How much profit do Amazon sellers really make? It's the question on everyone's lips. The #amazonseller hashtag on TikTok has over 715 million views, and would-be resellers are keen to know just how profitable this business is.
Here's the scoop: 70% of Amazon sellers are making money. 89% have a profitable online business, with 17% making between $1001 and $5000 per month. A further 18% make between $5001 and $25,000. In other words, selling on Amazon is lucrative, and if you do it right, you can make a great income from it.
However, you need to know how to sell on Amazon if you want to make a profitable business. This guide will explain everything you need to know, including:
- The average Amazon seller income
- The average profit
- How much money you need to get started
- How long it takes to become a profitable Amazon seller
- How to achieve higher profit margins
Let's dive in.
What Is the Average Amazon Seller Income?
There are a lot of factors determining how much you make on Amazon. It takes a long time to build a successful Amazon business, so comparing Amazon sellers that have been doing this for 10 years with a newbie is somewhat unfair.
Nevertheless, knowing the average monthly sales across the board can help you determine if selling on Amazon is the right path for you.
Generally, new Amazon sellers make $30,000 in annual profit. This is not total earnings, but the profits you make over the course of a year, accounting for outgoings such as inventory and Amazon fees.
Amazon FBA sellers can make a decent living by selling on the site. However, it's vital to consider how profitable it will be in the long run and whether you can make your business work.
In the end, it's worth it, with 46% of Amazon sellers reaching total lifetime profits of over $100,000.
What Are the Average Monthly Sales for Amazon Sellers?
Jungle Scout's State of the Amazon Seller report breaks down Amazon seller earnings into the following percentages:
For reference, these figures refer to the monthly sales of each seller. So, those making $500,000 are not taking home this amount, and a significant portion will be reinvested into the business.
The above figures are based on using fulfilment by Amazon (FBA), but there are, of course, other selling methods. It's tricky to say exactly how much a new online business will earn selling on Amazon, since the monthly sales depends on a vast range of factors ranging from fulfilment method to the quality of product descriptions.
Take these estimates with a pinch of salt, as it all hinges on your business plan.
How Much Do Amazon Sellers Profit?
According to Brand Builder University, new sellers can make $75,000 in monthly product sales with a strong business plan, and this equates to $15,000 take-home pay with an average profit margin of 20%.
Your profit is, however, contingent on a huge variety of factors. Firstly, it hinges on your sales volume and gross income. Then, no matter how much you earn, you will have certain business expenses, including:
- Fulfillment and storage fees (including long-term storage fees and other unexpected costs)
- Amazon fees
- Cost of stock
- Extra costs if you use private label products to make them unique
The most successful Amazon sellers (those in the 1% category making seven figures) are the ones who know how to assess their business models and make a profit no matter what.
It's not enough to simply put the price up to improve your profit margin. After all, you're competing with numerous other Amazon sellers who may be marketing the same or similar products. Instead, if you want to increase your profit margins, you need to increase your sales volume. This means learning how to differentiate your products, sell to your ideal customers, and convey your unique value proposition.
Is Selling on Amazon Still Profitable in 2023?
Yes, selling on Amazon can still be profitable in 2023. You might think that, with so many Amazon sellers, the marketplace is too crowded. After all, there are over 9.7 million Amazon sellers globally, and almost 2 million of them are active on the platform. Some of those sellers simply maintain the same business model they have used for decades since they were doing it with retail arbitrage before the days of software. It's intimidating to compete.
However, your Amazon FBA business is not competing with every Amazon seller. You are only competing with those within your niche and who sell in the same country. You can still make money online by selling on Amazon, but if you want to grow a successful business, you need to have a solid plan in place.
How Much Money Do I Need to Start Selling on Amazon?
The biggest hurdle to starting any business is funding. One of the most attractive features of becoming an Amazon seller is that you don't need tons of money to get started! It's possible to grow a healthy Amazon business with a couple of hundred dollars to get you going.
According to the Jungle Scout report, here's how much Amazon sellers spent starting their business:
- Less than $500: 17%
- $500-1000: 12%
- $1001-2500: 15%
- $2501-5000: 21%
- $5001-10,000: 13%
- $10,000+: 19%
- Don't know: 1%
The report also notes that most Amazon sellers began as bootstrappers, funding their Amazon businesses with their own money.
How Long Does It Take to Become a Profitable Amazon Seller?
The other factor you need to consider is time. Healthy profit margins don't come right away, and you will spend a couple of months trying to recoup the initial investment you made. This investment phase includes paying for things like stock, Amazon fees, and promotions.
Luckily, the respondents to the Jungle Scout survey had a positive outlook. 64% were profitable within the first year, with 22% seeing profits in the first three months. Given that this is a survey, there's a chance that only successful Amazon business owners responded, so take these findings lightly.
How Much Time Should You Spend Selling on Amazon?
If you want to achieve the amazing annual sales that other Amazon sellers are seeing, then you need to put the work in. The good news is that, compared to a lot of other businesses, selling on Amazon with online arbitrage is much less time-consuming.
Most Amazon sellers spend less than 20 hours per week on their business. Likely, this depends on how much time you want to invest and what else is happening in your life. The great thing about selling on Amazon is that you get to be your own boss, so the amount of time to spend on it is up to you.
How to Achieve Higher Profit Margins
Now that you know how much money Amazon sellers can make, you're probably going to be tempted to get started. As we've already noted, though, new sellers might be surprised to learn how much goes into selling on Amazon.
If you want to create a good profit margin and get on your way to making seven figures of Amazon FBA income, these ten tips will help you.
1. Differentiate Your Business
With all the sellers on Amazon, you need a way to stand out. The super sellers are the ones who know how to play the game. After all, new sellers have to compete against seasoned pros who are operating in the same marketplace.
The first step is to find a profitable niche. This will help you define your brand and start selling with products that fit the criteria. For a new seller, this is important, because it helps customers figure our who you are.
If you want strong profit margins, find a niche that has high interest and low competition. Often, it's a case of finding a compromise between the two.
Then, you can start to differentiate your products within that niche by adding a unique value. Your Amazon seller profits will soar if you learn how to differentiate through improvements, branding, and promotions.
2. Use Data
Don't shy away from data. You can view important metrics like your monthly or annual sales, inventory, and lifetime sales in your Amazon seller account. However, the best way to grow your business venture is by investing in software.
There are plenty of software options for you to try, including options like CheddarSoft. With some programs, you can view, manage, and restock your inventory in one place. Others will help you source products and forecast industry trends.
Without using data-driven market research, you can't grow your business. Just because you think a product is a good idea doesn't mean the market agrees, so make sure you assess the numbers before you commit to a business decision.
3. Understand How FBA Works
Amazon's fulfillment by Amazon involves using Amazon's warehouses to fulfil and ship orders. There are many pros to this method, including the quick shipping of Prime and the fact that Amazon handles your customer service.
However, you can end up screwed by the system if you don't understand how it works. Amazon FBA charges fees based on the type, size, and weight of a product. Essentially, these are inventory storage fees and shipping fees.
Get familiar with the system and carefully consider it before you invest in new stock.
4. Learn to Negotiate
Whether you source products from Facebook sellers, retail stores, or buy your stock wholesale, you need negotiation skills. New sellers can end up suffering with low profit margins if they don't know how to negotiate, so make sure you hone those skills!
Negotiation can help you haggle down prices from suppliers, ensuring your reselling margins are even higher. There's an art to it, though. If you offend your suppliers with a low-ball offer, they could refuse to work with you. Maintaining good relationships is essential to help your Amazon business thrive, so don't compromise on friendliness just because you want to get prices down.
5. Pay Attention to Your Products
When you start selling on Amazon, it's tempting to find as many products as possible and list them all right away. However, this is not the way to build a profitable Amazon business. Take things slower and carefully consider your plan.
In your first year of selling on Amazon, you might only list three products. By paying attention to these items, you can build a healthy profit margin.
Firstly, make sure you're happy with the product you're selling. If it's low-quality, you risk getting bad reviews from customers. Secondly, launch your items at the right time. Take care with each launch, offering promotions and marketing with each one.
Finally, pay attention to your product descriptions, as this is how your customers will find you.
6. Keep in Stock
Your organic rankings on Amazon will tank if you're consistently going out of stock. There's an art to getting your stock right. Buy too much, and you'll have to spend on slow-moving stock fees and storage. Buy too little, and your customers will become disappointed.
This is why good supplier relationships are so key – they will help you maintain a steady supply of goods.
7. Plan Carefully
Selling on Amazon takes time. We know how exciting it is to launch your new business, and many new sellers want to launch everything right away. However, if you want to grow a sustainable, thriving business, you need to take things steady.
Make sure you have a plan in place, detailing everything from your fulfillment method to your intended suppliers. Assess the different business models and consider which one works best for you. Then, draw up a five-year plan of how you will launch your products.
8. Learn from the Best
If you're feeling lost, don't worry. We all start somewhere, and even the best Amazon reseller was a new seller once upon a time. There are ways you can learn from the best, and you should take advantage of this if you want to take your lifetime profits to new heights.
The money you can make selling on Amazon is, essentially, limitless. By keeping up with industry experts and joining webinars with seven-figure resellers, for example, you can get advice from successful Amazon sellers and grow your business.
OA Cheddar offers bi-weekly webinars with the experts. Sign up today!
9. Put the Effort in
As with any business, you need to put in some time and effort. As we noted above, Amazon sellers can spend 20 hours or less selling on Amazon and still make a profit. This is especially true if you automate some of the process by investing in software, leads lists, and hiring help.
That said, if you want the best profit margins, you are going to need to spend some time honing your craft, communicating with suppliers, and sourcing the best products. Amazon FBA is great for making side hustle money, but take this as a reminder that you actually have to hustle!
10. Invest in Amazon PPC
Traffic on Amazon doesn't come automatically. Many sellers make the mistake of assuming that they can grow a business based purely on SEO product descriptions and Amazon's high traffic.
However, if you want to really make your profit margin soar, consider investing in ads. Amazon has numerous ad formats you can try out. Amazon PPC involves using ads run by experts to help drive your sales.
Set aside some budget to invest in marketing like this, and you can start making even more money in the long run.
Grow Your FBA Business Today with OA Cheddar
FBA sellers can make plenty of money selling on Amazon. However, if you truly want to take your business to the next level, you need to plan your business model carefully.
Want to grow to heights you hadn't even imagined? Try OA Cheddar today, and get hand-picked leads lists delivered to your inbox daily. Plus, you'll gain access to expert webinars to guide you along the way.
Why wait? Sign up today!