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5
MINUTE READ TIME
Published
February 13, 2024
|
Curt Williams
|
Partner Spotlight

Part 1: The True Cost of Launching a Product on Amazon: A Comprehensive Guide

Part 1: The True Cost of Launching a Product on Amazon: A Comprehensive Guide

Table of Contents

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This is part one of our two-part guide to launching a new product or brand on Amazon.

Launching a product on Amazon is a promising venture that opens the doors to a vast customer base and unprecedented growth opportunities. However, behind the scenes, aspiring entrepreneurs must navigate a complex web of costs. In this guide, we'll delve into the true costs of launching a product on Amazon, covering each stage from pre-launch preparation to financial considerations and highlighting key tools and services.

Beyond making sales, a successful product launch on Amazon is about establishing a brand, gaining visibility, and setting the stage for long-term success in the competitive marketplace.

Before we dive into the details of the costs of developing a product, it is recommended to first familiarize yourself with the costs associated with selling on Amazon itself. 

As detailed in the Carbon6 fee stack white paper, these costs encompass referral fees, fulfillment fees, storage fees, subscription fees, and many others. Amazon’s fee structure is a constantly updating and evolving list and, and it's crucial to understand these costs for accurate financial planning.

Pre-Launch Preparation

It’s vitally important to not rush into the ecommerce business. Plenty of entrepreneurs have come before you and they have made thousands of brilliant decisions as well as thousands of devastating mistakes – take your time learning from their trial and error to bypass that step. Once you’re ready to start, it’s time to figure out what to sell, who to sell to, and learn about who you’re selling against!

Research and Planning

Invest time and resources in thorough product research and planning, utilizing tools like Jungle Scout or Helium 10. These tools often come with subscription plans, ranging from $30 to $100 per month, but they are well worth it if you end up identifying a winning Hero SKU!

Learn more about using AI to assist your product development: AI in Product Development: Leveraging The New Age of Innovation

Wholesale Products

Maybe you just want to buy and sell an existing product – for that wholesaling process you can save time scouring the internet with advanced wholesale tools like ScanUnlimited.

Identifying Target Audience and Market Demand

Leverage tools such as Google Trends or AMZScout, (which may cost between $10 to $50 per month). Find out how markets are trending – and, like a seasoned surfer, find the perfect wave to ride.

Watch now: Learn from Brandon Young and Tim Jordan about launching a profitable business on Amazon

Competitor Analysis for Competitive Advantage

Tools like Perpetua can aid in competitive analysis, with subscription costs typically ranging from $30 to $100 per month. It’s key to know who and what you’re up against. Keep your friends close and your enemies closer. SellerTools can also help you identify which keywords your competitors are hitting, allowing you to find your perfect niche.

Product Development

Okay - you’ve done your research, you believe you have identified a gap in the market, but it’s going to take more than a wholesale product – this is something that needs to be invented or built from the ground up. On the back of that bar napkin you have sketched it out – it is THE perfect product to launch on Amazon!

Now there’s just one problem – how do you turn that sketch into an actual product?

Design, Manufacture, Deliver

At Linton Group, we have a very successful track record for launching high quality products on Amazon. In fact, in 2023 alone, our New Product Launch Program enabled our partners to generate over $21 Million in retail sales, with an average ROI of over 600% for every dollar invested in the program.

Here’s how the New Product Launch Program works:

Phase 1 – Feasibility

Bring us your idea. Whether you have a prototype, a rendering, that sketch on the napkin or even just a thought in your head – we’ll spend the first 1-2 months diving into what it might look like for you to bring this product to the market. 

The deliverables for Phase 1 are reports on the following:

  • Production Feasibility – can the product be made? And does it make sense to make the product in the way you’re thinking about it?
  • Tooling, Molding & Unit Cost Estimates – the tooling process can be a very expensive part of the product development. Making custom molds can easily run into the tens of thousands of dollars depending on the complexity of the project. We’ll tell you what those tool costs will be upfront and we’ll also give a quote for what each unit will cost to produce. Curious to learn more about tooling? Read our blog about it here
  • Lead Time Estimate – we’ll provide an estimate for how long it will take to design and develop a successful prototype and then how long it will take for mass production.
  • Compliance & Patent Discovery – Most products require compliance testing for safety standards, those can get pricey. We’ll let you know what to expect. We’ll also research any IP issues that may exist for your idea and bring those to your attention.

The cost of Phase 1 starts at $2500.00/mo and can be significantly more depending on the complexity of the product.

Phase 2 – Prototyping

During this phase, things get exciting and your product starts to come to life! The design and prototyping of a product can end up having several rounds of back-and-forth with the factory. This phase typically lasts 2-3 months.

The deliverables for Phase 2 are the following:

  • Product Spec Development – we flesh out the exact details and features and then get to work creating 2D & 3D renderings of your product.
  • Identification of Qualified Factory/s – we search our network of over 800 vetted overseas factories to identify the best options for the production. 
  • Sourcing and Negotiation – the factories come back to us with product proposals and pricing. Then we negotiate to come up with the best price for the highest quality product. 
  • Proof of Concept Prototyping – utilizing 3D printing and/or rapid prototyping techniques, we produce and test your product until you are 100% satisfied with the result.

The cost of Phase 2 continues at the monthly rate agreed upon for Phase 1.

Phase 3 – Manufacturing & Logistics Management

You know the costs, you know the timing, and now you are actually holding a prototype of the product in your hands! For the next 2-3 months, we move into mass production and then delivery to your warehouse.

The deliverables for Phase 3 are the following:

  • Draft & Issue Factory PO – we issue the Purchase Order for whatever qty of the product you’d like to produce and send it to the recommended factory/s.
  • Quality Control – this is a crucial part of the manufacturing process. Our in-house QC team will perform random inspections during and at the end of the production process to make sure the factory is keeping up with the agreed product standards. An exhaustive inspection report will be presented to you for your perusal.
  • Compliance Management – we will oversee all the logistics and processes involved with getting the product tested and the compliance documents secured.
  • Import, Customs & Delivery – not only will we ensure your shipment leaves the factory safely and on time, we will also manage the import process, customs clearance, and the delivery to your 3PL or FBA warehouse.

The cost of Phase 3 is 8% of the total PO cost.

This is the end of the first part of our two-part guide, where we covered some of the initial steps needed before launching any new product on Amazon.

You can read the second part here.

NEW! Download the free How to Rank Organically on Amazon white paper.
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