control your inventory, calculate Amazon or eBay costs, and be there to troubleshoot when problems arise.
Look for a company with years of experience helping small-to-medium sized businesses sell products better online. The best optimization companies will help navigate export and import fees when shipping to Amazon internationally. If you’ve ever dealt with getting items through customs, you know how valuable someone with experience can be.
The Bottom Line
When it comes down to it, most companies make more money when listing their products on Amazon. They get more eyes on their products and more eventual purchases. Most of those purchases have higher profits when sellers use Amazon’s FBA, but not all.
To find out if your company could benefit from listing to sell on Amazon contact an e-commerce expert today. They’ll have all the answers you need to decide your company’s next direction.
Where will the future point you?