By the end of this lesson you will know which of the four selling models fits the money you actually have, and you will have a written budget with no guesses in it.
Every Amazon course starts by showing you someone's earnings dashboard. This one starts with the bill, because the reason most people quit in month three is not that they picked a bad product. It is that they budgeted for inventory and nothing else, and then a storage charge, a returns charge and an accountant's invoice arrived in the same week.
There are two kinds of cost in this business. Fixed ones, which are published, verifiable and the same for everybody — you can write them down today. And variable ones, which depend entirely on what you sell and how well you sell it. Anybody who quotes you a single number for the second kind is guessing. What follows is the first kind in full, and an honest method for the second.
The four ways people sell, and what each one demands
The models differ less in skill than in how much cash sits still, and for how long, before anything comes back.
| Model | What you buy | What it demands before your first sale | Where it goes wrong |
|---|---|---|---|
| Retail arbitrage | Discounted stock from physical shops, resold on Amazon. | The least cash of the four — you buy a handful of units at a time and can stop any week. It demands your legs and your hours instead. | It does not scale, the same deal disappears next week, and many brands and categories will not let you list at all without an approved invoice. |
| Online arbitrage | The same idea, sourced from other websites instead of shops. | Similar money, more screen time, plus the tools you use to find price gaps. | Retail receipts are usually rejected when Amazon asks you to prove where stock came from. Sourcing from another retailer is not an authorized supply chain. |
| Wholesale | Stock bought directly from a brand or its authorized distributor, at trade prices, on a real account. | A company, a resale certificate, and a first order large enough for the supplier to take seriously. Also patience: opening brand accounts takes weeks of correspondence. | You will be told no far more often than yes, and the yeses take time. The upside is that a supplier relationship compounds instead of expiring. |
| Private label | Your own brand on a product a factory makes for you. | The most cash and the longest wait: samples, a production run, freight, customs, and usually a trademark before Amazon's Brand Registry will treat the brand as yours. | Everything is committed up front and you find out whether the product sells only after it has crossed an ocean. |
Nothing forces you to stay in one model. A common path is to start with wholesale because it teaches you how Amazon's fees, logistics and account health work while your money is in goods that already sell, and to move to private label later, once you can afford a run that does not sell.
What Amazon charges you
Three of Amazon's charges are published and easy to plan for. The rest depend on the physical object you are shipping, which is why the size and weight of your first product matter more than beginners expect.
The selling plan
Amazon offers two. The Individual plan costs $0.99 per item sold and has no monthly charge. The Professional plan costs $39.99 per month regardless of how much you sell.1 The arithmetic is simple: below roughly forty items a month the Individual plan is cheaper, above it the Professional plan is. The Professional plan also unlocks tools you will need eventually — bulk listing, advertising, and the reports your accountant will ask for — so most people who intend to build something switch early. Start on Individual if you want to test the water without a subscription running while you learn.
The referral fee
On every sale, Amazon keeps a percentage of the total price. It runs from 5% to 45% depending on category, with 15% covering a large share of the common ones — home and kitchen, toys and games, pet supplies, sports and outdoors, tools, office products — and a minimum of $0.30 on most categories.1 Amazon device accessories sit at the top of the range at 45%. Clothing has a tiered structure that starts at 5% for items under $15.
Look up the referral fee for the exact category you are considering, on Amazon's own pricing page, and write it down. A product that works at 8% and one that works at 15% are different businesses, and the difference is invisible until you do the arithmetic.
Fulfilment, storage, and the charges that arrive later
If you use Fulfilment by Amazon — you send stock to Amazon's warehouses and they pick, pack and ship it — you pay a per-unit fulfilment fee based on the product's price, weight and dimensions, plus a monthly storage fee based on the space your inventory occupies. On top of those, Amazon charges an aged inventory surcharge on items stored more than 181 days, a returns processing fee in some categories, removal or disposal fees when you take stock back, and an inbound placement service fee for distributing your shipment across warehouses.2
We are deliberately not printing a rate card here. Amazon revises these tables more than once a year, and a course page with stale fees costs you real money. The rates live in Seller Central's fee pages, and Amazon's Revenue Calculator will apply them to a specific product for you.3 Use the calculator on a real listing before you believe any margin you have worked out on paper.
The costs that have nothing to do with Amazon
These are the ones people forget, and several are unavoidable if you are not a U.S. resident. Lessons 2 to 5 cover each in detail; here is what they do to the budget.
| Item | What it costs | Who needs it |
|---|---|---|
| Forming an LLC in Wyoming | $100 to file the Articles of Organization, then an annual report licence tax of $60 or two-tenths of one mill on Wyoming assets, whichever is greater4 | Optional for U.S. residents at the very start; effectively required for non-residents, who need a U.S. entity to open a bank account |
| Forming an LLC in Delaware | A filing fee published in the state's fee schedule, then a flat $300 annual tax due by 1 June; Delaware LLCs file no annual report5 | An alternative to Wyoming, compared properly in lesson 2 |
| Registered agent | An annual fee to a commercial provider; prices vary widely, so compare three | Every LLC. The state requires an agent with a physical address in the state of formation5 |
| EIN (federal tax number) | Free. The IRS charges nothing6 | Every company. Beware of services charging hundreds of dollars for it — what you are paying for is the paperwork, not the number |
| U.S. address and mail forwarding | A monthly subscription, plus per-item scanning or forwarding | Non-residents, and anyone who does not want their home address on public filings |
| Accounting | Bookkeeping software monthly, plus a CPA at year end | Everyone. For a foreign-owned single-member LLC this is not optional — lesson 2 explains the filing whose penalty starts at $25,000 |
| Product research tools | Monthly subscriptions; most have free tiers worth starting on | Optional at first. Amazon's own Revenue Calculator and the public best-seller lists cost nothing |
| Trademark (USPTO) | $350 per class for a standard electronic application, with surcharges of $100 or $200 if the application is incomplete or uses custom wording; maintenance and renewal are $325 per class7 | Private label sellers who want Brand Registry. Not needed for arbitrage or wholesale |
Once your monthly sales pass a threshold set in Amazon's Business Solutions Agreement, you are required to carry commercial general liability insurance naming Amazon as an additional insured. Read the current threshold and coverage limits in the agreement itself rather than in a blog post; the figures and the wording are what your account is held to.
Putting a real number on your own start
Open a spreadsheet. Three sections, in this order.
- Money that leaves before you sell anything. Company formation, registered agent, address, the first month of your selling plan, any tools. These are knowable today, from the table above. Add them up. This is your setup cost, and for most people it lands in the low hundreds of dollars, not the thousands.
- Money that turns into goods. This is the number you choose, and the only sensible way to choose it is to decide what you can lose without changing how you live. Not what you can borrow. Inventory is the entire risk of this business: everything else is a rounding error next to a pallet of something nobody wants.
- Money that must stay liquid. Amazon pays out on a schedule, not on the day of the sale, so your second order is funded by your savings, not by your first order's revenue. Plan for at least one full purchase cycle of working capital, and for the fact that your first restock arrives before your first payout clears.
Then take one real product you might actually sell, and run it through Amazon's Revenue Calculator with its real dimensions and weight. If the result is a margin you would not accept from a stranger, the product is the problem, not the plan. Lesson 1 turns this into a repeatable filter.
What you will need for this lesson
- Documents
- None yet. Nothing here requires an account or an identity check.
- Money
- Nothing to spend. This lesson is about deciding what you are willing to spend.
- Time
- An hour with a spreadsheet, plus twenty minutes on Amazon's pricing page for your category.
- Tools
- Any spreadsheet, and Amazon's Revenue Calculator, which is free.
Mistakes that show up in the first month
- Budgeting for the goods and nothing else. Fulfilment, storage, returns and advertising are not edge cases; they are the normal cost of every unit you send in.
- Paying for a free thing. The EIN is free from the IRS. So is the Revenue Calculator. So are the best-seller lists that tell you what sells.
- Choosing a heavy, bulky, cheap product. Fulfilment fees follow size and weight while the referral fee follows price, so a large low-priced item can be unprofitable at every quantity.
- Subscribing to everything on day one. Three research tools and the Professional plan before your first sale is a monthly bill against zero revenue. Add subscriptions when a specific decision requires them.
- Forgetting that inventory ages. Stock that has not sold in six months costs you a surcharge on top of the storage you were already paying, and it is competing for cash with the product that would have sold.
- Ignoring the annual filings. The state wants its annual report. The IRS wants its forms. Both have deadlines that do not care how the store is doing.
Checklist before lesson 1
- I can name the four selling models and say which one my money fits.
- I have looked up the referral fee for my intended category on Amazon's pricing page and written it down.
- I have decided between the Individual and Professional plan for the first three months, and I know the break-even point is roughly forty items a month.
- My spreadsheet has three sections: setup, inventory, working capital.
- The inventory number is money I can lose without changing how I live.
- I have run one real product through Amazon's Revenue Calculator using its actual weight and dimensions.
- I have written down the annual costs — state report, accounting — that continue whether or not I sell anything.
Next
Lesson 1 takes the budget you just wrote and turns it into a filter: how to judge a model and a product on margin, weight, competition, restrictions and seasonality, and how to run unit economics that survive contact with real fees.
Sources
- Amazon, “How much does it cost to sell on Amazon?” — selling plan prices and the referral fee table by category. sell.amazon.com/pricing Checked 4 September 2026.
- Amazon, “Fulfillment by Amazon” — the cost categories: fulfilment, monthly storage, aged inventory surcharge on items stored more than 181 days, returns processing, removals and inbound placement. sell.amazon.com/fulfillment-by-amazon Checked 4 September 2026.
- Amazon, “Estimate fees and costs” — the Revenue Calculator and the per-unit fee estimates in Seller Central. sell.amazon.com/pricing/estimate Checked 4 September 2026.
- Wyoming Secretary of State, Business Division filing fee schedule — Limited Liability Companies: Articles of Organization $100.00; annual report licence tax $60.00 or two-tenths of one mill on the dollar of Wyoming assets, whichever is greater. sos.wyo.gov (PDF) Checked 4 September 2026.
- Delaware Division of Corporations, “How to form a new business entity” — LLCs file no annual report but pay an annual tax of $300.00 due no later than 1 June; every entity must maintain a registered agent with a physical Delaware address. corp.delaware.gov/howtoform Checked 4 September 2026.
- Internal Revenue Service, “Employer identification number” — an EIN is free from the IRS. irs.gov Checked 4 September 2026.
- United States Patent and Trademark Office, fee schedule effective 19 January 2025 — base application $350.00 per class; $100.00 surcharge for insufficient information; $200.00 for custom identification of goods and services and $200.00 per additional 1,000 characters; sections 8 and 9 maintenance and renewal $325.00 per class. uspto.gov Checked 4 September 2026.
Educational content, not legal, tax or immigration advice. Laws and Amazon policies change; verify with the official source and a licensed professional.