Amazon’s colossal reach and customer base make it one of the best platforms for new sellers to kickstart and grow their businesses. The platform provides various opportunities for people to enter Amazon with minimal capital. Yes, you read that right – becoming an Amazon seller is not out of reach. You can realize this even with a modest investment.
So, in this article, you will find out how much money Amazon sellers make, the fees for them, and what your ‘must-have’ pack should be when you begin selling on Amazon. Also, at the end of the article, the CEO of My Real Profit, Demian Lazurko, shared top tips for your thriving Amazon selling journey!
What is the Average Seller Income on Amazon?
According to Amazon statistics, about 50% of sellers on the platform make between $1,000 and $25,000 per month from sales. It comes out to about $12,000 to $300,000 per year.
Also, 25% of Amazon sellers make between $25,000 and $250,000 per month, which makes annual sales between $300,000 and $3,000,000.
Another 17% of sellers make less than $500 per month.
Small and medium-sized businesses (SMB sellers) account for over 60% of Amazon’s online store sales. Among them, 17% have achieved more than $100,000 in lifetime sales.
Although these numbers show a healthy Amazon business, they don’t reflect the seller’s profit, as they are only sales volume. So, let’s look at an Amazon seller’s real profit and what it depends on.
3 Types of Amazon Sellers & Their Actual Profit Margins
The profit of Amazon sellers depends on many factors, including the business models they use. Here, you can review the 3 types of sellers most commonly found on Amazon and estimate their approximate profits.
1. Privat Label Sellers
These sellers create their own brands and products. They often source generic products, customize them, and sell them under their brand name. Such sellers have the potential for higher profit margins and brand recognition. They can control the branding, packaging, and marketing of their products.
How Much Do Private Label Sellers Make?
More than half (56%) of private label sellers achieve the average monthly sales of $5,000 or higher. Additionally, 35% of private label sellers experience a profit within the initial six months of launching their products on the Amazon platform.
2. Retail Arbitrage Sellers
Retail arbitrage sellers take advantage of price differences between retail stores and Amazon. They purchase products at lower prices from brick-and-mortar retail stores and then resell them on Amazon at a higher price. This business model requires lower upfront investment as new sellers can start with small quantities. It’s a flexible model that allows sellers to adapt quickly to market trends.
How Much Do Retail Arbitrage Sellers Make?
Although retail arbitrage is a cost-effective method for entering the Amazon marketplace, it ranks as one of the less lucrative options. According to JungleScout’s statistics, 62% of retail arbitrage sellers generate monthly earnings below $5,000 on Amazon, with 25% earning less than $500.
In addition, insights from sellers indicate that nearly half (46%) took up to six months to see a profit using the retail arbitrage business model. Furthermore, 48% shared that the profit margins on their products are below 15%.
3. Wholesale Sellers
Wholesale sellers buy products in bulk from manufacturers or distributors and resell them on Amazon. They establish relationships with suppliers to purchase products at a discounted rate in larger quantities. Wholesale sellers benefit from economies of scale and can offer a wide variety of products without the need for product development.
How Much Do Wholesale Sellers Make?
Over half of wholesalers on Amazon (61%) generate monthly over $5,000. Additionally, 58% of sellers experience profit margins below 20%.
What are the Amazon Fees for Sellers?
Amazon has some fees for sellers, and the amount depends on the selected plan. So, choosing the most suitable plan for your requirements is crucial.
When you start your Amazon selling journey, you have 2 options. The first one, an individual plan, provides you with a fee of $0.99 for each sale you make, but you have a limit of a maximum of 40 items per month, and you can’t sell more. Such an option is considered the most affordable way for new sellers. However, the individual plan means you cannot access Amazon’s advanced seller tools.
On the other hand, if your sales volume is much more than 40 items per month, or if you seek greater control over advertising and product pages, you can select the professional membership. This membership costs $39.99 monthly and allows you to sell more than 40 items monthly.
Beyond the membership costs, Amazon sellers are also subject to additional fees:
1. Referral Fee
Amazon charges a percentage of the item’s sale price as a referral fee. The rate varies based on the product category but typically ranges from 6% to 45% (mostly 15%).
2. Variable Closing Fee
Some categories may have a variable closing fee in addition to the referral fee, which ranges from $0,99-$2.50. This category includes such products as books, music, video games, etc. This fee is applied per item sold and varies by type.
3. Amazon FBA Fees
For using Fulfillment by Amazon (FBA), sellers pay fulfillment fees for storage, packing, and shipping services. These fees depend on the size and weight of the item.
Amazon FBA sellers may pay storage fees for storing their inventory in Amazon fulfillment centers, especially during peak seasons.
As an Amazon FBA seller, you can also receive long-term storage fees if your product is unsold for over 365 days.
4. Refund Administration Fee
A fee may be charged to sellers for refunds processed on their behalf by Amazon.
5. High-Volume Listing Fee
In some cases, sellers with a large number of active non-media product listings may have a high-volume listing fee.
What Do You Need to Start Selling on Amazon
If you are a new seller, you should wonder how to start making money online. In the beginning, you need to have time and money. And no, we’re not talking about having too much money here. According to the Digiexe’s statistics, 27% of the most successful sellers on Amazon started their business with no more than $500. Does it sound impressive? Of course, it is. Look at the numbers:
during the first 6 weeks, 59% of sellers with lower capital were actively engaged in selling on Amazon, compared to the maximum of 42% observed among higher spenders in the same period;
profitability within three months was achieved by those who invested less compared to their higher-spending counterparts;
40% of sellers with lower spenders achieved profitability within this timeframe, contrasting with 24% of high spenders;
73% reported their profit margins are over 10%, while 24% said their profit margins were even higher than the 25% mark.
How Long Does It Take to Start Profiting on Amazon?
The period in which your business starts to rise up is not just about ‘time’ but more about your efforts, strategies, communication, and the product you are selling. It’s common for Amazon sellers to start profiting within the first year of selling on the platform.
Many sellers switch to a maintenance mode, awaiting the income streams once they identify products to sell and find a profitable niche. As an Amazon seller, you must always be on time with customer demands, analyze trends, and research the market.
Please note that the above statistics are not a 100% guide to a successful Amazon business. Each case is individual, and the development of your online business depends on many other factors.
Tips from the Experienced Seller to Start Selling on Amazon
So, how to become a profitable Amazon seller? We can’t give a panacea for a successful business, but we have some valuable tips from the CEO of My Real Profit — Demian Lazurko. Take notes!
Product is 60% of the success, so focus on creating a good product.
Launch products with low landed costs. The best model is high FBA fees but lower landed costs because inventory is the only upfront cost.
If you find a category with a lot of traffic and low competition, it’s too late. Most likely, a hundred more sellers will launch with you.
Think about how your product can compete. You must have a strong competitive advantage that customers can see through 1 picture if you want to succeed.
Invest in keyword research. SEO is essential when launching your first product.
Use a profit analytics tool to get real-time performance analysis.
Go with the Amazon FBA business model. There are so many benefits.
Will Amazon Online Business Be Profitable in 2024?
Selling on Amazon is going to be a profitable online business in 2024. But it’s more challenging to become a successful seller than everyone says. Amazon is a really lucrative platform, but the competition level is crazy. The Amazon trend in 2024 is a competitive advantage that customers can see in the 1st picture. Create a good product, and everything else will be solved.
To Sum Up
So, to start a competitive Amazon business, you need to be prepared to put in a lot of effort and understand the niche you will be selling in. The most important thing you should do is sell a quality product and know the market and your customers.
How much do Amazon sellers make on average?
About 50% of sellers on the platform make between $1,000 and $25,000 from monthly sales. The average Amazon seller’s income depends on the different business models they use and on the products they sell. For example, 47% of the FBA sellers reached total lifetime profits of $100,000, and 61% of the wholesale Amazon sellers can generate over $5,000 monthly.
Is it profitable to sell on Amazon in 2024?
Selling on Amazon can be profitable in 2024, but it depends on factors such as product selection, marketing strategies, and effective management of costs.
How do Amazon Sellers Get Paid?
Amazon sellers receive payments through direct deposit to their bank accounts.
How long does it take for an Amazon seller account to get approved?
If you provide all the necessary information and confirm your identity, you will be approved within 24 hours.
How to get incredibly high sales on Amazon?
Sell good-quality products, take time to implement an effective marketing strategy, use profit analytics tools, and invest in keyword research. These points don’t guarantee 100% high sales, but they can help boost your business.