14 Amazon FBA Costs You Should Expect for Private Labeling

Amazon FBA Costs

Hands down, the most common question I get from people is "how much does it cost to sell on Amazon?"

My answer is always "it depends."

Which is completely 100% the truth. We all know this because the cost completely depends on the type of product you choose. You could choose to sell a product that retails for $5 or $70. The first decision you have to make is product selection - which isn't easy. But is the most important I'd say.

Manufacturers also give special pricing for their most valuable and consistent customers. Which means experienced sellers also have fluctuating costs as well. But that's business!

Today I want to squander all the excuses people have for not hoping onto this opportunity because they're afraid of the costs. This is going to be a no holds barred conversation about the Amazon FBA costs you should expect for success.

Were going to talk about the costs for creating your own private label product and selling it on Amazon (using FBA.)

Although I cannot provide a numbers with 100% certainty - you'll get an idea for what to expect. Most of the costs associated with physical products are based on per item. Meaning it's associated with either 1 unit of the product (like prepping) or a pallet (for shipping.)

I've broken down the startup costs for a private label business come into 4 parts:

Amazon FBA Costs

You have the time and fees associated with product research, cost of the inventory itself, fees to ship the product to Amazon, and the fees required by Amazon.

Before diving in completely, if the process of finding a product is still a bit cloudy then you might want to bookmark this guide on starting a private label business for a future reading.

Now let's get started.

The Cost of Product Research

Back in the day (we're talking the early 2010's), everyone that was researching products to sell on Amazon was doing it manually.

Now that the prospect of earning a full time living as an Amazon seller is more accepted, there are a number amount of tools for every part of the process. From product research, inventory management, Amazon email services, to giveaway apps.

It's quite crazy actually. But I want you to know that you don't have to buy ANY of them. Not even ours.

All the services I mentioned above aren't mandatory to pay for, it's just easier to use them because they save us time.

Paid Product Research Tools​ ($$$$$)

The first thing you'll have to consider is whether you'd like to invest in a tool to help you do product research.

The free way of conducting initial research is to record all your findings into a Google spreadsheet. This is time intensive, but it saves you cash for investing into inventory.

The paid options usually make extracting, reading and manipulating Amazon data easier. Most of the time there's private training and a community involved as well.

Not to plug Amasuite too much, but things such as 'total offers' and 'opportunity scores' are metrics you only get with a paid tool.

'Total offers' is essential for private labellers to assess their competition. A total offer of 1 means that the product you're looking at is being offered only by 1 sellers. Usually, it's the manufacturer and they own the buy box since it's a private label product. The 'opportunity score' is a proprietary weighting system in Amasuite that helps you filter out better product opportunities.

The Cost of Your Private Label Product

The cost of your product depends on its size, material, weight, location, and order quantity. If you've ever used FedEx to ship something then you shouldn't be surprised about those factors.

Cost of Samples ($$$$$)

Once you've done your product research and have narrowed down a few products that fit your criteria, head over to Alibaba.com and reach out prospective suppliers and start ordering samples.

The cost of the product samples will vary. Usually, your manufacturer will ask you to pay the standard pricing, not bulk pricing since you're only ordering 1 and you'll have to cover shipping. Make sure you gather multiple samples from every supplier and depending on the size, you can probably ship it by air. You want multiple samples because a supplier may send you their best sample and this wouldn't be a true representation of their quality.

Cost of Packaging ($$$$$)

This fee will come into play when you decide on a manufacturer. Many manufacturers have relationships with packagers already so you can either piggyback off of an existing relationship or you can source your own.

At the beginning, it makes sense for you to go with a pre-existing relationship of the manufacturers. Unless, you need the product to be in something very specific. For example, yoga mats that have to be in an environmentally friendly package with minimal waste.

Your packaging will also be quoted on a per unit basis. Just like most things with this business model.​

Cost of a Minimum Order Quantity ($$$$$)

Inside of Amasuite, we have templates for you to start negotiating with manufacturers and the first thing you'll notice is we don't beat around the bush when it comes to establishing expectations on your end and from the manufacturers.

The MOQ is set by the manufacturer but if you can prove beforehand that you mean business, usually they can be more flexible. Since they believe that you'll be a long term customer of theirs.

It's impossible for us to give you a solid number as it's up to the manufacturer and your product selection, but I just want to let you know there's some wiggle room in there.

The Expected Fees of Shipping to Amazon

Cost of a Freight Forwarder ($$$$$)

We've simplified the shipping process to only be handled by one single freight forwarder. The role of the forwarder is to take care of the shipping from the manufacturer's warehouse to your desired location. Usually a prepping center.

The freight forwarder is the simplest option for sellers starting off. They will handle almost everything for you, including organizing customs.

But be sure to hammer out these details with your provider as every one is different. Your own requirements for a freight forwarder varies as well (air vs. sea shipping.) Finding the right one will require a bit of research and we suggest lining up 2 providers in the future. Just to be safe.

Cost of a Pre-Shipping Inspection ($$$$$)

It's ideal to find an inspector in China (or wherever you're ordering products from) that can look at and take pictures of your order prior to leaving the warehouse of the manufacturer.

There have been many horror stories of people receiving their products damaged. Without doing an inspection beforehand, you would never know when it occurred. At least with an on-site inspection, you don't have to accept the order prior to it being shipped overseas. It doesn't matter if you choose air or shipping, in this case, damaged goods are damaged goods. You can't sell them.

Cost of an Amazon Prepping Center ($$$$$)

There are dedicated prepping centers that only process Amazon products. These businesses are a third party from Amazon and aren't directly linked whatsoever.

The job of the preppers is to receive your product, make sure that the products are packaged according to Amazon's requirements and slap the appropriate labels on them.

The prep centers can also be another area of quality control before sending off your product to Amazon. The people at Amazon aren't going to check your product individually to see if it's the right goods or if there's damage. It simply gets placed into the warehouse until someone has purchased it. So if you (or your prepping center) make a mistake and sends the wrong product into a certain package, you'll be the one responsible and this could cause a negative review if it happens too often.

Cost of Shipping to Amazon ($$$$$)

Amazon will ask you to send your products to a few of their warehouses. Yes, a few. That's known as 'distributed inventory placement' and it's a setting in your Amazon account.

One trick we've learned is that if you send your product to Amazon using the 'inventory placement service' option, you can send your product to one Amazon location. There's a fee, of course, so you'll have to see how much it costs.

The two options are available right next to each other in your seller's account. See how much it costs to send your product using the distributed method to the different warehouses requested by Amazon and then see how much it costs to send your product via the 'inventory placement' method.

The Fees Required to Sell on Amazon

As a cost of doing business on Amazons platform, they will have to charge you for accessing their customers, providing customer service to them for your products, their affiliates, storage, and fulfillment costs.

It sounds like quite a bit and quite frankly it is, but Amazon is about volume so the charges for being on their platform are minimal considering how much benefit there is to accessing their customers.

An easy way to follow along with the rest of this article is to open up the Amazon revenue calculator and we'll explain each line item one by one.

Cost of Amazon's Professional Sellers Account ($$$$$)

This isn't in the Amazon revenue calculator but it comes standard to all sellers. If you want to sell on Amazon as a private labeller, you'll have to pay for this monthly subscription.

As we explained from another post, choosing your Amazon seller type is the first decision you'll have to make. You can either choose an individual account or a professional account.

The professional account is your only option if you're private labeling a product. It's the only account where you can create a new listing. Otherwise, you'd have to piggy back off another listing and that wouldn't be possible since your product is unique - right?

The cost of a sellers account is $40/month and there is no per-listing fee. It's just the flat subscription.

Cost of Amazon's Referral Fees ($$$$$)

Referral fees are paid to Amazon associates. This is just a fancy name for their affiliate program. These fees are paid to influencers who recommend products on Amazon to their audience.

The fees are based on the product category and the listing price. This referral price is based off the money recieved from the sale. Meaning if they used a coupon, the referral fee is based on the income.

There is also a minimum referral fee, but I wouldn't worry about that too much because you're always going to be paying the greater of them both and usually that's the fee based on product category. Get more information here.

You might also see a variable closing fee and that simply isn't going to be applicable to the normal physical product seller because this only applies to media items like software, video games, and DVDs.

Cost of Amazon's Monthly Storage ($$$$$)

The costs of both Amazon's storage fees and fulfillment fees change twice per year. Ranging from January to September and October to December. Storage fee's go up quite a bit in Q4, but that's because the space is more valuable and most sellers are going to make a heck of a lot more.

The storage fees are measured as a daily average per cubic feet and any products that have been stored for longer than 6 months are charged a 'semi-annual long-term storage fee'. Which can be expensive. As the prices may change from the date your reading this, here's a direct link to Amazon's info page on monthly storage fees.

Cost of Amazon's Fulfillment Fees ($$$$$)

There are two categories that your product will fall into: standard sized and oversized.

Fulfillment fees between January - September

As you can see, the cost really does 'depend' on the size of the product. The smaller your product though, the cheaper it will be to ship it from your manufacturer and to Amazon.

Each size varies and here's a link explaining the sizes of each.

Cost of Amazon Sponsored Ads ($$$$$)

Every keyword you target in your sponsored ads is going to have vastly different costs. Some people get lucky and enter a niche that has low competition in terms of their PPC bids, while others are quite high.

There are few things you will want to know though:

Two campaign types exist for Amazon sponsored ads. One is for automatic targeting and the other is for manual targeting. Most people prefer manual targeting, but as we mentioned in our post on Amazon selling tips - the automatic targeting option can be useful depending on your niche. So give it a try.

There's also a few placement types as well to be aware of. You can have 'sponsored products' which appear in the main product listings. A 'headline search ad' which is essentially a banner. Or a 'product display ad' which is a sidebar advertisement.

There isn't anything that says one type of placement or campaign is better, you'll have to experiment. That's what PPC is all about anyways, constant optimization.

Well there you have it, a full breakdown of the costs you can expect to start a private label business off of Amazon. If you haven't had a chance to kick off your product research, we strongly urge you to check out Amasuite and start building your physical product empire today.