Amazon FBA sellers make at least $1,000 a month on average in sales, according to Jungle Scout. Meanwhile, top sellers generally earn $100,000 or more per month. The site further shares that around 40% of Amazon sellers earn $1,000 to $25,000 in monthly sales. This means these sellers make an average of up to $12,000 to $300,000 in sales per year.
Thomas Parkinson is a top Amazon seller who has made over 7 figures twice. Today, he helps other sellers in their journeys through his Fast Track FBA program. Tim Sanders of Private Label Masters also makes 8 figures per year as an Amazon FBA seller and coach.
While Amazon FBA can be potentially profitable, it also has its drawbacks. On Reddit, user TheStruggleville writes they used to earn 6 figures with Amazon FBA. However, they also warn others about how Amazon fees can be "a silent killer. " Plus the Redditor adds that buying products from China is not a good idea.
In this feature, we'll consider if Amazon FBA can make you rich. We also look at what a good profit margin is for Amazon FBA. Plus, we'll share how long it takes to be profitable and how much you need to start in the industry. Finally, we also discuss why we think local lead generation is a more scalable business model.
Can Amazon FBA Make You Rich?
Amazon FBA can make you rich but it can be challenging. According to Amazon reports, only 5% of sellers report a lifetime sales revenue of $1 million to $5 million. Moreover, only 1% achieve a lifetime sales of over $5 million. Meanwhile, a bigger percentage of 47% report about earning under $25,000. Also, 16% of sellers take 3 to 6 months to earn profit. 20% turn profit within 6 months to 1 year while 22% take 3 months or less.
To reach high levels of success, you'll need to know what's trending in the market. You'll also have to be aggressive in reinvesting back into the business. Moreover, you'll need to build connections with the right suppliers. In short, getting rich with Amazon FBA is never a guarantee. It is not a get rich quick scheme as some may have you believe. Although it's possible to make significant earnings, it is likewise worth-noting that competition can be tough in 2024.
What is a Good Profit Margin for Amazon FBA?
A good profit margin for Amazon FBA is at least 20% or higher. On average, Amazon FBA sellers earn a profit margin of 15% to 20%. Reddit user Henrik.Powers says they've made a net profit of 31% for the past 3 years. This percentage is lower compared to years ago when their Amazon business enjoyed a profit of 40%. According to the post, most wholesalers make 7% to 13% while some brand owners earn around 25% in profit margins.
Of course, Amazon entrepreneurs need to consider their expenses to maximize profitability. As you calculate your potential profits, keep in mind you'll need to spend on Amazon fees and advertising costs to keep your business running.
How Long Does It Take to Become Profitable with Amazon FBA?
It takes at least 3 months to 2 years become profitable with Amazon FBA. According to Jungle Scout, 20% of sellers were profitable within their first 3 months. 16% were profitable in their first 3 to 6 months in business while 58% were profitable their first year. Meanwhile, 11% took 1 to 2 years before they made profit.
What Percentage Does Amazon FBA Take?
Amazon FBA takes about 15% from most of its sellers. Amazon referral fees range from 8% to 45%, depending on the product category. The minimum amount of referral fee is at $0.30.
In addition, Amazon users also have to pay:
- Subscription: $0.99 per item sold (individual sellers) or $39.99 per month (professional sellers)
- Amazon FBA storage fee: starts at $0.78 per cubic foot
- Amazon fulfillment costs (packing and shipping of orders): $2.29 to $194.95 per product, depending on the product type and size tier.
Is Amazon FBA Still Profitable in 2024?
Amazon FBA is still profitable in 2024, with 87% of sellers achieving profitability. However, the rising costs of Amazon FBA fees are significantly impacting profit margins. In fact, the platform has announced fee increases for 2024, with an average rise of $0.15 per unit sold. While this may seem small for some, it can substantially reduce profits for sellers with tight margins. Moreover, the Amazon marketplace has gotten more competitive over the years. There's been a huge rise in big distributors, suppliers & brands doing FBA themselves. This cuts out third party sellers in a lot of product categories. As such, it has become nearly impossible for smaller businesses to compete with these entities.
Before starting in your Amazon FBA journey, consider the following questions:
- Do you have the initial investment necessary to keep your Amazon FBA business running?
- Are you ready to not see any return on investment for at least 3 months to 2 years?
- Are you willing to reinvest any profit to launch more products?
- Can you dedicate ongoing time and effort to this business model and know it'll never be fully passive?
- Do you have the skills to compete against a global market? Are you willing to fail repeatedly and learn?
- Are you prepared to take risks continually? (product launches are never guaranteed to succeed, there is a lot of trial & error)
Begin your Amazon FBA journey by conducting thorough market and product research. Learn all you can about the business model before investing any money.
How Much Money Do You Need to Start Selling On Amazon?
You will need $1,000 to $5,000 to start selling on Amazon. Jungle Scout data says 25% of Amazon sellers start with less than $1,000 while 64% spend up to $5,000 or lower.
YouTuber Farida Bayoumi says a good budget for starting an Amazon store should be between $2,000 to $3,000.
The Amazon expert also shared a breakdown for necessary costs, such as the following:
- Amazon Seller Central professional account: $39.99
- Product samples: $250
- Initial inventory/shipping: $1,000
- Barcodes: $250
- Product photography: $100
- Amazon FBA Course: $240
- Initial marketing: $200
- Jungle Scout: $59
Farida also adds that some optional expenses include:
- Trademark: $600 to $2,600
- Packaging upgrade: $400
- Fiverr logo designer: $100 to $200
- Lawyer patent search: $500
Can You Start Amazon FBA With No Money?
You can start Amazon FBA with no money but with certain limitations. For example, it's possible to create a free individual seller account. This allows sellers to list up to 40 products per month. However, you'll still have to spend on product costs, shipping expenses and a flat rate of $0.99 per item sold on Amazon.
Warner Fields of Fields of Profit YouTube channel says it's not advisable to start an Amazon business without money. "If you don't have very much money at all, it's probably better for you to go start a service business," he says in a YouTube video. "Or honestly, just get a job until you have a good amount of money to start."
Warner started small with $1,500 and initially resold items he bought from thrift stores. He has since scaled operations by reinvesting money back to his business. Today, Warner is a 7-figure Amazon seller and the creator of The FBA Roadmap course.
Why Local Lead Generation Is A More Profitable Business Model Than Amazon FBA?
Amazon FBA can be a good business venture to explore for those who want to make money online. However, you may end up feeling dissapointed if you're expecting to earn significant profits quickly.
As a former Amazon FBA seller myself, I'd say local lead generation is a more superior business model. For example, lead gen brings higher profit margins of up to 90%. You don't need to spend expensively on advertising. With proven SEO tactics, you can leverage free traffic to your advantage. Also, you can earn between $500 to $3,000 from each lead gen site you create. The beautiful thing is you can own multiple sites to further boost your profit potential.
Lead generation is also easier and less competitive. Instead of going against global brands, you are focusing on smaller niches in specific geographic locations. As such, you are only competing for the top search engine spots with 5 to 10 small businesses.
Once you get to rank your site, you can offer it to local business owners for rent. This will bring you a stable revenue, especially as you build long-term client partnerships. They pay you a fixed amount month after month. Since you won't have to work much once your site ranks, this can lead to passive earnings. Case in point, I own several local lead generation websites and make up to $52,000 each month.
