[dropcap]T[/dropcap]here has been a lot of “heated” debates about whether or not you should let Amazon label your products on Facebook groups, in Amazon selling forums, Reddit and other places. Whenever a decision comes down to impacting your businesses bottom line then, ANY, substantive and educated discussion around the subject is good for everyone.
That’s the American spirit. Debate and decide.
True costs explained
What we hear a lot of the debate centered around for labeling is the cost. Currently, Amazon charges $.20 cents per item if you ask them to label your product for you. In order to make the idea more digestible, we wanted to share a cost example with a “volume” type of item that a lot of sellers are selling on Amazon.
CDs.
This could be the same for books as well and we know there are a lot of book sellers out there in Amazon ecosystem. Same math applies for Private Label or Online Arbitrage sellers too.
The chart is a little hard to see at it’s total length so we broke it up into two sections for you.
The formula is pretty straight foward:
Sales Price of CD (minus) Cost of CD (minus) Cost of Labeling (minus) Cost of Supplies
And this first clip is on the “low end” of quantity, cost and profit. Here is the same scale on the higher end of it so you can see the multiples.
So if you we’re able to sell all 1000 of your CDs for a minimum price of $9.99 then you would gross around $9,000 dollars. We didn’t back out the cost of labeling in the formula, but you can see it would cost you another $200 in profit.
The question we want to start a conversation around is if that $200 in savings is worth the time it takes to label those 1000 CDs? Especially if you stand to make $8, 890 in profit.
True cost of your time
So the math we believe works out to be about 2.2% roughly on the 1000 CD example from above. That’s how much profit you’re giving up in order to allow Amazon to label your products for you.
But wait,there is more… (I always wanted to say that)
If you chose to do the labeling yourself, then there are some hidden costs that you can’t forget about. For example, those labels that you apply yourself, they cost cost money.
So now the cost savings to do your labeling is lower. The item above (we made it a live link to Amazon if you really want to buy these labels) is for 1000 labels exactly (fits our example perfectly) and costs around $12.88 on a prime offer with no shipping.
So now the costs savings is reduced to: $200 – $12.88 = $187.12 or less if you didn’t get free shipping
But let’s keep it at the $187 figure for now.
But I can hire employees to do this work and pay less?
You sure can. But is your small business ready to hire on your first employee? Are you going to hire on this first employee just to help you label your items? If you hired on a helper at $10 an hour, then of course there would be savings because it wont take someone 18 hours to label 1000 CDs.
So if you already have employees in place then your most likely a green seller and labeling would be a perfect task to keep them busy and gainfully employed.
But if you don’t already have employees then we would like you to consider these potential costs or hiccups:
- Costs of payroll and accounting (even if you use quickbooks, Xero or some other platform…they cost money)
- Adding an employee usually means more billable hours for your accountant because he’ll need to make sure your on the straight and narrow with Uncle Sam
- Costs of liability if your employee files a wage claim against you (you can’t always just 1099 them, check your local state laws and be careful)
- Costs of liability if your employee injures themselves on the job (you can bet they are going to sue or file a workers comp claim)
There are actually a lot more nightmare scenarios but we cant cover them all here and we think you get the point.
Pulling it all together
If you’re casually selling on Amazon and don’t process a whole lot of items each month then you should probably just label your items. If you want to scale your business and compete with the big boy sellers across the markets, then you must always be thinking about scale and efficiency. This is one of those decisions you’ll need to make.
