If you want to sell on Amazon, your product research and selection are the most important parts of your strategy – never underestimate this task! Pick the right product and your eCommerce business will flourish. Choosing the wrong product will, of course, make sales and profits much more difficult.
Research is a daunting prospect for many sellers, and there is no denying it is a difficult one. But product research isn’t difficult! Let’s examine what Amazon product research actually involves.
Table of Contents
What is Amazon Product Research?
This is the process of researching products to sell on Amazon. This involves analyzing what’s selling so you can get in on the action. You look for products that you can source cheaply and sell for a profit. Doesn’t that sound easy? However, there are many important factors to consider in the process.
The niche you chose, your brand restrictions, your competitors, your costs, and fees will all affect whether your products are viable.
Why is it Important to do Product Research?
You can not identify potentially profitable products if you do not spend enough time improving your research skills. Randomly picking Amazon products just because they look good and you think they will sell will not work because what you think and what your research uncovers are likely to be complete opposites!
Sell what sells, not what you want to sell!
If you want your e-commerce business to grow and succeed, there is no room for guesswork or uninformed decisions.
Product research is also so difficult for Amazon sellers because they do not know where to start. After all, not all products are the same. It’s imperative that you have a clear idea of what a good product looks like before you begin your research.
Good Products vs. Bad Products
While the definition of “bad products” may be a bit of an exaggeration, you should definitely consider the characteristics of “good” products when searching for Amazon products to sell. If you want to survive, you need to find products that sell!
In addition, you need to look at the product from your point of view as a seller. For example, you may find that 50-inch televisions are just flying off the shelves. Nice! However, as an Amazon seller, you’ll probably have to store the product at your home, and you’ll also have to pay shipping fees, not to mention brand restrictions.
Therefore, you should leave such products to the big boys and instead focus on products that make running your eCommerce business easier and simplify your research.
Good products meet the following criteria:
- Small, lightweight, and sturdy – easy to store, pack and ship.
- Price range between £10 and £50 – entices impulse purchases
- Unbranded (with potential for branding) – higher profit margins
- Low competition – an opportunity for market entry
You will be able to exclude items that do not meet these criteria, making your research task less daunting and more manageable.
Now, you need not be concerned about heavy or bulky products, branded products, perishables, or products that are not impulse buys.
How to Research Products to Sell on Amazon
You can certainly pick winning products (and avoid many losers) by following the general guidance we present in the article “What To Sell on Amazon”, but if you’re looking for a more formal, scientific approach, you can dive deeper with product research.
With a passion to find winning products, a willingness to refine your search, and one or two product research tools, you’re well-equipped to find products that will take off pretty quickly. In this section, we explain how.
1. Using product research tools
Type product research amazon into your favorite search engine to find links to numerous software tools for conducting product research both on and off Amazon, including the following:
- AMZBase: A great tool for speeding up your product research. Simply hover over a product image to view the product’s Amazon Standard Identification Number (ASIN) and title description; click to view historical prices, source any related content, check listing info on other retailing sites, and more.
- AMZScout: Presents a spreadsheet interface that calls your attention to potentially high-volume, highly profitable products, identify growing trends, verify niche ideas, research other sellers, estimate fees and profits, and predict future competition.
- FBA Wizard: If you’re into retail arbitrage (buying products from other retailers to resell, as we explain in Chapter 7) consider FBA Wizard, which is designed specifically to help find profitable products to resell on Amazon. (During the writing of this book, FBA Wizard was available by invitation only, requiring that you supply a valid email address to register for notification of availability.)
- Helium10: This product is perhaps the most robust product research tool on the market and is available by subscription only (with a free trial). Features include Black Box Product Research into a database of more than 450 million products; Xray, a Chrome browser extension that provides a window into products listed on Amazon search results and product pages; Scribbles, a keyword optimizer for listings; Cerebro, a reverse ASIN search engine for researching competitors; and more.
- JungleScout: Another very robust product research product, JungleScout features a product database, product tracker, supplier database, keyword scout, sales analytics, and inventory manager. The product database in particular is designed to help you find winning products by drilling down to identify products with high demand. With product tracker, you can keep up on any Amazon product’s daily sales, inventory data, and revenue.
- Keepa: This product is a collection of browser extensions that provide access to a variety of product information, including price history charts of more than 100 million Amazon products, price drop and availability reports, international Amazon prices, and daily deals. Very limited access is free, but you’ll need to pay a monthly subscription price to increase your data quota.
- Seller App: A full-featured application for managing your Amazon business. Features are broken down into three categories — marketing, sales, and operations, with marketing including product research, product ideas, and keyword research. The product ideas feature is especially useful to identify potentially profitable products. You can choose from proven best sellers, trending products, new product releases, or even most wish-listed products.
- Sonar: This tool is driven heavily by keywords, showing you what Amazon shoppers are actually searching for and then helping you optimize keyword selection for your listings accordingly. You can ping keywords for free on the Sonar website, but to dig any deeper requires a subscription.
- Unicorn Smasher: This tool is dedicated to helping sellers identify products that show potential for high volume, profitable sales without getting bogged down in the numbers. Although it provides comprehensive data and a full dashboard packed with detailed sales info, it also boils down the numbers into sales estimates and an opportunity score to simplify product selection.
2. Sizing up the competition
One of the best ways to stay ahead of your competitors is to get into their heads to see what they’re doing and figure out their sales strategies. But first, you have to figure out who your top competitors are. The good news is that Amazon Sellers are equipped with various features and a goldmine of information to help identify their top competitors. Here are a few tips to help identify your top competitors and start gathering the information and insight you need to figure out what they’re up to. These tips are crucial to sail through the competitive Amazon marketplace and find your success.
Identify the top three primary keywords for your products and get the list of products that appear in the first and second pages of the search results for the selected keywords. The top sellers of those products are real competitors; they’re selling well, liked by customers, and are on top.
Navigate to your product detail pages and head to the “Amazon Best Sellers Rank” right below the product description. Select the categories and subcategories to explore the various Amazon Best Sellers pages for each category and subcategory in which you sell products. (Each Amazon Best Sellers page contains a list of 100 of the top selling products in the selected category or subcategory.) This is the real time data updated every hour and is considered the most reliable source of product sales and trends. Sellers can boost their sales significantly if they can use this data to their advantage.
Amazon product detail pages are crowded with tons of clues about what your competitors are offering to beat your product. Amazon places several important product carousels in various parts of the product detail page to target the shoppers who are interested in specific products. Scroll down each relevant product detail page, and note the following:
- Sponsored products related to this item
- Items frequently bought together
- Other items customers commonly buy after viewing this item
- Items related to those you’ve viewed
These are the products being placed by Amazon and other competitors strategically through the use of proven algorithms targeting the shoppers who are interested in these (and, hence, your) products.
After identifying your real competitors, assess them to develop a deeper understanding of the challenges they pose to your business. One of the best ways to stay ahead of your competitors is to get into their heads to see what they’re doing and figure out their sales strategies. Track the following details:
Products listed by your top competitors, recently added to their catalogs, and selling well: Closely monitoring what’s selling and what’s not selling for your competitors provides very good clues as to what products you should be selling.
Competitor product ratings and reviews: Steer clear of any products your competitors are already dominating with lots of positive ratings and reviews. Gravitate toward products with no or few positive reviews or those with numerous one- to three-star reviews. Low ratings/reviews may signal an opportunity — indicating that buyers have problem with the offering and you may be able to outsmart your competitors by offering a higher quality product or superior customer service.
Competitors’ sponsored products: Sponsored products reveal where your competitors are putting their money and hoping to gain traction, usually on products they expect to start selling well.
3. Exploring Alibaba and other Chinese online wholesale marketplaces
China is the world’s manufacturing hub, without a doubt! Millions of different products are being produced in China and are exported across China and around the world. Researching products in China can provide a window into the future of what’s likely to be trending in the United States or other markets down the road. Here are several Chinese sources from which to gather valuable product information:
Alibaba is poster child of Chinese ecommerce industry — the largest B2B marketplace on the planet, where you can connect with suppliers to source products for resale on Amazon (see Chapter 7 for details). Browse the website to find hundreds of suppliers offering just about any imaginable product. Choose the product category of interest and select Best Selling Products to view a list of hot sellers. Compare quotes from available suppliers to find the best price/quality balance for your business.
AliExpress is a great place for small sellers to source smaller quantities at best prices. Head directly to “New User Section” where hot deals are listed for new users — deals starting from $0.01. This section will help you to get the best deals on thousands of products.
Check out AliExpress’s new Dropshipping Center. (With drop-shipping, you never touch the product. Customers place their order with you, and the drop-shipper packs and labels the product and ships it directly to the customer. It’s the ideal no-hassle way to sell retail.) To go to the Aliexpress drop-shipping center, you can either google it or visit home.aliexpress.com/dropshippercenter/dashboard.htm.
To explore the Dropshipping Center, you need to create an AliExpress account. Upon logging into your account, you’re presented with a three-tab dashboard, two of which are great for conducting product research. The Hot DS Items tab lists more than 250 pages of hot-selling products, while the Product Analysis tab helps to track sales trends to gain insight into the sales and profit potential of different products.
DHGate bills itself as “The Gateway to China’s Finest.” It’s a wholesale marketplace that connects suppliers with retailers, enabling retailers to purchase in bulk from high-quality factories “at significantly lower prices than retail.” It serves approximately 2.2 million sellers globally and boasts more than 22 million product listings.
Global Sources connects wholesale suppliers with “more than 1.5 million international retailers, including 94 of the world’s top 100 retailers.” Here you can find suppliers in numerous product categories, including auto parts and accessories, consumer electronics, electronic components, fashion accessories and footwear, gifts, tools, home products, machinery, mobile electronics, and more. Scroll down to view the top 20 products listed by category.
Made-in-China is a free product sourcing platform with more than 10,000 verified suppliers in more than 20 industries. It’s not the greatest site for researching products to find products with respectable sales potential, but when you find a product you want to sell, you can scroll down and submit a request for a quote.
DIY Trade is a B2B online trading platform that provides access to more than five million products. Suppliers post their products, and as a retailer you can subscribe to product alerts to get early notification of new products. The DIY Trade website also runs a list of popular keywords across the top and a list of product categories along the left that can aid in product research.
Conducting serious research on these platforms will help you identify some of the best products to sell while boosting your overall product knowledge and your ability to pick products with high sales and profit potential.
4. Validating or Rejecting Product Ideas
When conducting product research, you’re likely to get overwhelmed with dozens of products ideas which all seem great bets but may fizzle when they hit the market. After coming up with a long list of product candidates, whittling down that list to the top 10 or top 20 can help to hedge your investment. In this section, we lead you through the process of vetting products based on their merits and true potential.
Weighing the pros and cons of carrying the latest, greatest products
A cool new tool or gadget that hasn’t yet shown up on the general consumer’s radar can be very enticing to an eager Amazon Seller, but avoid the temptation until you’ve had a chance to weigh the pros and cons.
Here are the pros:
- You can charge premium pricing for innovative products because they have limited to no competition.
- Selling bleeding-edge products helps you build a reputation among sellers as someone in-the-know, which can increase loyalty to your personal brand and can help drive future sales.
Meanwhile, here are the cons:
- You may need to invest more time, energy, and expertise educating prospective consumers on the features, functionality, and benefits of new products. In the process, you may end up losing customers with shorter attention spans.
- Innovative products tend to sell for higher prices as designers and manufacturers try to recoup research, development, and manufacturing costs incurred to introduce the new product to the market. New products won’t appeal to late adopters and budget-conscious consumers.
- You may end up spending considerable time and suffering anguish from trying to keep up with customer questions and complaints if the product is complex or buggy and the manufacturer offers limited or no product support.
Don’t rule out an entire product because one version of it doesn’t meet the desired criteria. Weigh the pros and cons based on your area, target customers, their spending patterns, and alternative products of the same type.
Considering seasonal products
Seasonal products can lead to boom or bust — a short-term boost in sales and profits during the season in which they’re popular followed by a bust over the rest of the year, during which time, you’re footing the bill for storage of products you may never be able to sell.
Amazon typically ships around one billion products during the Christmas holiday season. Although Amazon is tight-lipped about total sales figures, that represents a lot of money however you choose to look at it.
Although selling seasonal products can be rewarding over a limited period of time, it carries some significant risks you need to consider, such as the following:
- Seasonal sales are inconsistent and often unpredictable from year to year, making inventory planning that much more challenging.
- Seasonal trends are often driven by temporary trends such as the popularity of Angry Bird toys, increasing the challenge of predicting demand.
- Betting on a single season is a risky venture. To be successful on Amazon, you need a year-round selling strategy.
As you plan your Amazon retail business, be sure to offer core products that sell well all year. Then add seasonal products. Don’t build your plan for success solely on having a successful holiday sales season.
Giving new brands a try (or not)
In some product categories such as athletic shoes and watches, brands carry a lot of weight. When a new brand tries to wedge its way in between strong existing brands, consider carefully whether to offer that brand. On one hand, the new brand faces stiff headwinds in becoming established, but if the product is superior, being an early adopter of that brand can pay handsome dividends.
Here are a few key factors to consider before taking on a new brand in a product category dominated by strong brands:
- Trust: With established brands such as Nike, Adidas, and Rolex, people already trust the quality and durability of the products and know that these companies stand by their products with excellent warranties. Such isn’t the case with products from relatively unknown brands; customers may have concerns about longevity, functionality, materials quality, and after-sales service.
- Familiarity: Over time, customers find brands that are generally better at meeting their needs and preferences. For example, they may prefer the fit and feel of Brooks athletic shoes over those of Nike or vice versa. Breaking through this barrier with a new brand can be tough.
- Cost: On a positive note, you may be able to find great deals on new brands if the manufacturer is eager to drop the price in exchange for an opportunity to increase its market share. The results: increased sales, higher profit margins, or both.
- Opportunity: If the new brand is superior to established brands in one or more ways, it may eventually win a commanding position in a certain product category. By picking up the new brand early, you have a chance to help customers discover it and thus establish yourself as the go-to retailer of that brand.
Consider all the aspects of offering a relatively new brand before you get onboard.
5. Focusing on Price and Sales Volume
In some ways, product selection boils down to price and sales volume. For every product you’re thinking of listing, ask yourself, “Will I be able to sell enough of these items at a high enough price to earn a worthwhile profit?” If you can answer “yes” to that question, you should probably list the product.
In this section, we present a few techniques to help you develop clearer insight into evaluating price and sales volume and making informed product and pricing decisions. By following this guidance, you’ll be better equipped to pick products that are the right fit for your business and price your products more strategically.
Checking out different pricing strategies
Seasoned retailers use a host of different product pricing strategies to increase sales volume, revenue, and profits. Here are a few pricing strategies you may want to consider:
- Cost-plus pricing: A simple pricing model in which you calculate your cost and then add a markup that reflects the profit you want to earn from each sale, either as a percentage or dollar amount. This strategy alone won’t help much on Amazon where pricing is highly competitive.
- Competitive pricing: Set your price based on what the competition charges. You may want to set a lower price to undercut the competition or a higher price to reflect a superior product or the customer service a buyer can expect.
- Value-based pricing: Set your price based on the price of a comparable product and then add to that price for all the features/benefits that make your product or customer service more valuable. Just be sure that the additional price exceeds your investment in adding value.
- Price skimming: For new products or brands, consider setting a high price at the beginning to cash in on high demand and low supply of the product and then lower the price as the market matures.
- Penetration pricing: When you’re trying to break into a new market, consider setting prices low to establish yourself and then raising your prices later.
- Loss-leader pricing: This tactic involves selling one item at a loss in the hopes of getting customers to buy other products that you sell profitably. For example, grocery stores often offer milk, meats, or eggs at ridiculously low prices to get people into the store where they’ll buy plenty of other regularly priced items.
- Destroyer pricing: If a competitor is trying to move in on your territory, and you’re in a strong enough position to fight, you can temporarily sell products for less than your competitor can afford to for the purpose of discouraging that seller.
Keeping an eye on the competition
Competitive pricing plays a major role on Amazon because Amazon actively encourages it. After all, a big part of the reason people shop on Amazon is for its low prices, and Amazon wants to please its customers. By keeping tabs on your competitors’ pricing data for products that are the same or similar to yours, you stand to reap the following benefits:
- Gain insight into competitor price trends and strategies.
- Spot opportunities to increase your profit margin without hurting sales volume.
- Devise your own pricing strategy backed by competitor data.
- Use your pricing data to negotiate lower prices with your suppliers.
- Develop an intuitive sense of product value. When you can quickly ballpark the market value of an array of similar products, you can quickly buy and sell in certain product categories at a profit.
Several third-party tools, including some of those we discuss in the earlier section “Using product research tools,” show the price fluctuations of any product over a period of time. Tracking price movements over time provides a gold mine of information into your competitors’ pricing strategy and tactics.
However, merely staring at the data isn’t sufficient if you don’t look at it in a way that reveals valuable insights. As you examine the data, ask yourself the following questions:
- Who are the top sellers offering same or similar products to yours? Keep a list of your competitors, so you know whom to watch.
- How often they do change the prices? The frequency of price changes tells you clues about how they’re playing their pricing strategies around important holiday and off seasons.
- By what percentage do your competitors increase or decrease their prices? The percentage increase indicates how they are keeping up with their margins while increasing sales volumes.
- How do the top sellers react when competitors change their prices? These reactions reveal their strategy to beat the competition and how they’re winning despite the competition.
Based on the price fluctuations, where do you predict the price is heading in the near future and why? This exercise can help you to take precautionary measures to ward off future risks threats presented by the competition.
Consider a few scenarios in which a seller can use such data to boost sales and profits:
- Imagine you and your competitor have been offering a similar product at the same price of $60 during Cyber Monday. Immediately after Cyber Monday, your competitor raises his price to $90. If you’ve been tracking the price change, you could immediately raise your price to $80, increasing your profit margin while beating your competitor in sales volume. Had you not been tracking, you would still beat your competitor in terms of sales volume but would have left some revenue on the table.
- When tracking your competitor’s historic pricing variations and inventory levels, you notice your competitor raises prices whenever her inventory levels are low — usually a few months out of the year, even though sales remain steady. This could indicate your competitor has a supply chain problem. You could take advantage of this situation by increasing your inventory levels at the same time while reducing your price slightly, thereby increasing your sales volume and perhaps even capturing some market share.
- In another scenario, based on sales and traffic reports, you’ve noticed that a few of your ASINs have three times more traffic in July compared to March. More likely, the conversions follow the pattern. You could increase sales by fully optimizing those ASINs while increasing your inventory during historical periods of increased traffic.
- By identifying the best sellers in a category/subcategory offering similar products as yours, you could create sponsored advertisements by targeting the selected top performing ASINs of your competitor, which otherwise would are very difficult to compete against organically.
Estimating sales volume
Estimating the sales potential of any product is important when deciding whether to invest your time and money in it. Although businesses always struggle to predict sales, an informed guess is better than a blind guess and can help you lessen your exposure to risk.
The easiest way to estimate sales on Amazon is to use a product analysis tool that offers such a feature. JungleScout provides a free online sales estimator you can use to project sales for best-selling products in certain popular categories. To use JungleScout’s Amazon Sales Estimator, take the following steps:
- Go to www.junglescout.com/estimator.
- Choose an Amazon Best Seller’s Rank number. We realize that this may not be a ranking for a specific product you’re thinking of selling, but the estimator will give you a general idea of what to expect based on product category and Best Seller rank in that category.
- Choose your Amazon Marketplace (for example, United States, Canada, Mexico).
- Choose one of the available categories such as appliances, baby, electronics, or home & kitchen.
- Press the Calculate Sales! Button. The Amazon Sales Estimator displays the total number of the specified items likely to be sold per month.
- Based on the total number of those items sold on Amazon, guesstimate the percentage of the total you can win and the total revenue you can expect to earn in a month of sales. This step is more art than science.
You can continue with this exercise to multiply values from Step 6 by 3 or 12 to project future quarterly or annual sales and revenue. For a more comprehensive estimate of total sales and profits, consider repeating the exercise for everything in your product line and developing a three-year projection — something the big-box stores commonly do to remain competitive.
You can also gauge sales volume by researching other sources, such as trade magazines, quarterly reports, and small-business talk shows during which this topic is often discussed. Try to identify businesses similar to yours — about the same size, selling similar products — and evaluate your sales based on theirs. You may even want to contact retailers who operate outside your market and are willing to talk shop without much concern over your competing with them.
Setting realistic profit projections
Although sales volume is all about revenues, profits are influenced by a host of factors, including wholesale and retail pricing; storage, picking, packing, and shipping costs; returns; and more.
As a result, you can end up losing money on a product even when sales volume is rising. To reduce your risk, remain vigilant about controlling the cost factors that impact profits. In this section, we lead you through the process of setting realistic profit projections, which are key to monitoring costs and running a sustainable business.
Step 1: Estimate your gross sales revenue for next 12 months
As we discuss in the previous section “Estimating sales volume,” calculate your monthly sales for all products you carry and multiply by 12 to project your annual gross sales revenue for the year.
When calculating sales volume and revenues for the year, factor in supply and demand fluctuations; for example, brisk sales during the holiday seasons and slower sales during the normal times, or if you sell summer items, peak sales in the spring that slow over the summer and may be nonexistent during the fall and winter. The possibility of new product launches by competitors could also impact your sales volume and revenues.
Step 2: Calculate/estimate variable costs
Variable costs are those that are likely to change over time due to impacts from other factors, such as a distributor charging higher storage costs or a marketplace increasing its selling fees. Unexpected and significant changes in variable costs are often the root cause of business failures.
Though variable costs at Amazon are minimal, consider other possible variable costs outside Amazon that could negatively impact your profitability, such as the following:
- Raw material prices
- Employee/employment costs
- Machinery, equipment, tools
- Maintenance, upgrades, and repairs
- Supply chain disruptions
- Damaged goods at any point of time, such as due to severe weather or mishandling
- Unexpected product returns or recalls, due to design or manufacturing defects or other quality aspects
Estimate all variable costs to arrive at total monthly or annual variable costs.
Step 3: Calculate gross profit
Subtract your total variable cost estimate from your gross revenue estimate for the same period to determine gross profit. Keep in mind, however, that you still have some work to do to identify your net profit, which we discuss in the following section.
Step 4: Calculate net profit
Net profit is the amount of money you get to keep after paying all expenses. To estimate your net profit, subtract from your gross profit your fixed costs over the same period. Items that contribute to fixed costs include the following:
- Employee salaries
- Accounting and bookkeeping
Consider calculating net profit for the month, quarter, and one year out to stay on top of these numbers. (Many large retailers project out as far as three to five years.) If you find that your net profit is falling, reevaluate your product line, the cost of sourcing products, and your fixed and variable costs to gain clarity on what’s causing the decline in profits, and then address those issues.
If you follow the established criteria and remember to narrow your Amazon product research into niches while using information about competitors and trends, Amazon product research will never feel daunting. There’s no need to waste time finding non-starters when you can reduce your research and identify a best-selling product by using the readily available Amazon research tactics described above.