Amazon has grown into the world’s largest online marketplace, with over 9.7 million sellers globally (about 2.5M active) offering some 600 million products.
In 2024 Amazon’s revenue was dominated by North America (the U.S. alone generated ~$438B), while fast-growing regions like Asia (notably India and Japan) and emerging markets (India, Brazil, Mexico, etc.) contributed the rest.
This scale offers enormous reach, Amazon draws ~3 billion visits per month, and even smaller sites like Amazon India see ~300 million visitors.
In short, Amazon provides instant global exposure, but also brings its own challenges. Sellers must navigate fees, fierce competition, and region specific logistics (e.g. post-Brexit rules in the UK or strict import regulations in India ).
The rest of this guide breaks down the pros, cons, costs, and realities of selling on Amazon in 2025 and beyond, to help you decide if it makes sense for your business.
Pros of Selling on Amazon
Selling on Amazon gives businesses access to a ready-made ecommerce ecosystem. It combines demand, infrastructure, and trust in one platform. For many sellers, this reduces barriers that exist with standalone websites.
1. Massive Customer Reach
Amazon gives access to millions of ready-to-buy customers worldwide, far beyond what most small businesses could reach on their own. Its trusted brand and user base means new sellers can benefit from Amazon’s reputation for reliability and convenience.
2. Built-in Logistics (FBA)
If you use Fulfillment by Amazon (FBA), Amazon handles storage, packing, shipping, returns, and customer service. This saves small teams from complex fulfillment operations and provides the coveted Prime badge, which boosts sales. In short, “Amazon takes care of … logistics, freeing up your time to focus on product development and marketing” .
3. Scalability
Amazon’s infrastructure and tools allow sellers to scale rapidly. Its warehouse network (185+ fulfillment centers globally) can absorb high order volumes during peak seasons (e.g. holidays or Prime Day), something a small operation may struggle to match .
4. Marketing and Data Tools
Amazon provides advertising, analytics, and promotions (PPC ads, Brand Analytics, etc.) that help optimize sales. The platform’s algorithms and storefront features (like A+ Content, Vine, and Sponsored Brands) can enhance visibility for good products.
5. Brand Trust and Credibility
Even without having an established brand, selling on Amazon lets you borrow its credibility. Many customers prefer the Amazon marketplace over unknown websites. Over time, however, successful sellers often build their own brand presence via Brand Registry and enhanced listings.
Cons of Selling on Amazon
Selling on Amazon also comes with structural trade-offs. Fees, competition, and platform control can limit profitability and long-term independence. These risks increase as reliance on Amazon grows.
1. High Fees and Costs
Amazon charges various fees (referral fees, FBA fulfillment/storage fees, advertising costs, etc.) that can eat into 30–40% of your revenue in total . These fees are rising over time as the platform grows (Amazon’s ad revenue hit $56.2B in 2024, up 20% YOY ). High fees mean slimmer margins, especially on low-priced items.
2. Intense Competition
Hundreds of thousands of sellers may be competing for the same keywords or category. In the U.S., over half of top sellers on Amazon.com are based in China , meaning domestic sellers also face well-capitalized overseas competitors. Popular products often see price wars and copycat listings.
3. Limited Brand Control
On Amazon you have limited control over customer relationships. Branding is hard because Amazon owns the customer experience. As one analyst notes, “branding and customer loyalty are harder to build” on Amazon when you’re one seller among millions . Amazon can change its layout or rules without warning, affecting your visibility.
4. Policy Risk (Account Suspension)
Amazon strictly enforces policies on product authenticity, customer service metrics, etc. Even a small error (e.g. counterfeits, unsafe products, too many late shipments or bad reviews) can trigger an account suspension, which locks you out of sales . Recovering from a suspension can be costly and uncertain.
5. Advertising Costs
As competition increases, ad costs (CPC) have climbed. One report shows the average Amazon PPC cost-per-click (CPC) rose to about $1.04 in 2025 (up from ~$0.71 before 2020) . This means you may need to spend more on ads to reach customers, further squeezing profitability.
6. Dependence on Amazon
Heavy reliance on Amazon is risky. Algorithm changes, policy shifts (e.g. gating rules, fee hikes), or even external factors (global supply chain issues) can impact your Amazon business significantly.
Fulfillment Options: FBA vs FBM
A key decision for Amazon sellers is choosing how orders are fulfilled. The fulfillment method affects costs, control, scalability, and customer experience. Amazon offers two primary options, Fulfillment by Amazon (FBA) and Fulfilled by Merchant (FBM).
1. FBA (Fulfillment by Amazon)
Your inventory is stored in Amazon warehouses, and Amazon picks, packs, ships, and handles customer service/returns.
Pros:
Your listings get Prime eligibility (boosting buyer trust and conversion), Amazon handles logistics, and it’s easy to scale (no need for your own warehouses). FBA also offers services like international fulfillment and easy returns.
Cons:
You pay extra FBA fees (fulfillment per item, monthly storage, long-term storage on old inventory, removal/disposal fees, labeling prep fees, etc.). These fees can be substantial for large or slow-moving items. You also lose some control (e.g. you can’t customize packing or delivery as you wish). If inventory sits unsold, storage fees can accumulate.
2. FBM (Fulfilled by Merchant)
You list on Amazon but ship orders yourself (or via a third-party logistics provider).
Pros:
Lower Amazon costs, no FBA storage or fulfillment fees. More control over packaging, brand experience, and choice of courier. It can be better for oversized, high-value, or custom items.
Cons:
FBM listings are not automatically Prime-eligible (unless you qualify for Seller-Fulfilled Prime), which can reduce sales. You must manage your own warehousing, shipping, returns, and customer service, which requires more work and infrastructure. Amazon also expects fast shipping times, so you need reliable logistics.
Brands use a hybrid approach (some FBA, some FBM/Seller-Fulfilled Prime). The choice depends on your goals and products: if you want fast growth and broad reach, FBA’s convenience and Prime exposure is valuable; if you sell specialized or bulky items, or want tighter margins, FBM might be more cost-effective.
Breaking Down the True Costs of Selling on Amazon
To know if selling on Amazon is worth it, you have to be realistic about the costs. Profitability isn’t just your sale price minus your product cost; it’s about understanding every fee Amazon will charge you. Too many new sellers are caught off guard by unexpected expenses, which can turn a promising business into a financial drain.
This isn’t just a list of fees; it’s a financial roadmap to help you forecast accurately.
1. Amazon Selling Fee
Your core costs fall into a few key categories. Nearly every product you sell will incur most, if not all, of these charges.
Selling Plan Subscription: Amazon offers two plans. The Individual plan has no monthly fee but charges $0.99 per item sold. The Professional plan costs $39.99 per month (with no per-item fee) and is generally needed if you sell >40 items/month or want advanced features.
Referral Fees: On each sale, Amazon takes a percentage (referral fee) of the item’s sale price. For most categories this is 8–15%. Some categories (like electronics, home, footwear) are around 15%, and certain categories (Amazon devices, video game consoles, etc.) can go as high as 45%. This fee is fixed regardless of fulfillment method.
FBA Fulfillment Fees: If you use FBA, Amazon charges a per-unit fee for picking, packing, and shipping your products. The fee depends on item size and weight – e.g. small standard items might be $2–3, while large or heavy items could exceed $10 .
FBA Storage Fees: Amazon charges monthly storage fees based on the volume (cubic feet) of inventory stored. Rates rise sharply in Q4 (holiday season) . There are also long-term storage fees for inventory stored over 365 days (to penalize unsold stock).
For a deeper look at the Amazon fee breakdown, check out our complete guide on how much it costs to sell on Amazon.
2. The “Hidden” Costs
The most common mistake I see is sellers underestimating the “other” costs. They focus on the referral fee but forget about returns, storage penalties, and inbound shipping. Those can easily add another 10-15% to their total expenses.
Here are the budget-killers you need to monitor closely:
Inbound Shipping Costs: Getting your inventory to Amazon’s warehouses isn’t free. Whether you’re sending a few boxes via UPS or a full container from overseas, that cost is entirely on you, and it can be significant.
Customer Return Fees: When a customer returns an item, Amazon refunds most fees but keeps an administrative fee (up to $5 or 20% of the referral fee). This can make returns costly.
Long-Term Storage Fees: Amazon operates fulfillment centers, not storage units. If your products sit for too long (over 180 days), you’ll face substantial long-term storage penalties on top of your regular monthly fees.
Removal and Disposal Fees: If you have slow-moving or unsellable inventory, you must pay Amazon to either ship it back to you (a removal order) or destroy it (a disposal order).
Beyond selling and fulfillment fees, there are other costs:
Returns Processing Fee: When a customer returns an item, Amazon refunds most fees but keeps an administrative fee (up to $5 or 20% of the referral fee). This can make returns costly.
Advertising Costs: Amazon Ads (PPC) costs vary by keyword competition, but expect to bid on the order of $0.50–$3+ per click in many niches. Effective campaigns often require significant ad budgets.
Currency Conversion Fees: If you sell in international marketplaces, Amazon charges 0.75–1.5% on currency conversion (e.g. USD to EUR).
Miscellaneous Fees: High-volume sellers may pay extra for exceeding listing thresholds. If you sell media (books, DVDs), additional closing fees apply. UPC/barcode registration, Amazon subscription tools (like Vine), or external software also add to costs.
Despite the competition, independent sellers are taking a larger share. As of late 2024, third-party sellers account for 62% of all sales, a significant increase from 53% in 2019.
Many of the most successful sellers find their footing by focusing on a specific niche. For example, authors have found success by following a focused guide to self-publishing on Amazon.
Financial Realities: Margins, ROI, Startup Costs
Selling on Amazon requires clear financial expectations. Profitability depends on margins, ad spend, fees, and time to scale. Returns are possible, but they are neither instant nor guaranteed.
1. Profit Margins
Established Amazon sellers often achieve ~15–20% net profit margins after all costs. For example, one study found 57% of sellers have margins above 10%, and 28% above 20%.
New sellers usually have lower margins (often under 10%) as they learn the ropes and spend on ads/inventory.
Private-label businesses can hit the higher end (25–35%) if they nail product/brand strategy, while generic resellers may see only mid-single-digit margins.
2. Typical Revenue
The majority of sellers earn in the low thousands per month in sales. One study reports that 40% of sellers make $1K–$25K monthly, yielding roughly $200–$5K in profit (at ~15–20% margins). Only about 10–20% of sellers break into high-volume ($25K+ per month) or $50K+ per month tiers .
3. Startup Capital
Expect to invest at least a few thousand dollars to start. Basic inventory for wholesale or private label often costs $2K–$5K, plus marketing budget.
Private label (with custom manufacturing) might require $5K–$15K upfront. Dropshipping can start with under $1K since you only pay for orders, but you still need to pay for advertising and any legal fees (trademarks, etc.). Typical startup capital for most Amazon businesses is $1,000–$5,000.
4. Time to Profitability
On average, it takes 3–6 months before most sellers reach profitability. Newbies often spend months in product research, listing optimization, and learning advertising before seeing steady profits. Patience and reinvesting earnings is usually required.
Return on investment is not instant and not guaranteed. You must account for all costs (product sourcing, Amazon fees, ads, returns).
Consider unit economics for each product. Hidden costs like storage, label prep, returns, and advertising can erode profits. Thankfully, Amazon and third-party tools (like the Amazon Revenue Calculator or repricing/analytics software) can help project fees and ROI.
But ultimately, high fees and marketing spend mean volume and differentiation (unique products or strong brands) are key to good ROI on Amazon.
Why DTC & Retail Brands Grow Faster
For DTC and retail brands, Amazon is an accelerator. Brands that already sell across DTC, retail, or marketplaces enter Amazon with demand, trust, and buying intent already proven.
Instead of spending months testing products and burning cash on discovery ads, these brands plug into Amazon’s demand engine and scale immediately.
1. Existing Brand Demand Transfers Instantly
DTC and retail brands already own branded search demand. Customers search the brand name directly on Amazon, which drives higher CTR, higher conversion rates, and lower CPCs. Amazon’s A10 algorithm prioritizes this behavior, pushing branded ASINs up organically without excessive PPC spend.
2. Multi-SKU Catalogs Compound Growth
Brands with multiple products benefit from internal traffic flow. One strong ASIN feeds others through Storefront visits, Sponsored Brand ads, and Amazon’s recommendation placements. This creates account-level growth instead of isolated product performance.
3. Lower PPC Dependency
Branded campaigns consistently outperform category and competitor targeting. Lower CPC and ACOS allow brands to stay profitable while scaling, instead of subsidizing sales through aggressive ad spend. This stabilizes performance early in the launch phase.
4. Pricing and Margin Protection
Established brands compete on trust, not price. Customers choose the brand over cheaper alternatives, reducing exposure to price wars. This protects margins and minimizes reliance on discounts, coupons, or giveaways to convert.
5. Faster Path to Profitability
Because demand and positioning already exist, DTC and retail brands skip the trial-and-error phase. Listings convert immediately, ads optimize faster, and inventory turns quickly. Many brands reach net profitability within the first month, especially when branded traffic and Storefront funnels are used correctly.
6. Amazon Prefers Proven Brands
Amazon does not reward experimentation the way DTC channels do. It rewards proof. Brands that already sell successfully off-Amazon give the algorithm what it wants: demand, conversion, and velocity. Amazon then multiplies that momentum at scale.
Who Should (and Shouldn’t) Sell on Amazon
Amazon is not a universal fit. Success depends on product economics, risk tolerance, and willingness to operate within Amazon’s system.
1. Amazon Is Worth It If
- You are a DTC or retail brand with existing demand and multiple products.
- You have a product with strong demand and clear differentiation (better quality, unique features, or branding).
- You can absorb the upfront costs and survive a period of investment before turning profit.
- You’re prepared to comply with Amazon’s rules and can manage a complex fee structure.
- You want instant access to a massive customer base and are willing to rely partly on Amazon’s ecosystem (for logistics and sales).
- You can innovate in marketing (ads, brand storytelling) to stand out, or you have an established brand seeking expanded reach.
2. Amazon May Not Be Worth It If
- You sell generic, low-margin goods where Amazon fees would wipe out profit.
- You cannot invest the necessary startup capital (at least a few thousand dollars) or don’t have a plan for reinvesting initial earnings.
- You need complete control over branding and customer relationships.
- You are risk-averse about policy enforcement; if an account suspension would be catastrophic, the Amazon environment might be too risky.
- Your business model depends on very high margins that Amazon’s commission structure doesn’t allow.
Amazon remains the dominant marketplace and can be extremely profitable for the right seller. Its vast audience and infrastructure are unmatched, but so are its fees and competition.
Sellers who succeed on Amazon are those who treat it like a sophisticated retailer, investing in product quality, optimizing every listing for SEO, engaging in smart PPC campaigns, and continuously monitoring performance metrics.
Frequently Asked Questions
Here are direct answers to the most common questions from brands deciding if Amazon is right for them.
1. How Much Money Do I Need to Start Selling on Amazon?
While there’s no single magic number, a realistic starting budget is between $3,500 and $5,000. This isn’t an arbitrary figure; it’s based on the actual costs of getting a product launched successfully.
Here’s where that money goes:
- Professional Seller Account: At $39.99 per month, this is a must-have for any serious seller.
- Initial Inventory Order: This is your largest expense. You need enough stock to cover the first few weeks of sales to avoid running out and losing momentum.
- Product Photography: Professional photos are essential for building trust and can cost between $300 and $1,000.
- Amazon PPC Launch Budget: You can’t just list a product and hope for sales. An advertising budget is necessary from day one to drive initial sales and gather keyword data.
Is it possible to launch with less? Yes, but it significantly increases your risk of failure. A solid budget provides the flexibility to test, learn, and gain traction.
2. Is It Too Competitive for New Sellers to Succeed?
It’s definitely competitive, but it’s not too late for a new seller to succeed in 2025. The key is to focus on a specific, underserved niche rather than trying to compete with everyone.
New sellers win by being smarter, not by outspending larger brands. This usually means:
- Finding a Real Niche: Instead of selling a generic “yoga mat,” find an opening with something like an “extra-thick, non-slip cork yoga mat for hot yoga.” Specificity reduces your competition.
- Building a Superior Brand: A compelling brand story, thoughtful packaging, and excellent customer service can position your product as a premium choice, even if it’s not the cheapest.
- Offering Better Value: This doesn’t just mean a lower price. It could involve bundling a useful accessory, providing a better warranty, or designing a product that solves a common problem found in competitor reviews.
3. What Is the Most Profitable Category on Amazon?
This question is a bit of a red herring. Profitability is more about your specific product’s margins, competition, and customer demand than the broad category it belongs to. A high-margin product in a “boring” category is often a better business than a low-margin product in a “hot” one.
That said, some categories consistently offer a good mix of high demand and space for private label brands. These often include:
- Home & Kitchen: This is a huge category with endless opportunities for niche gadgets and products that solve everyday problems.
- Sports & Outdoors: Shoppers in this category are passionate and often willing to pay more for high-quality gear for their specific activity, from fly fishing to rock climbing.
- Beauty & Personal Care: Although crowded, brand loyalty is strong. A product that delivers on its promises can build a loyal customer base.
The most profitable category for you is the one where you’ve found a product with solid demand, manageable competition, and numbers that work.
