If you are wondering about the average income from selling on Amazon, then you have probably been dreaming about profitable, yet freeing business endeavors.
So just imagine: your own e-commerce business that allows you to live comfortably and do what you want when you want, but with very little time and effort. Sounds like a pipe dream, doesn’t it?
More people than ever before are conducting their shopping online. This phenomenon has created an incredible opportunity for would-be business owners to begin their own e-commerce businesses through the world’s #1 online platform: Amazon. Indeed, Amazon business owners are making upwards of $3 million per year selling a variety of products online!
But how much can you really make selling on Amazon? Is it worth the time and effort? Below, we walk through all that’s needed to find financial freedom through e-commerce, and the ways in which Amazon sellers actually make money.
The Average Income Selling on Amazon
Is it possible to make a living by selling on Amazon? The easy answer is “yes!,” though what kind of living depends on a number of factors, and will most likely take a little bit of time. Let’s look at some statistics…
According to Indeed.com, the average annual income of someone who sells on Amazon is about $42,000. Some even make as much as $3 million-plus in a single year! On the low end, that’s $3,500 per month in income. On the high end, $250,000.
About 26% of Amazon sellers bring in less than $1,000 per month, but nearly half report sales of between $1,000 and $25,000 each month. Nineteen percent of sellers — or about one in five — say they make anywhere from $25,000 to $250,000 each month. An incredible 6% of Amazon best sellers report sales in excess of $250,000 each month.
Okay, so you can make money selling on Amazon. But do these big numbers actually equal profit?
While big sales certainly indicate a successful business, it really comes down to profit. In any other market, the vast majority of small business owners fail to see any profit before two years. But the Amazon marketplace isn’t your average marketplace, and most sellers see profits within just a few months.
As with just about anything, first-time sellers face the biggest challenges when it comes to selling on Amazon. And yet, two-thirds of Amazon sellers report sales and profits before the end of their first year.
Twenty percent of Amazon sellers say they became profitable within three months of launching their online business, while 17% report profits after three to six months. The majority, 23%, began raking in the profits between six months and one year. An additional 20% say it took them a little longer, but they were ultimately profitable before two years.
Overall, Amazon sellers make more money when their profit margin is better. Most sellers — about 70% — see profit margins over 10%, while 36% of sellers have profit margins over 20%.
Up-Front Costs and Time Commitment of Selling on Amazon
Before starting any business, it’s important to determine what you’ll need to spend in money, time, and effort in order to get started.
While 22% of Amazon shop owners spent upwards of $10,000 to get started, doing so is far from necessary. About 32% spent between $2,501 and $9,999 to get started, and 22% spent between $501 and $2,500.
If you want to start a small business, but don’t want to spend a whole lot to get started, then an Amazon business could be a great option. Eighteen percent of Amazon sellers report spending less than $500 in order to get their e-commerce business off the ground.
Usually, these up-front costs are spent on inventory, Amazon selling fees, and promotions to attract customers.
In terms of time, selling on Amazon doesn’t have to require much. In fact, about two-thirds of Amazon sellers report spending fewer than 20 hours per week maintaining their online e-commerce business. Seventeen percent spend just 30 minutes a day on their Amazon shop!
And while it’s generally true that you get out what you put in, it’s also possible to hand the work over to the pros, so that you can focus on everything else worth focusing on.
Choosing Amazon to Sell
Amazon has been a powerhouse in the world of e-commerce since its founding as Cadabra in the summer of 1994. In that time, it’s become the world’s #1 best-performing e-commerce website, ranking higher than eBay, Walmart, Shopify, Etsy, and others.
Online sellers choose to sell on Amazon because Amazon knows how to attract customers. From its mission statement (in which they state their goal of “customer obsession”) to its generous return policy, Amazon is a place that shoppers depend upon.
A 2019 poll by Feedvisor determined that 89% of shoppers are likely to purchase a product from Amazon over any other online marketplace. Additionally, a whopping 70% of online shoppers regularly use Amazon as a search engine to find new brands and products.
And it seems this industry dominance is set to continue into the post-pandemic world. Consumer Trends reports that 74% of people believe they will continue to do their shopping via Amazon and other e-commerce platforms, even over brick-and-mortar retail stores when life returns to normal.
Fulfillment Methods for Amazon
If you want to sell on Amazon and maximize your profits, then it’s necessary to understand the two order fulfillment methods that are offered.
The first fulfillment option is Fulfillment by Merchant, or FBM. FBM sellers are responsible for storing their items, and then picking, packing, and shipping them when they sell.
The second option is Fulfillment by Amazon, or FBA. The overwhelming majority of Amazon sellers choose to sell their products as Fulfillment by Amazon. When a seller is registered as FBA, Amazon handles all aspects of an order, from storing, to picking, to packing and shipping. Amazon even deals with all returns, so this option takes a huge part of a seller’s workload off of his or her hands.
Although it would be easy to assume that FBM sellers save more money in fees (and therefore make more money), this isn’t always the case. FBA sellers do indeed pay more fees, but they also save money on storage rent, packing materials, and shipping costs — all things that can really add up in the long run. In fact, most serious and professional (and successful!) Amazon sellers choose to go the route of an FBA account.
Amazon Seller Fees
What fees do Amazon sellers pay? The answer depends on the product(s) being sold, as well as whether the products are being fulfilled by the merchant or Amazon.
There are three main fees associated with selling on Amazon:
- Selling on Amazon Fee: Both FBM and FBA sellers pay the Selling on Amazon Fee. Sellers registered as Individual Sellers will pay a Selling on Amazon Fee of 99 cents per item sold. Sellers registered as Professional Sellers will pay a monthly subscription fee of $39.99. Included in this mandatory fee are the Amazon Referral Fee and the Variable Closing Fee.
- Fulfillment by Amazon Fee: Amazon FBA sellers will pay the Fulfillment by Amazon Fee which is calculated by an individual item’s weight and dimension. This FBA fee also includes the Monthly Storage and Fulfillment fees.
- Refund Administration Fee: The Refund Administration Fee is only charged to an Amazon seller when an item is returned. In this case, the seller is charged either 20% of the refunded amount or a flat $5.00 rate — whichever is less.
Frequently Asked Questions About Selling on Amazon
1. What percentage of Amazon sellers make money?
According to a study done by Jungle Scout, 71% of Amazon sellers make $1,000 or more per month. Of that 71%, 13% can say they make between $5,000 and $10,000 each month, and 6% make more than $250,000 per month.
Only 26% make less than $1,000, while a whole 6% of sellers have become millionaires by running an e-commerce Amazon business.
2. Do sellers make more on Amazon or eBay?
According to Indeed.com, the average Amazon seller makes just under $42,000 per year. This breaks down to an average income of around $3,500 per month, which is 26% below the national average.
Indeed also reports that the average eBay seller makes about $76,000 per year, or 35% more than the national average.
3. How many sellers are on Amazon?
As of 2021, there are 9.7 million Amazon sellers worldwide. Of those, only about 1.9 million are active sellers. However, Amazon continues to grow. Each year, more than a million new sellers join Amazon in hopes of striking it rich.
4. If Fulfillment by Amazon takes over all the work, then what is left for a seller to do?
Even though a seller may pass along the responsibilities of storing, picking, packing, and shipping their items, there are still some things an FBA Amazon seller needs to do. For example, sourcing and pricing their own products still fall onto an Amazon seller’s plate. But at least in terms of the latter, online tools like this Amazon FBA cost calculator can make tasks a little easier.
5. How do I get paid as an Amazon seller?
Whether you are a new seller or a veteran, Amazon makes it very easy to get paid. When you register for your Amazon seller’s account, you will fill out all required tax forms. You will also submit your bank account information.
Once you begin selling and creating profits, Amazon will disburse your money from your online Amazon seller account into your preferred bank account. This is done every week or two, though it is also possible for sellers to request more frequent withdrawals.
6. Do Amazon sellers need to work full-time in order to bring in the big bucks?
No! In fact, most Amazon sellers work just part-time — sometimes as little as 30 minutes each day! With the Fulfillment by Amazon option taking care of the packing and shipping, sellers have more time to focus on aspects of their business like product research for new products, pricing, and SEO. Those sellers who want to free up even more time can work with a professional company like Amazon Automation.
7. How do you get started selling on Amazon?
At the get-go, getting started as a seller on Amazon is likely to cost you a little more time and research than you likely expect. It will also cost you some cash to get started, but maybe not as much as you assume.
Statistically, 58% of sellers spend less than $5,000 to get started selling on Amazon, while 28% of those spend less than even $1,000. Eighteen percent of those even spend less than $500 to get started.
Of course, your starting costs greatly depend upon what kind of items you’ll sell. Most money spent upfront goes towards product, fees, and promotions.
Pros and Cons of Selling on Amazon
- With more than 200 million Prime subscribers worldwide, Amazon is currently the world’s #1 best-performing e-commerce site
- One of the only e-commerce websites that allow its third-party sellers to store product
- Two convenient fulfillment options offered to sellers
- 89% of online shoppers say they check Amazon before any other place to shop online
- The vast majority of Amazon sellers make at least $1,000 per month
- Does not require a high amount of capital to get started
- You can run a successful e-commerce business on Amazon while working just four to five hours per week
- Seller fees are a little bit higher than some other e-commerce sites, though there are options for the seller to save money
- Amazon product categories are limited to new and/or high-quality items, which will restrict the potential of someone who specializes in second-hand product
- The average annual income of an Amazon seller is less than that of those who sell on other online retailers
- With nearly 10 million Amazon sellers worldwide, there can be a ton of competition
- Unlike some of its competitors, Amazon allows its customers a very generous return policy, though this policy also builds trust on the part of consumers
A Final Word
Running an Amazon FBA business can be a freeing and profitable endeavor. The e-commerce giant’s Fulfillment by Amazon program takes much of the hard work — including the storing, shipping, and return of product — away from the seller.
Though the FBA program does require more fees, it frees up sellers to focus on other aspects of their business. It also creates profits. Seventy percent of Amazon shop owners report profit margins of 10% or more, and Indeed.com reports that the average Amazon seller rakes in $42,000 annually.
Entrepreneurs looking for an affordable way to start a business that could bring in anywhere from $1,000 to $250,000 per month would do well to consider a Fulfillment by Amazon e-commerce shop.