How to Start an Amazon Wholesale Business: The Cost Breakdown

December 11, 2020
Written by Jayce Broda
amazon wholesale business

It's not surprising if more and more people want to start their own Amazon FBA business. But before anything else, you will have to know how to start an Amazon wholesale business. Amazon, the leading e-commerce giant in the United States and all over the world, has proven its greatness over the years. 

The platform has over 8 million sellers on the marketplace worldwide, with 2 million of it tagged as active sellers to date. With this, it's no wonder that more entrepreneurs are wanting to start selling on Amazon. This might even include you. If you are to start selling on Amazon, one of the first few things you would want to know is the cost of selling on the platform.

It's no secret that Amazon has paved the way for small and medium businesses. This alone is more than enough to urge any other small businesses out there to take part in building their Amazon business.

Cost of Starting a Business on Amazon

Here's a quick rundown of the initial costs that you should expect if you are to start selling on Amazon.

Product research

Before you start selling on Amazon, you have to make sure that you've done enough product research. Your research will help you determine which product will sell best. For this, you'll need to rummage through the entire Amazon marketplace. You'll have to compare prices, see how other sellers' products are doing, and learn about the sales they are making every month.

To do this, you'll need a product research tool. There are a lot of tools you can choose from. There's Jungle Scout, Novel Rank, Sales Rank Express, and Scope by Seller Labs, among others. The cost for these product research tools ranges from $40 to $100 dollars monthly.

Product samples

After doing your product research and seeing which one will work best for you, the next thing you have to do is to source them. You have to find wholesale suppliers for Amazon, but before you order hundreds of units, you first have to check for product samples. For this, you will have to at least shell out $75 to $100 for the product and shipping costs. This is just the average cost of a product sample. It will still depend on the product you're looking to outsource.

The best products that you can start to sell are the ones that cost at least $18 to $20. It's the best average price that will attract enough buyers while you're still able to make some decent profit. Another tip is, if you can get your prices to a reasonable $25, then do so. This will instantly enable your customer to be eligible for free shipping. Customers love to get free shipping on their items, and thus, you can expect that they'll prefer your products over others!

Inventory

After getting your samples and having them approved, you now have to pay for your inventory. Usually, suppliers have a minimum quantity that you have to purchase. It varies from one manufacturer to another, but on average, you should at least order 500 units of the product. The total cost will depend on the price per unit. However, you can expect to spend at least $2,000 for your initial inventory.

You can get the costs lowered by ordering more than 500 units. Conversely, if you still don't have the money for it, you can order fewer units with a higher cost per unit.

Signing up on Amazon: The First Step to Starting an Amazon Wholesale Business

You have two options when you're signing up on Amazon. You can either register for an individual seller account or go with a professional seller account.

Individual seller account

It is recommended that you get an individual seller account if you don't have a lot of inventory to start with. It costs $0.99 per item sold, and the maximum volume of products sold per month is fixed at 40.

Professional seller account

If you have a lot of inventory, then it's best that you register for the professional seller account. It's priced at $39.99 per month, and you get an unlimited volume of sales. You'll also be able to enjoy some seller features, such as bulk uploads and access to inventory management tools in the Amazon Seller Central. 

UPC Code

Upon selling on Amazon, you need to get a barcode for your products. Getting one will prompt the generation of your FNSKU or Fulfillment Network Stock Keeping Unit. To get your FNSKU, you will need to first have a GTIN or a Global Trade Identification Number. This will be in the form of a UPC Code.

Basically, you need to have a UPC code. Getting one will cost you $250 for your registration. You will be charged $50 for the annual renewal fee per 10 barcodes.

Amazon FBA fees

When you're just starting out, relying on Amazon FBA for your order fulfillment is the best way for you to go. Doing so will relieve you of additional order processing, inventory, and packaging costs. However, you will have to pay for the fulfillment costs and inventory costs.

The cost of the following are as follows:

  • Small items: $2.41
  • Large items: $3.19
  • Large items (1-2 lb): $4.71
  • Items greater than 2 lbs: $4.71 + $ 0.31 per lb in excess

The inventory costs will depend on the size and time period. For standard-sized items, it costs $0.64 per cubic foot from January to September and $2.35 per cubic foot from October to December.

Advertisements

When you're just starting out on Amazon, you should aim to get as much traction as possible. Keep in mind that you're battling with hundreds of established Amazon stores here. You'll want to stand out during your product launch.

This is where Amazon Pay-Per-Click or Amazon PPC comes in the way. With just $10 per day or $300 for 30 days, you get your products out there in the spotlight. Through this entire period, you can expect an increase in your sales. This will also do good in terms of your reviews, too! The more products you sell, the higher chances of you getting Amazon reviews.

Total Cost of Selling on Amazon

Starting out is always the hardest part. This is true especially if you're looking to sell on Amazon. After factoring in the costs of inventory, storage, product research, and required seller fees for Amazon, you will need at least $5,000 to kick-start your Amazon business. This is a shy estimate if you are to get, at most, 500 small-sized units. Keep in mind that the costs will vary depending on the number and size of product units you have and during which season.

The Benefits of Selling Wholesale Products on Amazon

It's completely understandable for you to be a bit wary of selling wholesale products on Amazon. After all, you will have to put in extra work and effort into selling large quantities of items. If you're still torn about this, here are the advantages of selling wholesale on Amazon that you should know.

1. Established Customer Base

One of the main advantages of selling wholesale on Amazon, particularly if you are already working with an established brand, is that you're guaranteed to cater to a loyal customer base. This can also prompt you to focus more on the administrative side of the business, rather than marketing your products.

2. Reliable inventory sourcing

When you're doing wholesale, as long as you have a reliable manufacturer, you are assured that you have a steady supply of your inventory. You don't have to worry about the pricing shooting up any time soon since you don't have to rely on the different pricing schemes of retailers. Aside from having an established inventory source, you also have a steady projection of the price, so you'll have a clue on how much you're going to sell your items for.

3. Easy to scale

Since you're in the wholesale business, it will be a lot easier for you to scale up your business depending on the demands of your customers. Unlike other different business models, it will be easier for you to order the supply you will need for the surge of product demands.

4. Lower risk

Compared to other business models, there are lower risks when it comes to considering selling wholesale products on Amazon. While you will be prompted to shell out a higher amount for your inventory, the risks are lower for you when it comes to taking accountability for these products.

Since you're not the owner of the brand, nor the manufacturer of the products, then these things lower down the risks of you getting involved with grave complaints.

Key Take-away

Selling on Amazon is one of the best decisions that you can make. However, you have to remember that you need to put in much effort into it. Before you invest thousands of your money, make sure that you're dedicated and fully committed to making your business work.

Interested in starting a wholesale business on Amazon? Now is the perfect time to do it! We can help you out with your account management needs and everything Amazon-related! Feel free to message us at [email protected]

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