If you’re thinking of starting dropshipping on Amazon, you’re probably asking yourself the crucial question: how much does it cost to start dropshipping on Amazon? Dropshipping offers the opportunity to launch an online business with relatively moderate investment. Nevertheless, to be transparent, there are associated costs. In this article, we’ll detail the various expenses you may encounter when starting and running your dropshipping business on Amazon.
Creating a seller account on Amazon
The first step in dropshipping on Amazon is to create a seller account. Amazon offers two types of account: Individual (free, but with a €0.99 selling fee per item sold) and Professional (€39.99 per month with additional selling fees based on item category). In general, if you plan to sell more than 40 items per month, the Professional account is more advantageous.
But beyond this fixed fee, there are several other costs to consider:
Amazon charges a referral fee for each item sold. This amount depends on the product category, but most commissions are between 8% and 15%.
The cost of shipping your orders depends on whether you choose to ship them yourself or use the “Fulfillment by Amazon” (FBA) service. Fulfillment fees for FBA include order preparation and packaging, shipping and handling, customer service and product returns.
These fees are based on the weight and dimensions of your product. They vary depending on whether you sell apparel or not.
In addition to the fees mentioned above, there are several other costs to consider. For example: inventory fees, book rental service fees, high-volume listing fees, refund administration fees.
There are also optional programs that can help increase your sales, such as advertising on Amazon, the FBA option, the inventory placement service, Amazon’s partner carrier program, and premium account services.
To illustrate all these costs, let’s take an example: suppose you have a Professional account and you sell a product in a category with a 15% commission.
- If this product costs €20, each sale will cost you €3 in commission.
- If you’re using FBA, let’s assume a €3 fulfillment fee per product as well.
If you sell 40 products a month, you’ll pay €240 in commission and fulfillment fees. Add to this the monthly cost of €39.99 for the seller’s account and you get a monthly expense of €279.99, i.e. an annual expense of €3359.88.
This does not include other possible fees or expenses for optional programs.
Tools and software costs
Tools and software can vary according to your specific needs. However, a few are essential for efficient management of your business.
Product search tools :
Another useful tool is Dropispy. It’s a spyware application for social networks, especially Facebook, that allows you to unearth winning products. Dropispy offers the ability to filter and analyze ads to identify those that generate the most engagement.
Basic use of Dropispy is free, but to unlock all its features, including unlimited access to data and more precise filters, subscription costs $29.90/month.
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Inventory and order managers:
These software packages make it easy to track inventory and manage orders. Solutions such as Inventory Source (from $50/month) or Ordoro (from $59/month) are examples.
Considering a product search tool like Jungle Scout at $39/month, an inventory and order manager like Inventory Source at $50/month, and an e-mail marketing tool like MailChimp at $9.99/month, you can plan on around $99/month, or $1188/year.
Suppliers and products - How much does it cost to start dropshipping on Amazon
The cost of your products will depend entirely on your supplier and the specific items you choose to sell. Some suppliers may charge membership or service fees, which can range from $20 to several hundred dollars per month. In addition, there are the costs of purchasing the product itself, which will be charged by your supplier each time an order is placed.
Assuming you have a supplier with no membership fees, and you sell a product costing €15 on average, if you sell 40 products a month, your expenses will be €600/month, or €7200/year.
Personalization and branding
Taking into account the creation of a logo at 250€ and a small expenditure on personalized packaging at 50€/month, the annual cost for personalization and branding would be around 850€.
To personalize your brand, you could also consider other elements, such as :
- the creation of a website (if you decide to go beyond Amazon)
- designing your social networking pages
- purchasing personalized e-mail templates.
Advertising and marketing
If you want to know how much it costs to start dropshipping on Amazon, you should know that a significant part of your business budget will go into advertising and marketing.
- Advertising on Amazon (PPC): The average cost per click (CPC) on Amazon is around $0.81. Assuming your conversion rate is 10%, you’ll spend about $8.10 to get a sale.
- Facebook ads: The average CPC on Facebook is around $0.97. If we assume the same conversion rate of 10%, you’ll spend around $9.70 per sale.
- TikTok ads: On average, the CPC on TikTok is around $0.10. With a conversion rate of 10%, that’s $1 per sale.
- Influencers: Costs can vary considerably depending on the popularity of the influencer. For an Instagram post, count from $10 to $10,000.
- Content creation for social networks: If you hire a content creator, prices can vary from $25 to $200 per post, depending on the quality and experience of the creator.
If you allocate a daily budget of $10 for Amazon advertising, $10 for Facebook ads and $2 for TikTok, you’ll spend around $7920/year. For a partnership with an influencer at $500 and a content creator at $50/post for one post per week, you add $3,100/year.
Other costs - How much does it cost to start dropshipping on amazon
- Subscriptions: There could be monthly fees for ancillary web hosting services if you use Amazon as a sales channel, etc.
- Shipping and handling: These costs are usually covered by the customer, but they can affect the final price and therefore your sales.
- Returns and refunds: Always be prepared for returns. Amazon charges return fees, which vary according to product category.
- Amazon storage fees (if you use FBA): These vary according to the volume of your products and the time they spend in Amazon’s warehouse.
Finally, taking into account additional costs such as a CRM service at $20/month, Amazon return fees at around 2% of sales and storage fees at around 1% of sales. You can budget around $240/year for CRM and €132/year for Amazon fees.
Budget for dropshipping on Amazon
Depending on your budget, you can adjust your expenses. Here are three possible scenarios:
- Low budget: If you’re on a tight budget, focus on essential expenses. You could research products yourself, manage orders manually and minimize marketing expenses. A realistic budget would be around €2,000 to €3,000 for the first year.
- Medium budget: With an average budget, you could afford some tools to help you manage your business and allocate a moderate budget to marketing. A realistic budget would be around €5000 to €7000 for the first year.
- High budget: If you have a larger budget, you can invest in premium tools, hire a content creator and work with more popular influencers. A realistic budget would be around €10,000 to €15,000 for the first year.
These figures are only estimates to illustrate the different options. Your actual budget will depend on many factors, including your specific objectives, your strategy and your ability to optimize costs and maximize sales.
When it comes to dropshipping on Amazon, it’s important to understand that this business requires initial investment and ongoing expenditure. So you’ll know how much it costs to start dropshipping on Amazon.
These costs can vary depending on the choices you make, the tools you use, your marketing strategy, and many other factors. However, we’ve illustrated several scenarios that can give you an idea of the costs involved, whether your budget is small, medium or large.
Dropshipping on Amazon isn’t necessarily an expensive business, but it’s not free either. With the right information and planning, you can manage these costs effectively and maximize your profits. Tools like Jungle Scout and Dropispy, among others, can prove invaluable in helping you manage your business more efficiently.
Ultimately, the cost of starting up dropshipping on Amazon will depend largely on your decisions and your determination to succeed. Whatever your approach, always bear in mind that every investment you make should bring you closer to your goal: creating a successful, profitable business.