If you’ve heard that selling on Amazon is a lucrative business venture, you heard right. As of 2021, the website has around 300 million registered users, 150 million Prime members. If you are wondering how much can you make selling on Amazon, then you are in the right place.
Ever since it launched its marketplace for third-party sellers to offer goods for sale, so many vendors have signed up. Back in 2020, there were around 2 million third-party sellers on the platform already (Source: Statista).
Because many businesses have leveraged the online platform as an additional sales channel, competition has also increased through the years. Ordinary individuals seeking to be their boss or diversify their income stream have started selling goods on the website. And they’re making good money from it.
Just how much money can you make selling on Amazon? The answer to this question varies depending on what you sell and what category you choose. You’ve probably read articles or watched videos of successful sellers talking about how they’ve made millions of dollars. But general statements like that are often not reassuring.
People want numbers to work with before dipping a toe in the water. Most people want to know how much can you make selling on Amazon before deciding to invest. And this is perfectly understandable. This is why we’re going to discuss it in this article
In this article, we’re going to talk about how much money sellers make, and how you can make more on Amazon. We’ll also discuss seller software tools that can help you increase your revenues.
Ready? Let’s dive right in.
So How Much Money Can You Make Selling on Amazon?
There are so many factors that can affect your earnings. All these things contribute to your potential earnings from your method of selling to your fulfillment. To have a much better idea regarding how much money you can make selling, let’s discuss them below.
When you start selling, you have the option between two fulfillment methods: FBA vs FBM. Both fulfillment methods have different effects on your potential income. To have a better idea, let’s discuss them below.
FBM (Fulfillment by Merchant)
Most online sellers, no matter what platform they use to sell, fulfill their orders. What does this mean? It means that when an order is placed, you are the one who’s going to pack and ship the order. You will be the one to handle all the customer concerns, such as answering inquiries, refunds, and returns too. This is the “default” way of handling orders for all third-party sellers, and this also rings true for vendors.
FBA (Fulfillment by Amazon)
Fulfillment by Amazon is a service offered by AMZ to their third-party vendors. Instead of letting the sellers fulfill the orders, AMZ will offer to do all the fulfillment. What this means is that AMZ will be the one to pick, pack, ship, and deliver the items to the customers. They will also handle post-purchase customer services such as returns, refunds, and exchanges. You have to send your inventory to their warehouse, and they will do the rest.
Advantages and Disadvantages of FBA/FBM
If you are wondering how much can you make selling on Amazon, you have to decide which method is better. Does FBM make you more money, or does FBA allow you to take in more revenues? If you are still undecided, here are some pointers you should remember.
So, how much do you value your time? Do you think you can earn more if you only focus on selling instead of fulfilling orders? How much productivity can you add if you start focusing on making sales and marketing instead of fulfillment? For some people, saving time can mean much, making FBA more valuable.
With FBA, you don’t have to worry about working so hard trying to fulfill hundreds of orders on Black Friday. You don’t have to skip holidays because you must fulfill the shipments before Christmas. You can let AMZ do all of this for you. And if you end up valuing your time much more, FBA can help make you more money in the long run.
Costs of Shipping
The question “How much can you make selling on Amazon” relies greatly on your shipping costs. You might not think it’s too big, but these costs add up little by little. Using FBM, you must ship your products via your chosen couriers. And if you are sending items one by one, individual shipping costs can greatly increase. However, with FBA, you use AMZ’s courier network and delivery system.
You don’t have to go out in the middle of the night to find a courier to ship your items. AMZ can easily fulfill your orders and even offer free delivery to your customers, which can further improve your conversion rates.
Now, this is where things can get tricky. Although FBA has a lot of positive things going on for it, one simple fact remains – it isn’t free. So if you are wondering how much you can make selling on Amazon, you need to calculate FBA fees. There are corresponding fees for every little thing that FBA offers, such as storage, packing, bubble wrapping, and shipping. So if you are wondering how much you can make selling on Amazon, monitor your fulfillment fees.
Now, are these fees going to be bigger or smaller compared to your FBM costs? Should you just do everything on your own instead of relying on AMZ? To answer that question, you need to calculate your costs using this FBA Calculator.
What Is The Best Selling Method?
Don’t just ask yourself the question, “how much can you make selling on Amazon” if you want to make a profit. Before everything else, choosing the best-selling method that works for you is important. Especially if you want to know how much you can make selling on Amazon. Some selling methods can earn big but are harder to execute. Others are easier to start but don’t give a bigger payout for each sale.
To help you decide how much can you make selling on Amazon, below are some of the popular selling methods:
Retail arbitrage is a selling method where vendors purchase their products at a meager price. After which, they sell them higher in AMZ to make a profit. The tern might initially sound complicated, but it’s elementary to understand. In layman’s terms, retail arbitrage can also be called “reselling”.
AMZ Sellers using this model often get their products in discount retail stores. If you have a Walmart or Target in your local neighborhood, that is a good place to find products with lower prices. Also, online marketplaces like eBay can be a great alternate source of low-priced products.
Private Label Selling
In private label selling, vendors re-brand generic products under their brand name. First, you need to find a manufacturer that can create the products you want to sell. Then you ask your manufacturer to add your brand, packaging, and logo to your products.
Private label has become a popular selling model because it gives sellers more control over manufacturing costs. With this method, profit margins can be adjusted by reducing costs. This can be great for those who want to sell something unique and build their brand following.
In dropshipping, the vendors don’t stock up an inventory. Instead, what they do is act like a middleman between the manufacturer and customers.
So, how does dropshipping work? It’s fairly simple. First, when a customer purchases from your store, you take their order and record it. Then, you’ll forward this order directly to your manufacturer, often overseas, to cut costs. Upon receiving the order, the manufacturer will then fulfill this order by sending the product under your name.
So, you are just marketing a product while adding up your markup. Once a customer buys, you will forward this purchase to your supplier and get your markup from the sale. Because of this, you are not required to maintain a stock room full of your inventory to sell. This can save you a lot of money in the long run since you aren’t putting out a big upfront capital. And this can also determine how much you can make selling on Amazon in the long run.
Monthly & Annual Earnings
In 2018, Statista conducted a survey of sellers to determine how much they make every year selling on Amazon. According to their findings:
- About 60% of sellers made less than $250,000 in a year. This roughly translates to monthly sales of $20,000 or less.
- About 12% of sellers made between $250,000 and $500,000 in a year. This means their monthly sales are anywhere between $21,000 and $42,000.
- 9% of sellers made between $500,000 and $1m
- 8% of sellers made between $1m and $2m
- 7% of sellers made between $2m and $6m
- 1% of sellers made between $6m and $10m
- 3% of sellers made over $10m
Jungle Scout also conducted a more recent survey in 2021 to find out the average monthly sales of sellers. Here’s a summary of their findings:
- 26% of sellers make below $1000 in monthly sales, which amounts to less than $12,000 in a year. 4% had no idea how much they make per month
- Almost half of sellers (44%) make between $1000 and $25000 in a month, translating to annual sales between $12,000 and $300,000.
- About 19% of sellers make between $25,000 and $250,000, translating to annual sales that range from $300,000 to $3,000,000
- 6% of sellers make more than $250,000 as monthly sales, amounting to $3m as annual sales.
It’s one thing to generate much revenue from sales and another to turn a profit. This begs the question, how much profit do sellers make?
Research has shown that most small businesses don’t make a profit in the first couple of years, but that’s not the case for sellers. Most sellers report high-profit margins, according to Jungle Scout’s survey. 68% of the respondents made profit margins above 10%, while 38% of the respondents saw profit margins above 20%. Only a handful was not yet profitable.
Furthermore, over half (64%) of those surveyed were profitable in their first year of selling.
Jungle Scout also made findings of the lifetime profits of established sellers. 42% of the respondents reported lifetime profits below $25,000, while 38% have made lifetime profits above $25000.
From these numbers, it’s obvious that selling on AMZ has high financial potential. And if you want to be among the top earners, there are tips and strategies you need to employ. Let’s take a look at them.
How to Make Money Selling on Amazon
When it comes to making money on Amazon, the possibilities are endless, but you have to do what it takes. Making a profit is the sole reason for setting up a business, so if you’ve decided to sell on Amazon, you’re probably wondering how to make money selling on Amazon. Here’s how top sellers make money on Amazon?
Set up a private label business
Selling private label products is a great way to make money on Amazon, especially for sellers who want to build a brand. By selling private label products, you can step out from the general market and carve a space for yourself in the marketplace. As long as you sell in a profitable niche and provide quality products, you can make good cash selling private label products on AMZ.
Maximize your profit margins
Many sellers focus on increasing their top-line (revenue) but neglect their bottom-line (profit). If you want to be a successful seller, you need to focus on maximizing your profit margins. Here are some strategies you can use:
- Your product should be priced twice as much as it costs to manufacture or purchase. This way, you can still make a decent profit even after deducting FBA fees and other expenses. You must be careful not to price your products too high; otherwise potential customers will go to your competition.
- Improve your business efficiency by finding ways to cut costs. You could do this by finding a manufacturer who will produce your products at a lower cost or asking your supplier to ship your goods directly to Amazon’s Fulfillment Center. If you do not use FBA to fulfill orders, you should consider doing so, as FBA has lower shipping costs for sellers.
- Focus on growing a sustainable business, not just short-term profits. One way to do this is by launching new products and expanding your offerings. Of course, you will need thorough product and market research before launching a new product. Also, focus on products that sell quickly and generate high sales volume, even if the profit margin is not so high.
Don’t take product marketing lightly
Yes, Amazon gets a lot of traffic and gives your products a wider reach, but don’t assume that customers will stumble on your products. You have to be proactive about being visible to shoppers. One of the best ways to promote your products is through Amazon PPC (pay-per-click) Advertising. Amazon PPC targets shoppers who are already browsing for products on AMZ.
You can also take advantage of social media platforms like Instagram or Facebook, and email marketing platforms.
How Much Does it Cost to Sell on Amazon: FBA Fees
Starting an AMZ business is easy, but like every other business, it involves some financial investment. You can create a seller central account for free, but you’ll need capital if you intend to build a profitable business. These costs are often unpredictable, still, it is important to know what is involved before starting. So, how much does it cost to sell on Amazon?
Selling on Amazon is not free, especially if you decide to use the FBA fulfillment option. Even if you don’t, you will still have to bear the costs of storage and shipping, which can be a lot. If you’re trying to save money, FBA is your best bet. Also, Amazon charges a selling plan and referral fee regardless of the fulfillment option, but some fees only apply to sellers using the FBA service.
Selling plan fees
After creating your seller account, you must choose a selling plan. AMZ offers two selling plans; Individual and Professional plans. AMZ charges $0.99 on every sale for sellers on the individual plan, while professional sellers pay a flat fee of $39.99 monthly. The individual plan is best for sellers who do not intend to sell more than 40 products monthly. If you plan to sell more than 40 products in a month, the professional plan is best for you.
A referral fee is AMZ’s commission on every sale and is charged by percentage. The percentage charged varies by category and can be anywhere from 8% to 45%.
This fee only applies to FBA sellers. Since Amazon stores and ships orders on behalf of sellers, they charge a token for storage. The storage fees are calculated based on the product’s size and weight. AMZ also charges a long-term inventory storage fee on items that stay longer than 365 days in a fulfillment center.
Besides the storage fees, you must also factor in the FBA fulfillment charges. AMZ stores, ships, and packs orders on behalf of FBA sellers; this service is not free. So, don’t forget to factor in fulfillment fees when calculating the selling costs on AMZ. FBA fulfillment fees vary based on the product category, size, and weight.
In addition to the fees listed above, there may also be additional fees incurred under certain circumstances. Some of the additional fees include FBA removal order fees and Returns processing fees.
Apart from AMZ fees, you’ll have to set some money aside for product sourcing, promotions, and other unexpected costs. It isn’t easy to estimate the cost of selling on Amazon, but you can use an FBA calculator to help you.
Can I Register to Sell on Amazon Fresh?
Amazon Fresh is AMZ’s grocery shopping and delivery platform. Shoppers can shop for groceries on this platform, then select a two-hour delivery window and have the items delivered to their doorstep.
Before now, third-party sellers could sign up to sell on this platform, but that is no longer the case.
Since third-party sellers can no longer sign up to sell on AMZ Fresh, AMZ manages the business through its Whole Foods subsidiary and employs drivers to deliver customer purchases. These drivers get paid and rewarded via Amazon Fresh Tips. Amazon Fresh Tips is AMZ’s way of letting customers reward drivers through their AMZ Fresh account. This way, customers pleased with the service and order delivery can anonymously leave tips for the drivers.
So, how much should you tip a driver? Typically, the website is set to add a $5 tip to your order automatically. You can leave it at this, or if you’re impressed with the driver’s service, you can increase the tip amount. We recommend leaving tips amounting to about 10-20% of the cost of your order.
Are you still wondering how much can you make selling on Amazon? The numbers don’t lie. Selling on Amazon is still a profitable business, and will remain so as long as AMZ continues to dominate the eCommerce space. You need to invest enough time and effort and leverage AMZ seller tools. Then you’re sure to build a sustainable and successful Amazon business.
There are many aspects of selling on AMZ that can only be done effectively with seller tools. From product research to finding target keywords, optimizing listings, PPC management, and other daily operations. You should invest in software tools that will support you in performing these tasks.
One of the best tools you should get is Zonbase, an all-in-one software tool designed to help with product research, keyword research, listing optimization, PPC management, and more. If you still want to know how much can you make selling on Amazon, start by utilizing this powerful tool.