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Amazon remains one of the largest ecommerce marketplaces worldwide, generating almost 514 billion USD in net sales in 2022. With nearly 2 million small- and medium-sized third-party Amazon sellers, it’s easy to assume that these sellers earn a lot each year.
Every budding entrepreneur who wishes to cash in on the ecommerce trend has their sights set on selling on Amazon. After all, it’s the most lucrative online selling platform these days—or is it?
How much money does an average seller really make on Amazon? And are they profitable? In this blog, we explore the average earnings and profits of an Amazon seller. We’ll also look at what affects these numbers and give tips on how to maximize revenues and profits.
According to a recent survey from Jungle Scout of over 2,000 Amazon sellers, 45% of respondents make anywhere from $1,000 to $25,000 per month. That’s an annual sale of $12,000 to $300,000 per month. Of course, some sellers make more or less than the median average.
The survey revealed that 25% of the respondents make $25,000 to $250,000 per month, while only 17% make $500 per month in sales. It’s also interesting to note that 46% of SMB Amazon sellers have already reached more than $100,000 in lifetime sales.
However, Amazon sales don’t paint a complete picture of a seller’s performance. A healthy Amazon business must be profitable above everything else. Keep reading to learn what makes an Amazon business profitable in 2023.
A lot of budding entrepreneurs consider Amazon to be the easiest online ecommerce platform to turn a healthy profit. With an initial investment as low as $500, you can set up shop and use the various available Amazon tools to run your business.
More than a quarter (27%) of Amazon sellers experience profits higher than 20%, while over half (52%) report profit earnings higher than 10%. As a matter of fact, 14% of SMB sellers earned over $50,000 in lifetime profits, while 9% reported lifetime profits of over $100,000. Not bad for a business that started as a “side hustle” for many.
If you’re wondering how much time sellers spend working on their Amazon business, a whopping 76% of sellers mentioned they only spend less than 20 hours per week working on their Amazon stores. Considering the profits vs. the hours spent working, that’s great value for their time.
But while profitability is achievable, how long does it take to get there? From the same survey mentioned above, 22% of respondents were profitable within 3 months—the fastest among the sellers surveyed. Only 13% took longer than one year to be profitable, while the majority (64%) achieved profitability within their first year.
Profitability is affected by several critical factors. This includes identifying profitable niches, choosing the right products, pricing competitively, and managing seller costs. Furthermore, staying profitable on Amazon requires constant adaptability and flexibility in the face of the ever-evolving ecommerce landscape.
Amazon frequently introduces new features and policies that can impact sellers’ performance and profitability. With the right tools in place, such as the ones Threecolts provide, you can remain on top of your Amazon selling strategy and be profitable in the shortest period possible.
When selling on Amazon, it's essential to consider the costs associated with the platform. Understanding these costs upfront is crucial for accurate financial planning and determining the profitability of your Amazon business. Here are some of the key costs you should be aware of:
Each product sold on Amazon is subject to referral fees, which are a percentage of the sale price. Think of it as the commission that Amazon gets every time you sell a product on its platform. The referral fee percentage varies based on the product category, ranging from 6% to 45% of the item's sale price.
If you choose to use Amazon's FBA (Fulfillment by Amazon) service, which handles storage, packaging, and shipping, there are additional fulfillment fees. These fees depend on the size, weight, and category of the product being sold. Our guide on Amazon FBA Seller Fees for 2023 will give you a detailed breakdown of the costs associated with selling on Amazon FBA.
For professional sellers, Amazon charges a monthly subscription fee of $39.99. This fee provides access to additional selling tools, such as inventory management and advertising options.
If your products are stored in Amazon's fulfillment centers, you may incur storage fees. These fees are calculated based on the volume of space your inventory occupies and vary depending on the time of year and product size.
Amazon offers various advertising options to help sellers increase visibility and drive sales. These advertising services, such as Sponsored Products or Sponsored Brands, have associated costs typically based on a pay-per-click model.
Sellers are responsible for shipping the products to Amazon's fulfillment centers. Additionally, packaging materials and shipping labels add to the overall cost of selling on Amazon.
Depending on your business model, you may incur costs related to sourcing or manufacturing the products you sell on Amazon. These costs include product development, manufacturing, and procurement.
In case of returns or refunds, sellers may be responsible for covering the associated costs, including return shipping fees and potential restocking fees. It's important to note that the specific costs can vary depending on various factors, such as the product category, size, and seller performance. Familiarizing yourself with Amazon's fee structure, using fee calculators provided by Amazon, and closely monitoring your expenses will help you understand and manage the costs of selling on Amazon effectively.
Selling the right product is one of the most important factors influencing Amazon seller earnings. Based on recent data, consumers are buying more groceries, clothes, and pet supplies on Amazon and fewer items under the Home & Kitchen, Electronics, and Office Supplies categories.
But before you go ahead and list your products under these top-selling categories, you should first study the market. Choosing the right product involves thorough market research, considering factors such as demand, competition, profit margins, and potential growth.
Sometimes, top-selling categories may not be the best fit for your business if you can offer something better in less popular categories. Handmade items, while not the most popular category, have one of the highest numbers of profitable sellers earning more than 20% net margins. Another example is the Automotive Parts & Accessories category, a less popular category where almost 50% of sellers earn 21% and above margins.
Remember, less popular categories have lower competition. However, you must ensure that there’s enough demand to make your efforts worthwhile. By identifying products with high demand and low competition, you can position yourself for higher profitability. Additionally, focusing on niche products that cater to specific customer needs can help differentiate your store and achieve better margins.
Amazon offers a lot of sub-categories under bigger and more popular main categories. Dig deep from your main category until you find a sub-category with a consistent sales history and low competition.
If you’re a new seller, finding the right products to sell on Amazon can be tough. With tools like Tactical Arbitrage, SellerRunning, and ScoutIQ, you can find profitable products with just a few taps.
Tactical Arbitrage scans thousands of websites to find the best-selling products and the lowest supplier prices. SellerRunning streamlines the product search process and lets you add listings to your store with one click. ScoutIQ helps you find profitable items to sell on Amazon with one scan.
Finding profitable products doesn’t have to be complicated. With Amazon tools at your disposal, you can complete this crucial step quickly and effortlessly.
Fulfillment options play a crucial role in determining seller margins on Amazon. Fulfillment by Amazon (FBA) allows you to store your products in Amazon's fulfillment centers, leveraging their vast infrastructure for storage, packaging, and shipping. This option provides several advantages, including Prime eligibility, faster shipping, and enhanced customer trust. By opting for FBA, you can increase your sales and overall earnings due to improved customer experience and visibility.
On the other hand, Fulfillment by Merchant (FBM) allows sellers to fulfill orders themselves or through third-party logistics providers. FBM gives you more control over the fulfillment process but requires additional time and resources for managing inventory, shipping, and customer service.
While FBM can be cost-effective for certain sellers, FBA generally offers greater convenience, scalability, and potential for higher earnings.
Ultimately, the choice between FBM and FBA depends on various factors, including your capacity, resources, product characteristics, and business goals. Analyzing the cost implications, customer expectations, and potential sales impact can help you make an informed decision about the most suitable fulfillment option for your specific circumstances.
To maximize profits on Amazon, new sellers can follow these tips:
As mentioned above, selling the right products is the key to high earnings and profits. Before diving into selling on Amazon, conduct comprehensive market research to identify profitable product opportunities. Analyze product demand, competition, profit margins, and customer preferences to make informed decisions about the products you choose to sell.
Create compelling and informative product listings that highlight the unique selling points of your products. Use high-quality images, well-crafted product descriptions, and relevant keywords to improve search visibility and attract potential customers.
Amazon is a very competitive marketplace, and you only have a flicker of a second to make an impact on a potential buyer. When a consumer searches for an item on Amazon, your product must appear within the first few search results (better if at the top) for it to fall within the radar of your buyer.
Your product name and photo must be compelling enough to make the buyer click on your listing. Once they’re inside, your product description must thoroughly answer any questions they have about your product.
Find the right balance between pricing competitively to attract customers and pricing profitably to ensure healthy profit margins. Regularly analyze competitor prices, adjust your pricing strategy accordingly, and consider using repricing tools to automate the process.
Another Threecolts tool, SmartRepricer, is built to automatically adjust your products’ prices based on market conditions. It’s proven to increase your profits and help you earn the coveted Buy Box more often. You just set your desired profit margin, and the tool will take care of the rest. You can stay competitive and attract more customers, maintaining your strong market presence.
As mentioned previously, Amazon FBA has great benefits for new sellers. Despite the additional costs you have to pay, Amazon FBA has crucial advantages that can increase your earnings and profits.
Utilize Amazon's FBA service to outsource storage, packaging, and shipping. By leveraging FBA, you can take advantage of Amazon's efficient fulfillment network, benefit from Prime eligibility, and enhance customer trust, which can lead to increased sales and profits.
If you’re worried that there may be lost opportunities due to mishandled product inventory, you can use a tool like DimeTyd Sellers. This tool analyzes your Amazon inventory and recovers everything you’re owed—whether these are refunds due to mishandled returns, damaged goods, lost inventory, or excessive fees. By efficiently handling your inventory, you can ensure that you earn the most profit possible from your products.
Invest in marketing and advertising to increase product visibility and drive sales. Explore Amazon's advertising options like Sponsored Products, Sponsored Brands, and display ads to reach potential customers.
Additionally, consider external marketing strategies such as social media promotion and influencer collaborations to expand your brand reach.
Keep a close eye on your seller performance metrics, such as order defect rate, late shipment rate, and customer feedback. Maintaining a high level of performance can positively impact your visibility, buy box eligibility, and overall sales.
Resolve customer issues promptly, provide excellent customer service, and actively seek positive feedback to improve your performance. You can use a tool like FeedbackWhiz Emails to automate requests for customer feedback. It’s a smart tool that targets your best customers who are most likely to leave a review and excludes the worst ones who requested refunds or frequently leave negative feedback. Gaining a lot of positive reviews is one way to stand out from your competitors, increasing your sales and profits.
FeedbackWhiz also lets you analyze your sales and profits through a comprehensive and customizable dashboard. You can break down sales, taxes, promotions, refunds, and fees to understand your profitability and optimize your Amazon strategy.
Optimize your inventory management to avoid stockouts or excess inventory. Analyze sales velocity, forecast demand, and use tools or software to automate inventory replenishment. This will help you maintain a healthy stock level, reduce storage costs, and avoid missed sales opportunities.
Stay updated with Amazon's policies, guidelines, and marketplace trends. Amazon is constantly evolving, and staying informed will help you adapt your strategies accordingly and seize new growth opportunities. By implementing these tips, new sellers can position themselves for success on Amazon and maximize their profits in the competitive ecommerce landscape.
Expanding your Amazon business internationally can be a game-changer for Amazon sellers looking to grow their sales and reach a wider customer base. With Amazon's global presence and established marketplaces in various countries, selling internationally has become more accessible than ever before.
By tapping into new markets, you can reach a more extensive customer base that may have different preferences and demands. Selling internationally allows you to diversify your customer portfolio, reducing dependence on a single market and potentially mitigating risks associated with market fluctuations or seasonality. Moreover, certain product categories may have higher demand in specific regions, providing the opportunity to capitalize on niche markets and gain a competitive edge.
When considering international expansion, it's essential to choose the right markets to target. Conduct thorough market research to identify countries with a high demand for your product category. Consider factors such as market size, growth rates, cultural fit, and competition. Look for countries with a large customer base and a growing ecommerce market.
Understand the legal and regulatory requirements for selling in different countries. Research import/export regulations, tax implications, product compliance, and any country-specific requirements related to your product category. Ensure that you can meet these requirements and navigate any potential challenges.
Our comprehensive guide on how to sell on Amazon Global Sites will give you a step-by-step process for listing in Amazon Marketplaces and help you determine the crucial factors for success.
Suppose your business is thriving domestically, and you have a solid foundation in terms of product quality, customer satisfaction, and operational efficiency. In that case, it may indicate that you're ready to explore international markets. Are you receiving consistent inquiries or orders from customers in specific countries? This may suggest that there’s an untapped market waiting for your products. These signs of international demand can provide valuable insights into potential markets to target.
You can also consider expanding internationally if you're experiencing fierce competition and diminishing growth opportunities in your domestic market. International expansion can be a strategic move to sustain and accelerate your business growth.
With proper planning and execution, international expansion can open up new avenues for growth and help you establish a global presence in the competitive ecommerce landscape.
Selling on Amazon presents a profitable opportunity, especially for those who are willing to put in the work of finding the right products and continuously optimizing their listings. However, to truly maximize your earnings and profits, you need to arm yourself with the right tools.
Threecolts offers a suite of solutions that can help you find profitable products with a few clicks, adjust prices to match market conditions automatically, maximize profit by finding lost refund opportunities, and encourage customer reviews from your best customers. Plus, you gain access to a comprehensive dashboard that helps you analyze your sales and other metrics so you can make data-driven decisions to optimize your Amazon selling strategy.
By utilizing these powerful tools, you can remain competitive, optimize your operations, earn more and achieve success on Amazon. Start using Threecolts today and take your Amazon business to new heights.
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