So the question is really simple – how much money do you need to invest in stock to start an Amazon FBA business?
The short answer is £1000.
The longer answer – it depends…
Let me cover the budget issue in detail in this blog post so you know for sure whether or not your situation is suitable for the Amazon business model.
First of all – when I talk about starting an Amazon FBA business, I’m referring to private label products, imported from China (in most cases). This means that you create your own brand, source products from China, brand them, import them into the UK (or whatever country you’re in), send your stock to Amazon’s warehouse, and start selling. This is what I have always been doing and in my opinion it is the BEST way to build a profitable business on Amazon.
But obviously there are other models, like:
- Retail arbitrage – where you look for heavily discounted items online/offline from popular retailers with the aim to buy and then flip them on Amazon for a profit.
- Wholesale – where you buy from local, UK based wholesale companies, like Pound line wholesalers and others.
- Liquidation & Clearance – where you buy liquidated/clearance stock from specialist companies. This can also include tested or untested customer returns.
With these models you can start selling on Amazon for as little as £50 or even less! As all it takes is for you to find good deals on products already selling on Amazon, then you can buy them in small quantities (retailers don’t have an MOQ!) and start selling!
The problem with these models is that they’re not real businesses in my mind – they are more like a hobby type of business or second income business as you will find it very hard to constantly look for good deals and at the end of the day it still all comes down to who can offer the lowest price on Amazon for that particular item.
This can be a good training model though for people who don’t have enough money to start importing – to get used to Amazon’s platform, Seller Central, rules, how it all works etc. But to be perfectly honest, even with a £100 budget you can actually start importing from China and that’s the way I would recommend people go, even with super small budgets.
Going back to the main private label products model – the question really is not that much about how much money you have to invest but what product you’re trying to source with the money you have! I have talked about this a lot on my blog and I usually refer to it as the BUYING POWER you have.
And here’s why your Buying Power is what matters most – if you want to source products for low enough prices to make a profit on Amazon (or anywhere else for that matter), you need to source them directly from manufacturers – usually in China (but it can be Pakistan, India, even the UK or EU countries for specific products).
But why? Why can’t you just buy those same products from local wholesalers?
- The only way to get the best prices is to buy from manufacturers directly;
- The only way to get TRUE branding for your products and packaging is to buy from manufacturers directly;
- The only way to improve/change a product as per your needs is to buy from manufacturers directly.
There’s no question about this really – you have to accept that you’ll have to deal with manufacturers directly which obviously means a pretty high MOQ (minimum order quantity) to deal with – quantities like 500 or even 1000 units per product are standard for most common goods.
While buying 1000 units at a time may sound scary to you – this is how it works and if you’re not willing to take these risks, maybe you shouldn’t be in business at all? As having a business by default means that you’re willing to take risks that others are not! Also, if you’re doing proper market research on Amazon and know your numbers, 500 or even 1000 units of a product is actually not a lot! Like I show in the free video you can watch on my blog – I sold more than 1000 units in my first month selling on Amazon!
In the worst case scenario, if you have done your numbers properly, you should be able to sell off the stock at cost price to not lose any money and just learn from the experience.
The good news is that while 500 or 1000 units of a product may sound like a HUGE investment, IF you pick the right product, it could actually mean that you’re investing just £500 or £1000. Yes, there are thousands of products you can source for a relatively low price of just $1 to $3 a piece and sell for £5 – £15+ on Amazon.
So, to answer the question of how much money you need to start selling on Amazon – I’d say that £1000 is a good number to begin with as that will allow you to buy 500 units of a cheap product that costs $1-$2 in China.
Of course, the more money you have the better, as a bigger budget will open up more possibilities on products you can sell! For example, if your budget is £10k, you can buy 500 units of a product that costs $10+ in China. And this is a product that could sell on Amazon for up to £30-£50 or more. Or you could of course invest into 3-4 cheaper items, to diversify and spread your risk.
But what about people with super small budgets, like £100 or £200? Would it be possible for them to import something from China at a decent quantity? YES!!!! There are products that can be bought for $0.10 and even less! And this means that you can buy 500 of such product and get it shipped to you for £100 or less, if it’s a very small and lightweight product.
Then you can use Amazon’s Small & Light program and sell the item for just a few pounds and still make very good profit per sale as the FBA fee will only be 60p or 80p, depending on the item’s size!!! This means that even selling an item for £3 to £5 can be very profitable and remember – you won’t have to process all those orders – Amazon will do it all for you!
These water brush pens can be bought for 30 c and even less per unit on Alibaba.com!
This particular listing sells a pack of 4 for £7.99 and a pack of 6 for £9.99 (at time of writing this post) and generates more than £1000 in sales per month or more than 200 sales! That seller makes at least £2 – £3 profit per sale which means that this one, super simple and cheap product alone generates him £500+ per month in profit:
Obviously I don’t know how much money the seller spends on PPC but this example just illustrates how you can source super cheap items from China, use FBA and still make a very good profit.
Here’s another tip for people on low budgets – say for example you have £200 and you have found a product that costs $0.50 in China with a minimum order quantity of 1000. You can’t afford that BUT what you can do is really push your supplier hard and ask them to do your first order at say 200 units. Say that you first need to test the market, customer reaction, product quality and so on.
Not all suppliers will agree to this but many will! IF the product you’re sourcing is in stock at the manufacturer and they don’t have to run the production line for you, it is actually very easy to negotiate smaller MOQs, especially with suppliers who are actively looking for new customers. This may mean that you’ll have to pay a slightly higher price, and that’s perfectly fine as long as your margins will be able to support that.
This is a very powerful strategy that many people overlook – I had one situation when my manufacturer had set the MOQ for an item at 1000 units. I really wanted to test the product but didn’t want to commit to that large of a first order without seeing how it would sell (as the product was quite unique, with no real equivalent on the market). And I knew that they already held stock of the item as I had actually asked them to send me images of their warehouse/stock room!!!
Long story short – the supplier agreed to an initial order of just 100 units, at almost the same price they quoted me for 1000 units because they honestly said that they are looking for new customers in the UK and want to build a long term relationship.
To sum it all up – it doesn’t really matter how much money you have, it all comes down to starting with a product that is suitable for your buying power, and of course – the time & effort you put into this! You need to hustle real hard if you start with nothing! Contact as many suppliers as possible (not just 2-3) and really push them hard on MOQ negotiations. Trust me, if you try this with enough suppliers, one will agree with your terms and you’ll be able to source a much smaller quantity of the product than initially quoted.
Don’t forget about the branding part though. Remember, we’re trying to create something unique and sell a BRANDED product on Amazon, not just another un-branded version of the same product. You have to allocate some money for the logo, packaging design (if needed) and product photography.
Packaging in most cases won’t be your number one priority, but a logo and great product pictures will be! You can get a logo done on Fiverr for $5 but you can also get it done for $20 or $50. I wouldn’t really go with the $5 option as you will get what you pay for. But say $30-$50 should get you a decent quality logo on the same Fiverr.com or even Upwork.com.
When you’re on a small budget, you need to take some risks. For example, you put a logo design project on Upwork.com for $50. Obviously experienced designers won’t apply as the price is too low. But you’ll get many offers from new designers just starting out on Upwork – they won’t have any feedback yet or glowing testimonials but that doesn’t mean they can’t do a good job for you!
Check their portfolio and if you like what you see, take the risk and hire them! In the worst case scenario, if they don’t provide a logo design of the quality you expected, you can cancel the project and move on! So think smart and invest smart, when every penny counts.
Going back to the whole importing process – product cost is one thing but you’ll also have to cover the shipping fee, import duty & VAT. The shipping costs you’ll get from the supplier but import duty and VAT you can calculate following this guide. Or simply use 25% as a general number to calculate how much you’ll have to pay in taxes.
Each and every product is different of course but in most cases you can use the 50% rule, which means that you can spend 50% of your budget on the stock itself, then it will be 20%-30% on shipping and the same amount in taxes to make up 100%. Obviously it’s better to play safe with this so please do calculate all costs before you buy anything so that you don’t end up in a situation where you have ordered products but have no money to pay for import duty, VAT or product pictures.
Speaking about product pictures – they’re your number one priority, after the product itself. So you must allocate some of your budget for professional product images on a white background as well as some lifestyle images (with people ideally, or say pets if the product requires that). How much you spend on this process depends on YOU!
You can simply use online services that offer this OR you could get in touch with multiple local photographers and try to arrange a better deal, possibly even a free deal! Say that you’re starting a new Amazon business and are looking for a long term relationship with a photographer who can do all your product images, social images etc. Say that you want to test them out with one product!
Photographers LOVE long term, regular customers and if you contact 10 people, I’m sure that at least one will happily do your first shoot at a discounted price or even for free. It’s all about relationship building and talking with people – don’t forget that not everything has to happen online! You should actually start by asking around and seeing whether any of your friends have a photographer contact they can share with you. LOOK AROUND!!!
Ok, I’m veering a bit off-topic here but I just wanted to show you that you can still do many things and start selling on Amazon, even using FBA, on a very small budget and still make profit!
I don’t believe in there being too small a budget for this – it’s all about what you do with the money you have, how smart you are – are you ready to hustle for real and simply get things done? If your budget is lacking slightly then you need to make up for it with drive and determination. I hope you agree?
If you have already started selling on Amazon, I would love to hear your stories on how much money you invested or any money saving tips you can share with other blog readers! So feel free to leave your comments or questions below this post.