First of all, hi and welcome back!
I know the blog posts have been sporadic recently as I’ve been incredibly busy dealing with some personal issues. But I have some very big plans and ideas for this blog coming up which I’m very excited to share with you all!
This includes launching a brand new product on Amazon FBA and tracking the progress every step of the way on AndrewMinalto.com, right from the product research stage all the way to the launch and beyond.
I’m still considering whether to do it myself or possibly even select one of my Amazon Sharks members or blog readers to do it. That way it would make a perfect live case study for starting an Amazon FBA business in 2022, where you can see exactly what’s involved every step of the way.
Either way I’m very excited!
But more on that very soon as it brings me perfectly to the topic of today’s post.
How much does it cost to start an Amazon UK FBA business?
But I’m warning you in advance that the answer might not be what you want to hear! And I’ve spoken about this before, how I don’t agree with some “gurus” who claim you can start an online business with next to no investment needed.
Of course it is true that we’re in an age of opportunity for business and it’s not like the old days of bricks and mortar where you needed a lot of money to get started – for rent, staff, equipment, etc. BUT that doesn’t mean you can set up your own private label business on Amazon for £100.
Sorry, it just doesn’t work like that.
You’ll notice that I mentioned private label specifically as that’s what I’m talking about in this post. Flipping or arbitrage is a whole other matter and with that business model you CAN start with pretty much any amount (and start turning a good profit almost immediately as we showed in this blog post).
Also, if you’re not completely clear on the differences between private label and flipping then take a look at this post where I covered it all in detail.
But back to the question at hand, and rather than me just giving a blanket figure of how much you need, let’s instead go through the costs step by step as there’s of course a lot of variation depending on the product, and that way you can see where it all adds up.
Generally speaking I like to get 3 or more samples from manufacturers that pass my initial filtering system and this costs about £50-£75 each including shipping via courier. It can be a lot less and sometimes even free if you’re simply sampling one of their own products, but I want the sample to be as close to my final product as possible. That means OEM branding and custom packaging and any other changes I require.
At £75 x 3, that gives us £225 for samples.
I hope you can see why I get frustrated at the people who say you can start selling on Amazon with a few hundred pounds as we’ve just spent over £200 simply to help us choose a manufacturer!
Speaking of custom packaging, this is a must have for your Amazon business where branding is so integral to the success of your product launch. You may also need a logo and some other work done, but in total £150 for design work is enough to cover everything.
Product Inventory – Product Cost, Shipping, and Taxes
This is the big one – the cost to manufacture your product in China and get it shipped to you, including all import taxes that are due.
This can of course vary hugely but working backwards from an ideal product on Amazon can give us a pretty good idea of the initial product cost, so for example something with a £15-£20 selling price and 35% margin would like something like this:
Item cost – £5 / $6.50 x 500 = £2,500 / $3,250
Most real manufacturers will ask for a minimum order of 1,000 units but if it’s your first order with them you can easily negotiate that down to 500, so that’s what we’ll use for our order size.
Shipping – £1,000
For our shipping we’ll be using a freight forwarder as they handle everything when it comes to the import and paperwork, so you won’t be hit with any nasty extra fees.
Tax (import duty and VAT) – £3,500 x 25% = £875
20% VAT and 5% import duty.
Total Product Inventory Cost – £2,500 + £1,000 + £875 = £4,375
Then there are a few other small costs that you need to get to this point and they are:
Jungle Scout Software
My long time blog readers will know I never suggest getting a ton of software when you’re just starting out as you don’t need most of it and if anything it just makes your life more complicated.
The big exception to this is Jungle Scout, which you 100% need to do proper product research and validation.
They have 3 different plans:
While you can probably get by on the Basic, it does have some limitations in terms of product tracking and searches, so I’ll use 1 month of the Suite cost instead, which is £50.
And while we’re on the topic of subscriptions that you need to sell on Amazon, a GS1 membership is a must have!
The Starter 10 plan is more than enough for most new product launches, adding another £60 on to our costs.
So we’ve now reached the point where we have our products in hand in the UK and our total cost so far sits at £4,860.
But unfortunately there’s still more to go before you’re ready to start selling on Amazon!
You need to register your Trademark to be able to apply for Amazon’s Brand Registry, and this costs £170 via the Intellectual Property Office.
It’s so often overlooked by new Amazon sellers who think they can do it themselves. After all how hard is it to take a nice picture when we all have high end smartphone cameras to hand? But product photography can make or break your Amazon product launch and even a tiny difference in your conversion rate can mean thousands and thousands of pounds in additional sales and profit.
So please don’t be penny smart pound foolish and skimp when it comes to getting professional product photography done for your Amazon business – I’m talking proper lifestyle pictures and branded infographics here!
£300+ is a good budget to set aside for this.
You’re now ready to send your product in to Amazon! And with the trademark registration and product photography on top, we’re now sitting at £5,330 spent.
And last but not least we have the product launch costs:
Amazon VINE Product Giveaways
Reviews are absolutely integral on Amazon but conversely they’re also very hard to get as Amazon customers just don’t leave reviews that often.
But we can’t simply wait for our product reviews to come in naturally as they’re a big factor in people’s buying decisions, and this is where Amazon’s Vine program comes into play.
I’ve covered this program in detail in separate blog posts but long story short is that you’ll give away up to 30 of your product in exchange for product reviews.
You can of course opt for less, but as long as the product cost isn’t prohibitive, I suggest doing the full 30. In our theoretical case that means 30 x £8.75, which is the landed cost per product, so £262.50 in product giveaways.
Amazon Sponsored Products Advertising
I considered leaving this one out as technically you can launch your product without it and wait for your sales to grow organically but the whole point of this post is to show you the true costs of a real Amazon FBA product launch and a PPC budget is vital here.
Of course the idea here in the long term is that you’ll be covering PPC costs from product sales but initially they won’t be profitable so you need to factor that into your budget. You can be more aggressive but £10 a day times 30 days will set you up nicely. So that’s £300 for advertising on Amazon.
And there you have it!
That brings us to a grand total of £5,892.50
|Amazon Sponsored Products||£300.00|
I honestly think that’s a very realistic figure but as always I’d love to hear your thoughts. How much did it cost you to launch your first product on Amazon? Was it more or less than our £5,900 figure?
If you have any questions, or even your own cost cutting tips to share, then feel free to comment below and I’ll personally get back to you.
Otherwise, until next time!
All the best,