The average price of a product on Amazon is about 25 dollars. And it makes sense. Everyone has 20 bucks.
It’s the sweet spot for impulse buys and quirky gifts.
Souvenirs and knick-knacks sold in airports are usually priced under 20 dollars, even when it’s a pen or a shot glass. You can just grab one and go, guilt free.
So as Amazon FBA sellers, might this logic translate to more sales on Amazon via FBA?
Not so fast.
If you are an FBA seller there is a price line that you don’t want to cross, before the Amazon FBA fees kill your profits. Pay attention to what I’m about to tell you or you’ll be working for Amazon for free. (Hey if you’re lucky Jeff might send you a Christmas bonus)
If you’re considering selling cheaper items, first use the Amazon profit estimator. This is your starting point in figuring out if your product is worth selling via FBA.
But beware. The app isn’t perfect. Amazon FBA fees can be up to 35% higher than what the Amazon profit estimation app reports.
Tip: If the fees you’re getting on the fee preview end up being higher than the ones you are charged when the item sells, contact Amazon seller support and have them check the weight and measurements of this item. A wrong fee estimate can can kill your profit entirely.
Many sellers agree that no product is worth listing unless you’re doubling your money after cost, but that thinking is too simplistic. There is still money to be made on cheaper items and here’s how.
How low can you go?
There is a way to profit from cheaper products. Just follow these rules to know if it’s worth selling:
- If it’s a fast moving item and you have large amount of stock, then it’s worth selling a $10.00 to 15.00 product
- But if its a niche product with a sales rank above a million a $10 dollar item may not be worth it
- Take pleasure knowing your competitors aren’t making much either off that 10 dollar FBA product
Raising your selling price is one way to fight back the Amazon FBA fees, but first do your pricing research on BigTracker to see if you can stay competitive at a higher price.
The benefit to selling cheaper products is they have the potential to sell in high quantities like airport impulse buys.
Let’s review the Amazon FBA fees for 2018 below.
|Updated 2018 Amazon FBA Fees
Picking, Packing & Shipping orders
(1-lb. or less)
+ 38¢/lb. over first 2 lbs.
(1-lb. or less)
+ 38¢/lb. over first 2 lbs.
+ 79¢/lb. over first 90 lbs.
+ 38¢/lb. over 2 lbs.
+ 91¢/lb. over first 90 lbs.
|Apparel items: Add 40¢ per unit
|Monthly Inventory Storage
per cubic foot
|64¢ per cubic foot
|43¢ per cubic foot
|$2.35 per cubic foot
|$1.15 per cubic foot
And lets not forget the seller fees!
|Ranges from 6% to 20%, most sellers pay 15%
|Minimum Referral Fee
|$0-$2, if Referral fee is under minimum fee
|Variable Closing Fee
|All Media Categories
How do I make profit on FBA on a ten dollar product?
If you are an arbitrageur and you buy something to resell, make sure to:
- Figure how much you can sell it for
- Add Amazon’s seller fee, plus the monthly storage fee
- Use BigTracker to see what other sellers are selling the same item for
- If you can compete on price, send it to FBA. If you cannot compete in price, use “Fulfilled by Merchant” on that item.
The trick to profiting with low priced items on FBA is by selling in volume.
If you’re only selling a few items a week or month, it’s not worth it. But if your products sell several per day, those small profits add-up. The downside is these fast selling, low priced items are very competitive, with hundreds of sellers selling the same product.
That being said, it is possible to make a decent income from selling low cost items priced under ten dollars.
For example, take an item that sells for $8.90. The item costs $1.70 to buy. After factoring in cost of supplies and shipping, the actual cost of the item will be $2.00.
After Amazon seller and Amazon FBA fees of up to 60%, you’re left with around two dollars in profit. If the item is small, easy to label, and requires little prep work, it may be a viable product. If you can sell more than 30 a month, then it just may be worth your time and effort to sell it on FBA. A $54.00 a month in profit from this product is a nice little amount of cash for little work.
Keep scaling up and it’s all gravy.
Therefore, selling cheaper products with FBA depends on how much of a profit margin you are willing to work for.
Will you work for less than a dollar profit per product? Or do you only sell items with a profit margin of over 75%?
At over 50% of your product cost, Amazon FBA fees are huge for many sellers.
That being said, using FBA hugely boosts profits through raising your rate-of-sale. Alternatively, many items could sell through seller fulfillment at a higher profit, but still might not be worth considering.
No margin for error.
And if you haven’t already, consider upgrading your account to a Professional Seller account. For $39.99 a month Amazon will waive the $1.00 pick and pack fee on every order so you only need to sell 40 items a month to benefit from the upgrade.
Put your toes in the water
It’s easy to be burned by Amazon FBA fees. My advice is to send a few items to the FBA warehouse first and test them before investing and committing a large volume of stock to Amazon.
Remember your “estimate” is your FBA costs. Don’t forget referral fees on top of that. Also remember customers will pay more for FBA to get the item faster, especially if they’re Prime members.
You can even add your shipping costs to the price of the item so you don’t get burned. This is business, not charity.
Sell hundreds or thousands of units a month at a small but profitable margin, and you can still make real money from cheaper products on FBA.