If you’re trying to find out the perfect item to sell on Amazon but are overwhelmed by the platform’s massive size and large number of product categories, then you’re not alone.
There are several factors to consider and many calculations to do in order to land on a profitable product.
To make this process easier for you, I’ve put together a complete guide that covers everything there is to know about Amazon product selection.
This post includes dos and don’ts, valuable tips, a thorough Amazon product categories’ breakdown and more!
So, without further ado, let’s get started.
The item you decide to sell sets the course for your entire Amazon business. It can either make or break your sales. Your product affects all aspects of your business directly like sourcing, marketing campaigns, packaging, shipping, etc.
This is exactly what makes product selection an extremely important step for your Amazon business.
Before you go towards how to select the right product, let’s first understand that product selection can prove to be a timely and costly process, especially if you’re not sure about what you’re doing.
Trying out new products again and again is not the way to find a winner. The key is to have to go through a minimum number of products to hit upon the right one.
If you remain patient and invest enough time and money during the product selection stage of your business, it can save you lots of energy and capital later.
Like we said earlier, your product is the basis upon which your Amazon business depends. It affects everything.
The type of product you select determines the nature of your marketing campaign strategies, your target audiences, you pre-launch or launch methods, packaging materials, shipment, and whatnot.
It wouldn’t be far fetched to say that your selected item to sell truly is the first building block of your entire Amazon business.
The first thing you need during the product selection stage is the right mindset.
The right mindset means two things. First, you need to learn to not get stuck on products and move on to potentially better options. Secondly, you need to have patience to deal with losses and unprofitable products.
Remember, it’s all part of a process. Trying to build your business with a dead process will cost you a lot more than just abandoning it and exploring other options.
Be prepared to take risks. I’ve seen many sellers going to great lengths on researching about products and Amazon selling strategies but never really placing the first order for their product. Don’t be one of them.
Now that we’ve learned the importance of product selection process, let’s get right into it.
First things first, you need to understand the numbers associated with your product. Predictions may lie but calculations don’t.
If you find a product you like, you have to calculate its return on investment before you decide to sell it:
ROI tells you exactly how much you would make with a product after paying off Amazon fees and the cost of goods landed.
Remember, Amazon charges the following 4 types of fees to sellers:
Referral Fees - This is the money you have to pay simply for benefitting from Amazon’s platform and massive buyer community
FBA Fees - Fulfilled By Amazon fees goes to Amazon as they “fulfill” each of your shipment whenever you make a sale. This includes shipping procedure, customer service, product returns, etc.
Storage Fees - This is the fee you pay for using up Amazon warehouse space. This is charged according to the size and dimensions of your product
Ad Spend - This is what you pay for advertising on Amazon’s website
Once you calculate all these fees for your product, add them all up to the cost of your goods landed. Now, subtract this sum from your sales price.
The number you get after subtraction would be the maximum you can make with your selected product. This number is called the Contribution Margin.
When you divide your contribution margin by your cost of goods landed (and multiply it with 100), you’ll finally get your Return on Investment for each sale.
I always recommend products that have at least 150% ROI. A 150% ROI means that for each dollar you invest, you get a dollar and a half in return!
One of the most important factors to take into consideration about your product category is its competition. It is very difficult to make progress in competitive niches as a new seller.
In a competitive space, the most experienced sellers with prominent brand images are more likely to succeed. A new seller is almost always left behind in such niches.
This is why I always advise Amazon beginners to start with less competitive products and move towards more competitive ones once they’ve built a reputation for their brand.
However, competitive products are usually the ones with the highest demand. The trick is to find a product that is both in-demand, and also moderately competitive.
In short, the right product
Here are the 5 ways to find a product that falls under both these categories:
Always look out for big fish sellers. If a product category has been dominated by the same prominent sellers for a long period of time, it means that there is simply no room for inexperienced sellers to join.
It’s almost impossible to compete with such sellers when it comes to winning the customer’s trust.
Even if you’re selling a high-quality, reliable product, buyers would still choose a seller with multiple reviews over you - a new seller with a maximum number of just 3-5 reviews.
On the other hand, if you see a category where there are multiple sellers competing against each other but no dominant sellers, consider this as an opportunity.
You can introduce a reliable product, compete against other sellers and eventually rise to the top of such a category. Think big!
Another way to check for a product’s competition level is by looking at the number of reviews top listings have in that category.
Your goal should be to find a category where the lop listings have no more than 150 reviews. If a listing has over 150 reviews, its seller is likely to dominate the whole category soon (if he hasn’t already done so).
The more number of reviews top listings have, the tougher the competition will be for a new seller in that category. Lesser the number of reviews, lower the competition and greater the chances for you to rank higher in that category.
It’s that simple.
As long as we’re talking about product reviews, I have another bonus tip for you. While you’re checking for the number of reviews, keep an eye on other sellers’ review scores as well.
In case of lower scores (3-4 stars), find out what the customers are complaining about. As you look at more and more listings, you’ll find some recurrent complaints. These negative points of other sellers are an opportunity for improvement for you.
If you sell on Amazon, your number one goal should be to rank higher in your product category. This ranking works through keywords.
Every Amazon seller selects keywords (for each product) that they aim to rank for on Amazon. This puts them in direct competition with every other seller of their niche aiming to rank for that same keyword.
For example, let’s suppose that you sell frying pans on Amazons and the keyword you’ve selected to rank for is “frying pan”. Now, if a customer searches for “frying pan” on Amazon, lands on your listing, and makes a purchase, your ranking will improve.
However, if a customer searches for “skillet” on Amazon, lands on your listing, and even makes a purchase, it still won’t contribute to an improvement in your product’s ranking on Amazon.
Yes, it would still count as a regular sale but it wouldn’t affect your Amazon ranking.
This is why keywords play a major role in your Amazon business. Like product categories, some keywords are competitive and some are not.
Your job is to target keywords that are not already being targeted by a thousand other Amazon sellers and rank for them.
Let me share a tip with you on how to do that: rank for specific (but not too specific) keywords.
For example, if you sell liquid cat food, the keyword “pet food” would be too generic and also very competitive. The keyword “liquid cat food” may be a bit too specific (very few people would search for it) but “cat food” is just the right keyword in this case.
Usually sellers only target a couple of broad, competitive keywords. This serves no good as you usually end up getting discouraged because competitive keywords make it almost impossible to get a good ranking.
The trick is to target longer keyword phrases that don’t have as much competition and thus make it easier to get a good ranking and stay on the first page of the search results!
While looking for less competitive products, it’s important to make sure that you don’t compromise on product demand.
The easiest way to find out what’s currently in-demand on Amazon is to simply checkout their Best Selling items page:
This page lists the top 100 products currently selling big on Amazon. Using this list, you can quickly identify which products are already making money on Amazon and thus are undoubtedly profitable.
In addition to a list of top selling items in each product category, you can also learn lots of relevant, valuable data to help you find out the perfect product to sell.
Once you find a product you like, the next step would be to check for how many people are already selling it, how much it’s being sold for, whether or not there’s room for improvement and so on.
If you see too many sellers already making money off of the product, or a couple of prominent sellers dominating the sales, try to go for another item.
After you’ve found a reliable product, you can simply find a supplier that’s already making that item, put your label on it and start your Amazon private label business right away!
Note: Your goal should be to select a product with minimal competition, not almost zero competition (there’s probably a reason that no one’s selling it, right?).
In this section, I have 4 tips for you to help you choose a profitable product. Actually, these tips are lessons that I learned from making mistakes again and again on Amazon until finally realizing what I was doing wrong.
To make sure that you don’t waste valuable time and investment capital making the same mistakes, let’s discuss each of these tips in detail:
The main thing you want out of your business is a stable income, right? In order to make sure that this income is not inconsistent, you have to choose a product that remains in-demand throughout the year.
The two main reasons you should stay away from seasonal items are:
I’ve often seen sellers making the mistake of doing inadequate research about a product and falling for a temporary rise in its demand. By the time they’ve stocked up units and started selling, the product is already almost completely out of demand.
To see what I mean, take a look at how the number of searches for the term “winter sports” on Google vary around the year:
See how people lose interest almost completely during summers? This is exactly what would happen to the business of someone selling winter sports gear on Amazon.
Let’s come towards the second reason now: what makes seasonal items highly competitive?
Consider this example. Everyone knows that fireworks sell more on 4th of July. This is why almost everybody becomes a businessman on this day. Same goes for Christmas, Halloween and almost every other holiday!
This unusually high number of sellers make seasonal items highly competitive!
Hassle-free shipping means less risky and cheaper shipping. Cheaper shipping means more margin for profit!
High shipping fees is something sellers and buyers both dislike. If you have ever bought something online, you would be familiar with a buyer’s reluctance to pay high shipping fees.
Therefore as a seller, try to avoid attaching the high-cost shipping label to your product.
In order to ensure a low-cost, simple shipment, you have to choose a product that is
Heavy and fragile items both require extra care during shipment and thus cost more as well.
In case of fragile items, there’s always a possibility of damage during shipping no matter how many precautionary measures you take.
When a damaged product reaches its buyer, be prepared for a negative review that will most likely have a long-lasting impact on your potential upcoming sales.
Let’s come towards the third factor now: size of your product.
Even if your item is large in dimensions, ask yourself if it is foldable. If yes, you’re good to go.
However, if you have a pretty large product that cannot be folded or made smaller in any way, it’s better to look for another item instead. Otherwise, it will cost you extra shipping cost.
Trust me, it is best to avoid electronics, crockery, or any other complicated items at least as a new seller. Products like these are not only difficult (and costly) to manufacture, but also high-priced and mostly fragile.
Yes, higher priced items usually do have greater profit margins but only if they are bought. Remember, you are a new seller who yet has no substantial brand reputation and who will not be readily trusted by customers.
In a position like this, it’s very difficult to compete with more reputable competitors in order to sell expensive and fragile items. This is why I recommend at least starting off with a simple product.
Like I said earlier, durable items also mean easy shipping and lesser chances of product damage during shipping.
However, these are not the only 2 benefits durable items promise. Another thing that I have learned from my experience on Amazon is that it is far more likely to make sales with easy-to-ship items.
This is important. New sellers often go directly towards higher priced products in hopes of making larger profits. Most of these sellers end up with unsold products lying in their storage for months.
To understand why this happens, put yourself in the buyer’s shoes.
If you go online and find a product you love that costs $100, you won’t just buy it instantly only because you like it.
You would want to check for reviews, brand history, social media presence of the brand, etc. to make sure you don’t waste a large sum of money over a low-quality product.
On the other hand, if you see a product that you love and that only costs like 10 bucks, you wouldn’t go to great lengths about researching the brand or seller.
This difference of attitude is exactly why you should start with lower priced items.
Gaining customer trust is vital to sell expensive items.The only way you can do that is by receiving a substantial number of product reviews, building a reputation for your brand on social media etc. All of this takes a lot of time and experience.
Moreover, marketing campaigns (PPC, giveaways, discounts etc) can prove to be highly costly for such items as well.
When it comes to the lower limit, there are two reasons for not going below $15.
First, items costing around just $5 seem to the buyers to be more likely to be low-quality so they trust such items less.
Secondly, the competition that comes with low-costing items is something you want to avoid at least as a new seller.
Let’s come to the last section of this Amazon product selection post.
We have already covered all the general dos and don’ts, tips and strategies etc., it’s time to talk about something more specific: Amazon Product Categories.
This section is more like a shortcut to save you a lot of time that could have otherwise been spent on researching dead-end categories. I have divided different Amazon categories into groups based on how easy it is to build a successful business with them:
There are 4 main product categories that lie in this group:
This category is very saturated and highly competitive. There are just too many comparable products. A potential buyer has so many options to choose from that the odds of him even landing on your listing are pretty slim.
There are tons of substitutes which make it extremely difficult for a new product to rank.
Items in this category are usually difficult to manufacture and come with high shipping costs. We have already discussed in detail how and why both of these factors are major deal-breakers.
This category is also highly competitive and is dominated by sophisticated sellers that leave little to no room for new sellers.
Most of these sellers have been in this category for years now and have so many tricks up their sleeves that competing with them is just impossible.
This space is also highly competitive and mostly dominated by just a handful of prominent sellers.
Moreover, the nature of items in this category makes it very difficult to gain customer trust as a new seller (people get more conscious while buying items to apply directly on their skin).
This group includes the following categories:
This is probably the least attractive product category on Amazon, making it among the least saturated niches. It would be a good idea to take a look into this category as there is a lot of room for new sellers.
This is another great, often overlooked category that offers lots of in-demand products with relatively lower competition. Here are some more categories that have great potential but are still often overlooked by new sellers:
There are two categories on Amazon take make it to this group:
This is a tricky category with a pretty strict quality control because Amazon has to verify whether or not jewelry items actually have the claimed attributes or not. Moreover, the referral fee for these products is also slightly higher than other categories.
On the plus side, the shipping costs and storage fees for jewelry items is very low.
The number one factor that differentiates this niche from the rest of the niches is the fact that items from Adult category don’t automatically show up in search results unless the category is selected explicitly.
Most important thing to know about this category is that PPC is not allowed. This means you cannot put up ads of sponsored products from this category on Amazon.
Product selection is an extremely important step of your Amazon business.
However, to make sure that all your efforts actually do pay off, you have to combine your carefully chosen product with awesome pre-launch and launch strategies, a reliable supplier, marketing campaigns etc.
Remember, research is the key to finding a well-rounded product to sell. If you do enough research during this phase, you’ll find all the upcoming steps of your business far easier!
BONUS! One of our good friends actually also saw books as a good opportunity in Amazon, you may check out his blog here.
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