What is a Good FBA Profit Margin

Thinking of becoming an Amazon seller but not sure whether you should? It’s normal to have some doubts before you take the plunge.

You’ll likely be asking yourself: Is it worth the time and effort? Will I make a profit?

In this blog post, we’ve provided answers to frequently asked questions. You’ll learn how much Amazon sellers make, how to calculate your profit margins and top tips to maximise your earnings.

As a result, you’ll better understand how much Amazon FBA could contribute to your annual earnings.

Frequently Asked Questions:

To answer these questions, we’ve used data from a recent JungleScout survey, which asked thousands of Amazon sellers about their earnings. We’ve also included our advice, which comes from our extensive experience helping Amazon sellers grow their businesses internationally.

What is a good profit margin on Amazon FBA?

On average, Amazon sellers have a profit margin of 10 per cent. In fact, 68 per cent of sellers have margins higher than 10 per cent.

Is Amazon FBA selling profitable in 2022?

For most people, Amazon FBA has been profitable in 2022. More than two-thirds of sellers report a profit margin higher than 10 per cent.

However, this doesn’t guarantee that you’ll see results. Many factors can affect your margins. For example, a new competitor may overtake you, or the industry could become oversaturated. Being adaptive to changing circumstances will be crucial to your success.

How much do FBA sellers make?

Most sellers make $1 000 per month, with only 26 per cent of sellers making less than this. As such, it’s a great way to supplement your current income. 

Research shows that it is possible to turn Amazon FBA into a full-time job. Two-fifths of people surveyed made $100 000 in lifetime sales. If you’re particularly successful, you can make even more money. For example, 20 per cent of sellers make $50 000 per month.

What percentage of Amazon sellers are successful?

92 per cent of Amazon sellers make a profit, meaning it’s likely that you will too.

How people define ‘success’ will vary from person to person. Some people merely want additional disposable income, whereas others want to turn Amazon selling into a full-time job. Others may wish to sell their business in future.

How long does it take to become profitable on Amazon?

64 per cent of Amazon sellers make a profit within the first year.

If you’re new to Amazon selling or still deciding whether you want to give it a shot, these statistics may be helpful to know:

•14 per cent of sellers made a profit in their first three months

•17 per cent of sellers made a profit in their first six months

•27 per cent of sellers made a profit in their first six -12 months

How much money do you need to start selling on Amazon?

This varies considerably on the product, market, and industry you’re moving into. But you can start selling for under $500 in some cases.

Here are some key statistics:

•27 per cent of people spend no more than $5 000 to start selling on Amazon

•27 per cent spend less than $1 000

•22 per cent spend more than $10 000

What costs will I have when I start selling on Amazon?

• Sourcing: You’ll have to pay for the products themselves, plus any samples you try before choosing a manufacturer.

• Product Preparation: Ensure that your Amazon FBA labeling and packaging meet Amazon’s standards and you have sufficient holding storage when exceeding FBA stock limits.

• Fees: This includes your Amazon seller subscription, plus any Amazon FBA fees if you choose these services.

• Promotions: To get your product seen by your target audience, you’ll have to factor in costs for Amazon Pay-Per-Click advertising.

What are Amazon’s selling fees?

Amazon charges the following fees to sell your product on their site:

•Subscription: You can choose an ‘Individual’ or ‘Professional’ seller account based on how many units you sell per month. ‘Individual’ accounts are charged on an item-by-item basis, whereas the ‘Professional’ account is a once-off monthly fee.

•Referral: You have to pay Amazon a fee for listing your products on their website, just like you’d pay an estate agent to connect you with potential buyers for a home.

•Amazon FBA: If you opt for this service, you’ll have to pay fulfilment costs and storage fees.

•Extras: Other fees include long-term storage, removal order and any penalties you may incur.

Return on Investment (ROI)

How to Calculate Your Amazon FBA ROI

Here’s a simple formula to work out your ROI:

Net Profit / Costs * 100 = ROI

‘Net profit’ refers to your profit after expenses are deducted. ‘Costs’ include fees for Amazon FBA services, your Amazon Seller account, and any marketing spend.

You can work out ROI – or return on investment – for individual products, product lines or the business.

To illustrate, if you have an ROI of 100 per cent, you’ve doubled the amount of money that you put into the business when you started. If your ROI is 200 per cent, you’ve tripled your investment, and so on.

Why is it helpful to know your ROI?

ROI is a barometer to help you understand when to grow your business. If ROI is high, it’s likely you can start investing money back into the business. For example, you could launch a new product line, up your marketing spend or expand internationally into new markets and go global.

It also alerts you to whether you have a buffer in place. By this, we mean cash reserves if something goes wrong in the future or your ROI decreases over time.

Final Thoughts

Starting to sell on Amazon can feel like a daunting prospect. You’ll likely question whether you can make a profit and whether it’ll be worth it.

Starting to sell on Amazon can feel like a daunting prospect. You’ll likely question whether you can make a profit and whether it’ll be worth it.

How Zee Can Help

Are you looking to sell on Amazon internationally? With Zee, you can easily ship your orders to Amazon’s fulfilment centres. We act as your importer of record and make sure everything to do with customs compliance, stuck shipments and air freight go smoothly.