BUILD. GROW. EXIT BIG! THE PROFESSIONAL’S GUIDE TO SELLING ON AMAZON
Welcome to Basilio Inc. Build. Grow. Exit Big: The Professional’s Guide To Selling On Amazon. If you’re thinking about starting up your own business as an Amazon seller, stick around, because you’ve come to the right place. Amazon is the world’s largest ecommerce site. As of 2018, Amazon had $233 billion in revenue, and more than 5 million third-party sellers currently operate across Amazon’s 12 worldwide marketplaces. So selling on Amazon represents a huge opportunity—if you know where to start and what to keep in mind as you build your Amazon seller business. In this comprehensive guide, you’ll learn everything you need to know about selling on Amazon. Here’s what to expect as you make your way through it!
Every day, new Amazon sellers face the challenges of selecting products that don’t meet their expectations. It’s crucial to recognize that consistently acquiring fast-selling, high-margin products forms the backbone of a successful Amazon business. In this chapter, we will guide you through the product research process for both reselling branded goods and manufacturing your own products.
Reselling vs. Manufacturing: Tradeoffs and Considerations
Before diving into product research, it’s essential to consider the tradeoffs between reselling someone else’s brands and manufacturing your own products. Here are the advantages and factors to consider for each approach:
Reselling Branded Goods
Competition: When reselling branded goods, you must compete with other sellers who have access to the same products. This can lead to price wars and limited control over product positioning.
Inventory Challenges: As a reseller, you may face inventory shortages during high-demand seasons, such as the fourth quarter. Depending solely on suppliers for inventory can be risky.
Product Evaluation: While reselling, your focus shifts to effectively evaluating products and identifying profitable opportunities in the market. Your success hinges on sourcing enough products to avoid stockouts.
Market Analysis: Study the market trends, demand, and competition for the product you are interested in selling. Look for opportunities where demand exceeds supply or where you can offer a unique selling proposition.
Competitor Analysis: Analyze the performance of other sellers offering the same or similar products. Evaluate their pricing, customer reviews, sales volume, and fulfillment methods to identify gaps or areas for improvement.
Profitability Assessment: Determine the potential profitability of the product by calculating the estimated profit margin based on the cost of sourcing or manufacturing, shipping fees, Amazon fees, and expected selling price.
Manufacturing Your Own Products
Idea Generation: Brainstorm product ideas based on your expertise, passion, or identified market gaps. Look for opportunities to solve problems, offer innovative solutions, or improve existing products.
Prototyping and Testing: Develop prototypes of your product and conduct testing to ensure functionality, quality, and customer satisfaction. Iterate and refine the product based on feedback.
Intellectual Property Protection: If your product is unique and innovative, consider obtaining patents or trademarks to protect your intellectual property and create a competitive advantage.
Manufacturing and Sourcing: Identify reliable manufacturers or suppliers who can produce your product at a competitive price while maintaining quality standards. Ensure they have the capacity to meet your demand as your business grows.
Control and Scalability: Manufacturing your own products gives you greater control over pricing, branding, and positioning. It allows you to scale your operations based on demand, as you are not reliant on external suppliers for inventory.
Brand Differentiation: Manufacturing your own products offers the opportunity to create a unique brand with a distinct value proposition. This can lead to increased customer loyalty and higher profit margins.
Long-Term Potential: By developing your own products, you have the potential to build a lasting supply and distribution model. While profit margins may differ from reselling, successful manufacturers can achieve substantial revenue.
It’s important to note that both approaches can be successful. Resellers can achieve significant revenue and established brands, while manufacturers enjoy greater control and brand differentiation. The choice ultimately depends on your business goals, resources, and preferences.
Conducting Product Research
Regardless of the approach you choose, conducting thorough product research is crucial.
Market Analysis: Evaluate market trends, demand, and competition for the products you are considering. Identify gaps, opportunities, and customer needs that align with your business goals.
Profitability Assessment: Calculate the potential profitability of the products by factoring in costs, fees, and expected selling prices. Consider shipping, storage, and fulfillment fees in your analysis.
Customer Feedback and Reviews: Study customer reviews and feedback for similar products to understand their strengths, weaknesses, and areas for improvement. This will help you identify potential product differentiators.
Supplier Evaluation: If reselling, assess potential suppliers based on their reputation, reliability, product quality, and fulfillment capabilities. For manufacturers, identify reliable manufacturing partners with experience in your industry.
Remember, product research is an ongoing process. Stay updated on market trends, customer preferences, and competition to ensure you make informed decisions and optimize your product selection.
Criteria for Determining Good Products to Sell on Amazon
When determining good products to sell on Amazon, whether through reselling or manufacturing, it’s important to establish criteria for success. Consider factors such as market demand, competition analysis, profitability, product sourcing, quality and branding, seasonality and trends, as well as sales rank and performance metrics. Conduct thorough research, identify products with strong demand and low competition, ensure reasonable profit margins, prioritize high-quality offerings, adapt to market trends, and analyze performance metrics to make informed decisions. By considering these criteria, you can increase your chances of selecting profitable products that meet customer needs and thrive in the competitive Amazon marketplace.
Sales rank is a crucial factor to consider when finding products to sell on Amazon. The Amazon Best Sellers calculation, also known as Sales Rank, is based on a product’s overall unit sales volume and is updated hourly to reflect recent and historical sales on Amazon.com. It serves as a ranking system for all products within a category, with each product listing being ranked in comparison to others in the same category.
The sales rank number represents a blended average of sales over the past 7 and 30 days. A rank of #1 indicates that the product has either recently outsold all others in its category or has had exceptional sales performance in the past. However, it’s important to note that if a product is listed in multiple categories, its rank may vary across those categories.
While recent sales play a significant role, Amazon’s Bestsellers Rank also incorporates predictive features based on historical data. This means that even a newly released iPhone case can have a higher rank than an older case with more cumulative sales, thanks to the predictive factors taken into account.
Many sellers use different approaches to assess the sales rank component in their product research. Some resellers and sellers who manufacture their own products look for products on Amazon’s bestsellers list with a ranking below 500. Others calculate the top 1%, 5%, or 15% in sales rank for each category and establish comfort zones based on risk tolerance. They determine a numerical rank that falls within their risk tolerance for each category, ensuring a higher chance of sales success.
However, it’s important to recognize that the sales volume associated with a specific sales rank number can vary significantly across different categories. For example, a book with a rank of 50 could sell anywhere between 500 and 2,000 copies per day, while a pack of protein bars with the same rank might sell between 50 and 200 units daily. The same sales rank in different categories yields different sales volumes.
To gain a better understanding of how a given sales rank relates to daily unit sales, you can utilize tools like FBAtoolkit.com. This free website allows you to input a sales rank number for each category and provides an estimated daily sales volume. However, it’s important to note that these estimates may sometimes underestimate the actual sales associated with a sales rank.
Another useful method, especially for products not yet available on Amazon, is to evaluate sales on eBay. By filtering completed listings on eBay, you can see the ratio of sold vs. unsold listings and gain insights into demand for similar products.
While sales rank is an important factor, there is ongoing debate about its significance in buying decisions. Some sellers prioritize profit margin and are willing to invest in products with low sales rank but high profitability, even if they sell relatively few units. On the other hand, some sellers require solid proof of high demand before investing in a product, regardless of its selling price.
It is advisable to take a balanced approach, leaning toward requiring sales rank proof to ensure customer demand while also acknowledging the potential of marketing improvements to revive abandoned listings. By enhancing listing content, images, and utilizing product ads, it’s possible to drive sales and improve conversion rates.
In summary, while sales rank is a vital criterion for determining product potential on Amazon, it should be considered alongside other factors such as profitability, market demand, competition, and marketing potential. Conduct thorough research and analysis to make informed decisions about the products you choose to sell on Amazon and maximize your chances of success.
Sales Rank Secret: Sellers employ various methods to obtain sales rank information for products they intend to resell or research for potential manufacturing. Here are four main methods commonly used:
Manual In-house: Some sellers personally search Amazon using the supplier’s product information and retrieve the sales rank details from the product detail page.
Manual Outsourced: Similar to the previous method, sellers outsource the task to individuals or teams overseas who data-mine the Amazon site. The seller provides a document or spreadsheet with product titles, brand names, and manufacturing part numbers, and the outsourced team provides the sales rank data.
Scraping: Although this approach goes against Amazon’s terms and may be illegal in certain states, some sellers hire or develop robotic programs, known as “bots,” to crawl Amazon’s site and extract the required information using brand names, keywords, or manufacturing part numbers.
Amazon’s Product API: The most efficient and preferred method involves utilizing Amazon’s Product API to collect information. Originally designed for Amazon affiliates, this API enables sellers to automatically retrieve data for products that meet their specific criteria, facilitating informed purchasing decisions.
By utilizing these methods, sellers can access valuable sales rank information that aids in evaluating product demand and making informed business choices. However, it’s important to adhere to Amazon’s policies and legal regulations when obtaining data through these means.
Sales Rank History
Sales Rank History: Relying on a single data point for sales rank can be misleading due to potential fluctuations caused by sudden changes in customer demand. Simply looking at the current sales rank might not provide an accurate picture of an item’s overall sales performance. To make reliable predictions about an item’s selling rate, it is crucial to analyze its sales rank trends over an extended period.
One valuable tool for examining sales rank history is camelcamelcamel. While normally, accessing product information via API does not allow storing historical sales data, camelcamelcamel has a special arrangement with Amazon, enabling them to store sales rank and Buy Box price information for millions of products long term. By entering the ASIN or searching by product name, users can discover how a product’s sales rank has trended over time, helping determine whether the current rank is an anomaly or a genuine representation of its sales performance. Although manually entering ASINs and assessing the results graphically can be time-consuming, camelcamelcamel provides this insightful historical data.
Another effective tool for analyzing sales history is Keepa. It is a browser extension that conveniently displays historical sales information directly on the Amazon product detail page, allowing sellers to quickly assess an item’s sales performance. Keepa also serves as a handy tool for consumers shopping on Amazon.
By leveraging these tools, sellers gain access to valuable sales rank history, enabling them to make more informed decisions about product selection and market trends. Understanding the long-term sales performance of an item is vital for accurate sales predictions and successful selling strategies on Amazon.
Reviews: Evaluating the number of reviews a product has received is an important factor to consider when researching products. For sellers looking to manufacture their own products, analyzing reviews on similar products can provide insights into market competitiveness and the longevity of products in that niche.
If you’re planning to manufacture your own products and come across a market niche where each competing product has thousands of reviews, it indicates that the niche is likely mature. This suggests that the products have been on the market for a while and there is already significant competition. In such cases, it may be wise to explore other product options.
On the other hand, resellers adopt a different approach. More reviews for a product indicate a history of high-volume sales, which can be a positive signal for resellers to consider entering the market and selling that particular brand. However, it is essential to assess the pricing and competition landscape to ensure there is still an opportunity to establish a presence as another reseller.
Are there specific thresholds for reviews? For resellers, there are no fixed thresholds. While the number of reviews can serve as a reference point, it’s important not to disregard a product with low review counts if it is a top seller in its category. For sellers manufacturing their own products, some may have arbitrary cutoffs, such as requiring a minimum of 200 reviews but no more than 100 reviews. However, it is advisable to place more weight on factors like the number of sellers competing for the Buy Box and the presence of similar products within the category when assessing market potential.
By considering the review count alongside other critical factors, sellers can make informed decisions about the competitiveness and viability of products on Amazon. Balancing review data with market dynamics will help identify profitable opportunities and guide sellers towards successful product selection strategies.
Competition – Product Sold on Amazon
Competition: It’s crucial to acknowledge the challenges of competing directly with Amazon as a seller on the platform. In some cases, sellers with exceptional customer metrics or significantly lower prices may share Buy Box rotation with Amazon. If a seller’s price is substantially lower than Amazon’s current price, they can indeed win a larger share of the Buy Box from Amazon.
However, it’s important to exercise caution. Amazon reprices its products reactively and frequently, often matching or undercutting competitor prices. Lowering your price may prompt Amazon to reduce its price to a point where it could even result in losses for them.
Furthermore, Amazon appears to have an intricate understanding of the Buy Box algorithm. Even as a high-performing seller with an FBA offer, competing directly with Amazon’s own retail offers doesn’t guarantee that matching or undercutting their price will secure the Buy Box. Amazon Retail can leverage its perfect seller performance metrics and price its products slightly higher than yours while still maintaining Buy Box dominance.
For sellers in the media category, it’s important to note that Amazon typically dominates the Buy Box if it has the product in stock. Therefore, it’s not advisable to engage in price competition with Amazon on products where your chances of winning the Buy Box are slim.
To navigate competition with Amazon effectively, sellers should focus on optimizing other aspects of their business, such as improving customer metrics, offering unique value propositions, and identifying niche markets where they can differentiate themselves. It’s crucial to assess the competitive landscape and consider a comprehensive strategy beyond simply engaging in price wars with Amazon.
Are there other Sellers with FBA offers on the product? Assessing the competition in terms of the number of total offers and the presence of Fulfilled by Amazon (FBA) sellers is crucial. It’s a common mistake for sellers to assume that they only need to list their product for a slightly lower price than their competitors. However, it’s important to recognize that pricing dynamics on Amazon are highly dynamic and competitive.
For instance, let’s say you’re researching a folding camping chair and find that there are 12 competitors, with 3 of them being FBA sellers. The current buy box price for the product indicates an 85% markup from your cost, and the sales rank suggests an estimated 10 unit sales per day.
When evaluating your pricing strategy, it’s crucial not to assume that listing your product at a slightly lower price than your competitors will guarantee you 100% of the Buy Box share. Competition on Amazon often leads to repricing, and some sellers may have low costs or repricing rules designed to win the Buy Box at any cost.
To effectively estimate the price at which you can sell your item and secure a significant portion of the Buy Box share, you need to develop a process that may involve a general rule or a more complex formula. This approach will help you estimate your unit sales based on your proportional share of the Buy Box, allowing you to make informed purchasing decisions and avoid overstocking.
Moreover, if the existing competitors for a particular product are primarily FBA sellers with similar pricing, it’s important to understand that entering as an FBA seller may result in obtaining slightly more or less than your “fair share of the pie.” The size of the market for the product typically remains unchanged, meaning that additional FBA sellers are essentially competing for the same pool of potential buyers.
In such cases, it becomes crucial to differentiate your offering, provide unique value propositions, and explore strategies beyond simply relying on pricing to stand out from the competition. By understanding the competitive landscape and implementing a comprehensive approach, you can position yourself for success in the dynamic world of Amazon selling.
Is the Product Sold at Walmart or Costco? When considering products to sell on Amazon, it is essential to evaluate whether the product is already being sold by major retailers like Walmart or Costco. If a product is already available through these big box retailers, it may indicate that the market is saturated or highly competitive. Our objective is to either enhance the quality of an existing high-selling niche product by creating a unique value proposition or to find a niche item with consistent buyers where we can offer competitive prices.
While some competition is inevitable, it’s important to be smart and avoid saturated markets. Don’t let this discourage you from considering all products, but exercise caution when it comes to highly competitive spaces dominated by big box retailers.
Product Attributes are another important aspect to consider when evaluating the viability of selling a product on Amazon. These include factors such as Amazon category commission, product size, and the specific or niche nature of the product.
Amazon category commission refers to the referral fee sellers pay on each item sold, which varies depending on the product category. It is essential to factor this fee into your profitability estimation when deciding on products to purchase for resale or manufacture.
Product size is a consideration for both resellers and manufacturer-sellers. Larger and heavier items incur higher shipping costs from your supplier to you and from you to Amazon or the customer. They also take up more space in your warehouse and may result in higher return shipping costs or increased FBA storage fees.
For resellers, the specific or niche nature of the product matters less than its sales performance and desired selling price. When we mention “specific” products, we mean evaluating individual products rather than entire product lines. It’s important to assess each SKU separately, as customer interest and demand can vary significantly even within a supplier’s catalog. Focus on ordering only those SKUs that align with profitable pricing based on your product research data and estimate the appropriate quantity based on sales velocity indicated by the sales rank.
By considering these factors and conducting thorough product research, you can make informed decisions about the products to sell on Amazon and maximize your chances of success.
We have observed that resellers often struggle when they start purchasing products because they make the common mistake of buying too many different items and assuming that all the products from a brand will sell well and be profitable. However, on Amazon, we rarely see entire profitable product lines, but rather many individual profitable products.
Similarly, seller-manufacturers can also spread themselves too thin by attempting to exploit multiple niches, resulting in negative income. They often make the mistake of adding additional products without thoroughly testing them, such as varying sizes, colors, or accessories. The costs of sampling these new products can quickly add up. Successful seller-manufacturers eventually realize that focusing on select products that consistently sell well becomes their strategy.
Even for those aiming to create their own brand, it’s advisable to start with the most profitable product or a few top products and gradually expand the product line after thoroughly assessing their potential sales volume and profitability.
Furthermore, launching generic products on Amazon can be challenging unless you plan to disrupt the market solely based on price. Usually, generic products that sell well on the platform are already priced in a way that makes it difficult to achieve significant profits, or they have established brand names associated with higher product quality.
During your research and product development process, it’s important to identify and create products that fulfill a specific demand. This often involves producing items with unique features or targeting a specific niche. For example, rather than offering a generic lamp shade, focus on creating a Craftsman-style lamp shade in a distinct color with a cherry blossom print. Alternatively, consider improving the features or quality of a popular selling item to provide a unique value proposition compared to competing products.
Take a look at the #1 selling apron by Chef Works as an example. It is a small, lightweight apron with a price of over $10, nearly 500 reviews, and a sales rank in the top 300 for the Home Improvement category. By analyzing customer reviews, you can identify specific demands or missing features that present opportunities for product replication or improvement. For instance, customers consistently express a desire for an adjustable neck tie, which could be a valuable feature to add to a similar product while ensuring it doesn’t infringe on any copyright or trademark protection.
In summary, focusing on individual profitable products, fulfilling specific demand voids, and enhancing existing products with unique features are effective strategies for success on Amazon.
When manufacturing your own product, it’s crucial to consider potential liabilities that could arise. Firstly, ensure that your product is not too closely related to another product, as this could potentially infringe upon copyright or trademark laws. Additionally, assess whether your product poses a high risk of lawsuits due to its intended use. Consider whether there are any potential safety concerns that could lead to accidents or injuries, increasing your liability exposure.
Another factor to consider is the complexity and fragility of the product. It is advisable to avoid manufacturing fragile items like vases or complex mechanical products such as chain saws or air compressors. These types of products not only carry the risk of causing harm to customers but also require stringent quality standards and potentially expensive warranties to offer.
By carefully evaluating potential liabilities and considering the complexity and fragility of your product, you can mitigate risks and ensure a safer and more manageable manufacturing process.
More Criteria for determining Good Products to Sell
Price Ceilings and Floors When determining good products to sell on Amazon, the price range of the products is a crucial criterion to consider. Low-priced items, typically below $8-10, require selling in large quantities to generate significant profits. The shipping costs associated with these low-priced items can consume a significant portion of the profit margin. Conversely, higher-priced items have the advantage of a lower fulfillment cost as a percentage of the margin. However, finding the right balance is essential.
Consideration for Resellers For resellers, the focus shifts to evaluating the inventory turnover based on available capital rather than the specific price of the product. The goal is to ensure that the profit margins and sales rank align with the predetermined timeframe for inventory turnover. The actual price of the product becomes less significant, whether it is $20 or $2,000, as long as the necessary metrics are verified appropriately.
Price Ranges for Seller-Manufacturers For sellers producing their own products, establishing a suitable price range for evaluation is beneficial. Some sellers find success within the $7-$40 range, considering it a good sweet spot for product selection. Others prefer a wider price range of $10-$200. Success can be achieved across different price points, and there is no definitive magic range. It is important to thoroughly assess the product’s potential, taking into account various factors beyond price alone.
Points to Consider Outside the Ranges Stepping outside the recommended price ranges requires careful consideration. Selling items priced below $10 can result in disproportionately high expenses for FBA or merchant-fulfilled shipping. On the other hand, higher-priced items above $300 can present challenges, such as increased capital investment, shipping complexities, and a higher risk of mistakes, especially for sellers who are new to the business. Additionally, higher-priced items for new brands may sell more slowly as customers tend to be more cautious when purchasing items exceeding $50.
Finding the Right Balance While price ceilings and floors are important, sellers should also evaluate other factors such as profit margins, shipping costs, inventory turnover, and customer purchasing behaviors. Striking the right balance between price and other criteria is crucial in determining the potential success of a product on Amazon. By carefully assessing these aspects, sellers can make informed decisions and identify products that offer a favorable balance between price and profitability.
Reasons to Consider $300-Plus Products
Some sellers with significant financial resources or drop-shipping capabilities specifically target products priced at $300 or higher. They do so for two primary reasons:
Zero-Fee Fulfillment: Products sold through FBA that are classified as standard-size units and priced at $300 or more are eligible for Zero-Fee Fulfillment. This means sellers pay no fees for order fulfillment, including Order Handling, Pick & Pack, and Weight Handling. However, other fees such as Inventory Storage, optional services, and Selling on Amazon fees still apply. It’s important to note that oversize units and Multi-Channel Fulfillment orders are not eligible for Zero-Fee Fulfillment.
Gross Profit Dollars:These sellers prioritize the gross profit generated from each sale. By optimizing a listing and increasing its sales velocity from 1 unit per month to 1 unit per week, they can generate substantial profits. For instance, if a product sells for $3,000 and the seller’s margin and product category allow for it, the gross profit per sale could range from $300 to $900.
In comparison, selling a lightweight standard-size product priced at $10 in most Amazon categories would result in post-fee gross revenue ranging from $4 to $6. When factoring in the product’s cost from the supplier, which let’s say is $2 per unit, the net profit would fall within the range of $2 to $4.
To achieve the same level of weekly profit as the high-ticket-item seller, selling $300 products, one would need to sell 75 to 150 units. To reach a weekly profit of $900, one would have to sell 225 to 450 units. These numbers represent the best-case scenario. Hence, some sellers aim for higher-priced items, emphasizing the potential for greater profits. That is also why we advise against going below $10 for product pricing.
Considering these factors, sellers need to weigh the benefits of higher-priced products against factors such as supply chain costs, market demand, and their own financial capabilities. It’s crucial to conduct thorough research and analysis to ensure the viability and profitability of selling products in the $300-plus price range on Amazon.
Price History Another important consideration is the price history of a product. It is crucial not to assume that the current Buy Box price represents the typical price. Product prices can fluctuate seasonally, and the entry of different sellers into the market can lead to dramatic changes.
To gain insights into the pricing trends, tools like camelcamelcamel and Keepa can be incredibly useful. By entering the ASIN or searching for products by name, you can access the price history and see how the Buy Box price has evolved over time.
Analyzing the price history allows you to determine whether the current Buy Box price is an anomaly or a reliable representation of the product’s price on Amazon over an extended period. However, it is worth noting that this process can be time-consuming as you enter ASINs one by one and assess the graphical results.
By studying the price history, you can identify patterns, such as price fluctuations during certain seasons or the impact of new competitors entering the market. This information empowers you to make informed pricing decisions and anticipate potential changes in demand and competitiveness.
Additionally, monitoring the price history helps you assess the competitiveness of your own pricing strategy. You can determine whether your prices align with market trends and adjust them accordingly to stay competitive and maximize your sales potential.
Remember that price is a critical factor in the Amazon marketplace, and understanding the price history of a product is an essential step in determining its viability and profitability.
MAP Policies One crucial aspect to consider, especially for resellers, is whether the brands you have researched have a minimum advertised price (MAP) policy in place.
If a brand enforces a MAP policy, it can significantly impact your reselling strategy. Violating the MAP policy can lead to consequences, including potential backlash from the brand and damage to your reputation. You may find yourself operating under an alias, hoping to avoid detection while undercutting prices.
On the other hand, if you abide by the MAP policy, you may find limited opportunities for sales. Your products may only gain visibility when competing sellers run out of inventory, allowing you and other sellers who comply with MAP to gain some Buy Box share.
Some resellers have leveraged the existence of MAP policies as a way to establish relationships with brands. They offer MAP violation reporting and policing services to the brands they aim to collaborate with, sometimes leading to successful partnerships. In such cases, these resellers assist brands in transitioning to online platforms or take on the responsibility of managing distributor pricing complexities on Amazon.
It’s important to recognize that MAP policies can have a significant impact on your reselling journey. Violating MAP policies can jeopardize your business, while adhering to them may limit your sales opportunities. It’s essential to carefully evaluate the presence and enforcement of MAP policies when deciding which products to sell, considering the potential benefits and challenges associated with each approach.
No Online Sales/Product Warranties One important consideration is whether the brands manufacturing the products you have researched prohibit marketplace sales. Over the years, sellers have received letters from a brand’s “legal department” informing them that selling the brand’s products on Amazon without authorization is not permitted.
The brand emphasizes that products not sold by authorized resellers through approved channels are not covered by the brand’s warranties. They assert that they cannot guarantee the authenticity or validate the warranty of products sold by unapproved retailers.
Let’s simplify this legal jargon for gray market resellers: Legally, the first sale doctrine grants you the right to sell or dispose of your product as you wish, with certain conditions and exceptions.
However, some brands argue that your agreement with Amazon nullifies this right. Amazon requires new items to be sold in pristine condition, including being in the original packaging, containing all parts, manuals, instructions, and most importantly, having intact and accessible original manufacturer’s warranties for customers.
In essence, the brand does not recognize you as an authorized retailer, which raises concerns regarding warranty coverage.
If an Amazon customer purchases an item from you, the brand may refuse to honor the warranty or only recognize the remaining warranty period from the time you purchased the product as an unauthorized retailer.
Your options include becoming an authorized retailer, selling the items as “used,” or removing your product offers for that brand.
If the manufacturer reports infringement to Amazon, claiming to be the original manufacturer and providing evidence, while you lack proof of being an authorized reseller, claiming to offer the manufacturer’s warranty could result in a violation and potential suspension.
Where are these sellers missing the mark? They haven’t fully understood Amazon’s terms, conditions, and seller requirements.
Sellers can choose to offer the manufacturer’s warranty on a product, but they are not obligated to do so. Alternatively, they can provide their own product warranty, which can be as short as 30 days to align with Amazon’s minimum return policy duration. It’s crucial for sellers to grasp these nuances and make informed decisions to comply with Amazon’s guidelines while safeguarding their business interests.
Gated Brands Some larger and influential brands have taken additional measures to control their presence on Amazon. Two notable examples are Fossil Group, the parent company of watch and fashion accessory brands like Michael Kors, DKNY, Diesel, Skagen, and others, and Asics, the shoe company.
These brands have reached agreements with Amazon to gate their brands on the platform. This means that only Amazon Retail or authorized distributors with written authorization from the brands are allowed to create product listings for their brands. Other sellers who were previously offering their products on Amazon are no longer able to list them, and unauthorized sellers in the future are also restricted.
However, this type of brand gating is relatively rare because it is not typically in Amazon’s or the customer’s best interest to limit popular product lines to being sold exclusively by Amazon Retail at full Manufacturer’s Suggested Retail Price (MSRP). Amazon may no longer be able to maintain its position as the low-price leader for those products, potentially resulting in a loss of significant market share.
While brand gating serves to protect the brand’s image and control distribution, it may limit competition and consumer choice on the Amazon platform. The balance between brand control and marketplace openness is an ongoing consideration for both brands and Amazon.
Seasonality When evaluating products to sell on Amazon, it’s important to consider seasonality. This involves assessing the sales rank of the item to understand how it performs in comparison to other products in the same category throughout the year and to gauge the overall sales lift during specific seasons on Amazon.
Keep in mind that an item’s sales rank may experience only a marginal increase within a category, but its sales could significantly multiply, doubling, quadrupling, or even increasing twentyfold due to the overall seasonal demand within the category.
For products you manufacture, it’s crucial to find items that either have a consistent base of buyers or exhibit a reasonably predictable sales pattern.
Be cautious when dealing with overly seasonal items such as Christmas ornaments or winter clothes. Proper assessment is necessary to avoid over-purchasing, which could result in the need to heavily discount or liquidate inventory before the season ends. Alternatively, you may face the challenge of holding onto inventory until the next season, which can tie up your capital.
There are different categories of seasonal items to consider. Some sellers successfully rotate through various seasonal apparel items, ensuring a constant flow of sales throughout the year. Other products may have a strong overall demand but experience a significant spike during the holidays or their respective seasons. Additionally, certain items may only sell well during their specific season, such as costumes in September and October before Halloween.
When selecting products, it’s advisable to choose those that have the potential for consistent sales in the foreseeable future. Be aware that if you opt for older models of a product, such as iPhone 5S cases, the customer base for that particular model will gradually decline over time.
Margin Opportunity/Profitability Calculation
To accurately assess the profitability of the items you plan to sell on Amazon, it’s important to consider both historical profitability and potential profitability. This involves using formulaic calculations and data from various criteria we have discussed, such as the Price Range (Buy Box Price) and Product Attributes (Weight & Dimensions).
We provide the Amazon Profit Matrix sheet and a video demo in our Additional Resources section, which can help you quickly evaluate the expected profit margin for a specific item.
Here’s a quick overview of the sheet: For resellers, you input the average historical buy box price for your item and fill in all the required information to calculate the estimated profit. The sheet will indicate whether the products fall above or below your established profit margin, which could be 10%, 20%, or 50%. Keep in mind that the sheet does not account for the costs of product returns, which can vary from negligible to significant. It’s important to experiment with smaller quantities initially to establish average return and recovery rates for your inventory.
Some experienced resellers with a better understanding of risks and established history operate with narrow net margins of 10-15%. They focus on purchasing products with strong brand equity and rely on quick inventory turnover every 30-60 days. However, such tight margins leave little room for error, so it’s crucial to find products with low return rates.
For sellers manufacturing their own products, there are inherent uncertainties and risks involved. These include the possibility of slow sales or higher-than-expected return rates. As a result, seller-manufacturers should aim for products that generate at least a 50% gross margin to account for these risks and ensure a reasonable level of profitability.
By utilizing the Amazon Profit Matrix sheet and considering the associated factors, you can make informed decisions about the profitability of the products you plan to sell, mitigating risks and optimizing your profit potential on the Amazon platform.
When it comes to researching products for reselling, there are several steps and criteria to consider. Resellers have a relatively easier process compared to seller-manufacturers. As you follow the supplier identification steps in the Finding a Supplier chapter, you will request and receive product lists from approved suppliers.
To determine which products to purchase from your suppliers, you will use our ASIN lookup tool. This tool helps you acquire the necessary product criteria data points for evaluation.
The general product criteria for assessing a potential purchase include
Sales Rank (& Sales History)
Price Ceilings & Floors
Our ASIN lookup tool provides 4 out of the 8 measures, including Sales Rank, Product Reviews, Buy Box price, and competitors. Combining this data with the cost information you enter into the Amazon Profit Matrix, you obtain the fifth criterion: Profit Margin.
Next, you need to determine the seasonality, product restrictions, and product attributes of the items. With this information, you can assess whether a particular product is suitable for purchase.
As you identify brands and obtain their price lists, you can submit the UPCs using the ASIN lookup tool. The tool provides the data in a downloadable format, which you can enter into the Amazon Profit Matrix along with your cost of goods sold (COGS) to determine profitability.
This streamlined process makes it easier to evaluate the product lists you obtain from brands, distributors, or gray market suppliers. This is also why we don’t recommend retail arbitrage for most sellers, as it doesn’t allow for efficient evaluation using this method.
With retail arbitrage, you have to evaluate each SKU individually by scanning each product into your app. It’s similar to manually entering product information from a supplier list one by one into Amazon’s search toolbar.
Here’s a secret sourcing tip: If you can obtain lists of brands attending trade shows, search for their products using their brand name as a keyword. This will provide you with the top 50 listings ranking for that brand name keyword. You can assess this information to see how many of their products are currently sold by Amazon and the average sales rank across their SKUs.
This approach can significantly change how you approach trade shows. Instead of attending numerous shows each year, you can focus on the few that these brands specifically attend. When you go to the show, you can allocate one day to visit these brands and schedule appointments with their representatives in advance.
Alternatively, if you only find a few brands that meet your criteria at a particular show, you may consider not attending the show and instead directly visit and engage with those brands to establish a business relationship.
By following these research strategies, you can effectively evaluate potential products for reselling and make informed decisions that maximize your chances of success on Amazon.
Product Research for Seller-Manufacturers When it comes to researching products for seller-manufacturers, many of the same criteria as resellers apply. These include sales rank and sales history, product reviews, product attributes, buy box price and price history, competitors (Amazon, FBA, & FBM), seasonality, and profit margin. However, the approach differs as you use this information as a guide to determine what products to produce, working backward from resellers.
Unlike resellers who receive a list of products and their costs from suppliers, you won’t know the product cost upfront. Instead, your research method focuses on finding products that meet most of the criteria and have strong sales potential. Once you have identified such products, you can submit requests to your manufacturer-suppliers to determine the production cost and evaluate if there is enough profit involved to make it worthwhile to produce and test the product’s market performance.
So, how can you conduct product research for manufacturing?
Analyze Major Marketplace Sites: Start by examining what is currently selling on major marketplace sites.
You can do this in three ways:
Explore popular categories and identify products with high sales rank and positive customer reviews.
Look into bestseller lists to identify recurring trends or successful product types.
Utilize product research tools that provide insights into top-selling products across various categories.
Monitor Niche-Specific Websites: Keep an eye on websites or forums dedicated to your niche or industry. These platforms often showcase popular products, discuss market trends, and provide valuable insights. Pay attention to customer feedback, demand, and any gaps in the market that you can capitalize on.
Stay Updated on Social Media and Influencers: Follow relevant social media accounts, influencers, and industry experts within your niche. They can offer valuable information on trending products, consumer preferences, and emerging market opportunities. Engage with the community to gain insights and feedback.
By leveraging these research methods, you can identify potential product opportunities for manufacturing. Once you have a shortlist of promising products, you can engage with your manufacturer-suppliers to determine the production costs and evaluate the profitability. This approach allows you to align your manufacturing efforts with market demand and increase the likelihood of success in the competitive landscape of selling on major marketplace sites.
Manual Product Research Methods
Amazon: Start your product research on Amazon itself. Explore different categories, enter relevant search terms, and drill down the results to identify products that are underrepresented or lacking in competition. Pay attention to product rankings, customer reviews, and prices to gauge demand and market potential.
Manufacturer Databases: Utilize manufacturer listing websites like Alibaba to discover products that are being promoted. Check the average selling prices on platforms such as Amazon, eBay, and other sites to evaluate the profit margins you can achieve with those products.
eBay: Use completed listings on eBay to understand the prices at which similar products consistently sell. Analyze auction descriptions to gather insights about product features, benefits, and customer demand. Consider the listed-to-sold ratio to assess demand and the prices customers are willing to pay.
Etsy: Although it may violate the site’s product qualifications, some Etsy sellers source products from Alibaba and sell them at higher prices on Etsy. While researching on Etsy can provide initial insights, it’s important to validate the correlation between demand on Etsy and Amazon.
Comparison or Review Sites: Explore niche-specific comparison or review sites that rank well in search engine results. These sites often promote high-selling products and can provide valuable ideas outside of the typical products found on Amazon. Consider consumer feedback, price points, and the popularity of products featured on these sites.
Review Sites: Websites like consumersearch.com that rank well in search engines can provide insights into popular and high-selling products. As affiliates, they have an incentive to promote products with strong demand.
Comparison Sites: Platforms like confused.com, gocompare.com, moneysavingexpert.com, and others rank highly in search engine results. These affiliate-driven sites can also offer information on high-selling products and market trends.
By manually conducting product research using these methods, you can uncover potential product opportunities, assess market demand, and evaluate the profitability of different products. Remember to analyze customer reviews, sales rankings, pricing trends, and other relevant data to make informed decisions about the products you choose to sell.
While the manual approach has its merits, it requires creative and analytical intuition that may not be your strong suit or preference. Moreover, manually entering SKU information into Amazon’s search toolbar can be time-consuming and inefficient. As an alternative, many sellers utilize the following lists to more efficiently browse best-selling products:
This list showcases the top trending products on Amazon, providing insights into rapidly growing sales and emerging market trends.
Amazon’s Best Sellers List: Displaying Amazon’s top 100 items for each category, this list predominantly features products sold by Amazon. It can give you a snapshot of highly popular products across various categories.
Amazon Selling Coach:Included as a list method because Amazon provides a list of recommended SKUs for you to consider. Look at their recommendations to find products that you can emulate or draw inspiration from.
mySimon Top Searches
Shopzilla Top Searches
Kaboodle Hot Picks
These websites offer lists of popular search queries and trending products, providing additional ideas and insights into consumer interests.
If you want to take automation to the next level, you can leverage software applications such as:
Terapeak.com: A paid service that allows you to access robust Amazon and eBay SKU data. This tool can provide valuable insights into sales history and customer interest, making it worthwhile for brand-building and assessing market potential.
Google Adwords Keyword Planner tool: Originally designed for SEO and pay-per-click keyword research, this tool can also give you an initial understanding of online search traffic for different product types. Use it to gauge the relative interest among Google users for various products or niches.
Additionally, there are various sites that offer the ability to extract ASIN data. Some examples include: http://zonasinhunter.com http://www.asinscraper.com/ http://download.cnet.com/Amazon-Scraper/3000-2379_4-75965326.html (search for “Amazon Scraper” on cnet.com) http://asingrabber.com http://amasuite.com
These sites provide tools to extract valuable data related to ASINs, allowing you to gather insights and make informed decisions based on product information and market trends.
By incorporating semi-automated and fully automated approaches into your product research, you can save time, gain access to valuable data, and enhance your ability to identify profitable products for resale or manufacturing.
What Are You Looking For?
When conducting product research, it’s important to consider the following criteria to find products that meet your requirements:
Sales Rank (& Sales History): Instead of using a standard rule of thumb like only considering products in the top 500 in each category, take into account the monthly unit volume and customer base in each category. Determine the volume you aim to sell and research product categories on Amazon to establish your cutoff. For example, you may consider the top 1,000 in Sports & Outdoors but only the top 300 in Pet Supplies.
Product Reviews: Resellers should look for products with a high average rating and plenty of positive reviews. A high rating is crucial to minimize returns, while the number of reviews is less significant as long as there is sufficient sales volume. Be aware that many reviews for similar products indicate an established market, making it more challenging to compete at the top tier.
Product Attributes:Consider factors such as weight, size, category, complexity, durability, and niche when assessing products. These qualities influence shipping, storage, warranty requirements, customer expectations, and competition levels. Although it may seem overwhelming, understanding these attributes is vital.
Buy Box Price (& Price History): Determine if the product fits within a price range that customers are willing to pay without breaking the bank. Assess whether the selling prices allow you to generate a profit based on quotes from your suppliers. Additionally, ensure that shipping and fulfillment fees won’t erode your profit margin.
Competitors (Amazon, FBA, & FBM): Evaluate the number of competitors selling the product, including Amazon. While you won’t directly compete with Amazon for the buy box, they will compete for traffic to their product detail page. Consider the level of competition and the strategies employed by other sellers.
Seasonality: Analyze whether the product can be sold consistently throughout the year or if it is subject to seasonal fluctuations. Plan accordingly by estimating the need for additional inventory during peak seasons and accounting for potential sales droughts. Also, anticipate how advancements in technology may impact the relevance of your product over time.
Profit Margin:Assess the logistical costs and supplier quotes based on the product attributes to estimate your profit margin. Seller-manufacturers often aim for a minimum 50% margin (100% markup). Determine if the expected sale price on Amazon will generate a profitable return and calculate the potential profit margin.
By carefully considering these criteria during your product research, you can identify products that align with your goals and offer the potential for success on Amazon.
Questions to Ask Before Building Your Product line Portfolio
Once you have a few product ideas, it’s essential to ask yourself the following questions to evaluate their viability:
Will your product have a high refund rate? Consider if your product is prone to issues or if it may not meet customers’ expectations. Products with a high refund rate can be costly and impact your profitability. Aim for products that have a low likelihood of returns to minimize the impact on your business.
Will it be expensive to ship? Evaluate the size, weight, and shipping requirements of your product. Shipping costs can significantly affect your profit margins, especially for larger or heavier items. Choose products that are cost-effective to ship to ensure your business remains profitable.
Will it only be bought a few months of the year? Assess the seasonality of your product. If it is only in demand for a limited time or during specific seasons, you’ll need to plan your inventory and sales strategy accordingly. Consider if the potential sales during peak periods justify the investment and whether you can manage inventory effectively during off-peak seasons.
Will people expect it to work flawlessly for years on end?Understand customer expectations regarding product quality and durability. If your product is expected to last for a long time, it should be built with high-quality materials and designed to withstand regular use. Meeting or exceeding customer expectations for product performance is crucial to maintain customer satisfaction and minimize returns.
Will people expect great customer support and education? Evaluate the level of customer support and education required for your product. Some products may require detailed instructions, technical support, or extensive customer service. Ensure that you have the resources and capability to provide exceptional customer support and educate your customers about the product.
Variations And Sizes: When considering product options, it’s important to take into account the aspect of variations and sizes. For instance, let’s say you come across a successful exercise apparel product that seems promising for manufacturing your own version. However, it’s worth noting that apparel, particularly items with multiple sizes, may not be the most ideal choice for smaller companies. The inclusion of alternate sizes adds complexity to both the initial product development and the selling process on the platform. You will need to manage and maintain sufficient stock levels for each size variant, which can be challenging. Additionally, apparel and shoes often experience high return rates as customers may find that the product doesn’t fit them as expected.
Identifying Non-Branded Products with Strong Sales: It’s crucial to identify product categories where brand recognition is not a significant factor for customers. In these cases, customers rely more on factors such as customer reviews, price, and product features to make their purchasing decisions. Take, for example, remote control helicopters or original equipment manufacturer (OEM) replacement parts for home appliances. Customers are more focused on the quality, functionality, and value offered by the product rather than a specific brand name. Understanding which products fall into this category can help you choose items with good sales potential, even without a well-established brand presence.
Test Your Product Before You Purchase and Sell in Bulk: Before committing to a bulk order of your chosen product, it is crucial to thoroughly test the product to ensure its quality and functionality.
To evaluate your samples effectively, consider asking yourself the following questions:
Is the quality of the product up to your expectations?
Do you notice any signs of cheap or subpar craftsmanship?
Are all the necessary parts and components included?
If instructions are required, are they clear and easy to understand?
Does the product function as intended?
How does it hold up under rigorous or heavy use?
Is the packaging visually appealing and well-designed?
Does the packaging include any required warnings, liability labels, or warranty information?
Would you feel confident giving this product as a gift, surpassing competitors’ offerings?
Is there anything that could potentially disappoint customers after they receive and use the product?
How can you customize the product to make it uniquely yours on Amazon? Consider factors such as adding your brand name or incorporating UPCs on the packaging. These elements help differentiate your product and secure your brand’s presence through Amazon’s Brand Registry.
If the product meets your quality standards and performs well during the testing phase, consider selling your samples online. This will allow you to gather feedback from customers and gauge their satisfaction. It is essential to pay attention to any negative feedback related to product issues or if you had to significantly lower your selling price. These indicators may necessitate a reevaluation of the products you intend to manufacture. On the other hand, if you receive positive feedback or no feedback at all, it suggests that you may have found a viable product. In such cases, you can proceed to place a larger order and test the market on a larger scale.
Learn from my own experience in my first business, where we faced product quality issues with kitchen aprons after placing a large order without prior testing. This oversight resulted in customer complaints, refunds, and chargebacks, adding further strain to the business.
By testing your product samples through online platforms like Amazon or eBay and actively seeking customer feedback, you can gain valuable insights to make informed decisions. This approach minimizes potential risks and increases the likelihood of success when scaling up your manufacturing and sales operations
Let’s Review the Approaches to Product Planning and Sourcing
Poor Product Planning: One common mistake in product planning is basing your business plan solely on personal use, belief in its potential sales, or the fact that the item was on sale. These reasons often lack a comprehensive understanding of market demand and profitability.
Average Product Planning: Another approach that is often mistaken for superior planning involves identifying SKUs with low sales rank and finding suppliers that offer sufficient margin. While this approach incorporates some level of numerical research, it lacks the complexity needed for consistent success.
Superior Product Planning
Distribution Model: Understand the competition level of your product, including the number of competitors and their inventory depth. Analyze the product’s historical sales rank trend over time, rather than relying on a single data point. Monitor pricing trends to make informed decisions.
Supplier Relationships: Seek out suppliers that offer favorable terms beyond upfront payment, such as extended payment terms or credit options. Establish relationships with multiple suppliers, including direct partnerships with the brand, authorized distributors, and even gray market suppliers. Diversifying your supplier base provides flexibility in case of stock shortages or price fluctuations.
Purchasing Model: Develop a purchasing strategy that allows you to maintain adequate inventory levels without excessive overhead costs. Stay agile and be prepared to exit SKUs that become overly competitive, are priced too low, receive negative reviews, or have high return rates.
Supplier Relationships: Nurture good relationships with your suppliers to gain access to closeout deals and secure inventory well in advance, particularly for the crucial 4th quarter.
Remember, for every product you research, only a small percentage will achieve success on Amazon. Therefore, it is crucial to carefully analyze and compare different options, constantly refreshing your approach and adapting to market dynamics.
Ultimately, it is important to develop a passion for a product’s numbers and analytics rather than falling in love with the product itself. This analytical approach will help you make data-driven decisions and increase your chances of achieving profitability and success.