With the drastic growth of eCommerce over the last decade, Amazon has taken a leading position in the industry. In 2019, 45% of the total US eCommerce transaction value came through Amazon, and this number is expected to keep rising in 2020.
The pandemic actually created an opportunity for online businesses, and Amazon was able to get even bigger as a direct result of the lockdown.
Based on the newest statistics in the first quarter of 2020, Amazon’s global sales volumes reached $ 37 billion USD, increasing by 8 billion USD from 29 billion USD of the same quarter in 2019.
Obviously, Amazon is the biggest marketplace in the world. It has more than 12 million items from its own inventory and up to 350 million products from online sellers. While it might be a challenge for new stores to enter this marketplace, there is always a way to find your niche.
While there is always an opportunity, it is critical for newcomers to prepare a plan and determine what goods they might have luck selling.
Here are some recommendations that may help you find great markets on Amazon, and also a new business for yourself. There are loads of options for you, so don’t be in a hurry, or get stressed when you find that an area you like is already saturated!
- 1 Some Basic principles for Selling on Amazon
- 2 Sell a Product that is in High Demand
- 3 What is a Good Product to Sell on Amazon?
- 4 Researching Online Products that Work
- 5 Amazon’s Best Sellers
- 6 Check Out The Reviews
- 7 Tools to Help
- 8 The Margin Matters
- 9 Selling on Amazon isn’t Hard – But Building a Business Takes Time
Some Basic principles for Selling on Amazon
Before launching a business on Amazon, it would be a good idea to yourself these questions:
- Do you know what is being sold on Amazon?
- What is popular with shoppers?
According to an article published in June 2020 by Statista, an international data research website, in the US, the top 10 categories for American consumers in 2019 respectively were (in order of most popular to least popular):
- Clothing, shoes, and jewel
- Home / Kitchen appliances
- Beauty and personal products
- Mobile phone and accessories
- Movies / Film
- Pet-related products
- Grocery and Food
Keep in mind that the above data came from the pre-COVID-19 world, so things like groceries and food may be a lot more popular today than they were a year ago. People are being forced to do more online, and shopping for everyday goods with Amazon is on the rise.
When you start selling on a huge market like Amazon where there is already a massive amount of stuff for sale, you need to go into the market with a plan. Making sure you are selling a desirable item or kind of product is very important.
By selling what is in demand, you will up your chances to make good profits. There will always be shortages for some products, and by leveraging your knowledge of the market, you will be able to use Amazon’s massive reach for your own benefit.
There are 2 basic principles every seller should bear in mind when choosing a category for their new store. You should combine these two ideas, and use them to ensure your Amazon store is as marketable as possible.
Sell a Product that is in High Demand
Sell what customers need, not what you want to sell. For example, over the last few months, there has been a big rise in the demand for hand sanitizer, cleaning wipes, and facemasks.
While you aren’t allowed to sell these items at a super-high price, you can be sure that these kinds of items will have ongoing demand.
The more understanding you have about the marketplace, the more likely your store will be to capitalize on emerging and existing market trends.
Besides digging for a list of products with high demand, that are used frequently, or with seasonal demand, never forget to focus on quality. This is the most important factor to keep buyers coming back to your store, so never take quality for granted, even when you are selling online.
Find a Niche Market Where You Can Compete
There will always be a market for niche-products that will appeal to a limited audience. The competition in these smaller markets will be far lower, as larger sellers simply can’t move a meaningful amount of products in smaller markets.
For example, instead of targeting the general market on a large scale, small sellers can narrow down their scope, and focus on a particular group of buyers. This task requires to combine your comprehension of products and do further research about different customers.
As a result, you may be able to find a new selling angle with enough space for your business to thrive. You may not be able to do millions of dollars in gross sales, but you may be able to connect with a dedicated group of consumers who are underserved at the moment.
One example of this strategy would be something like clothing for small dogs, or cats. While there are some shops out there for pets, it is unlikely that there are specialist stores for tiny market segments.
If you wanted to specialize in clothes and accessories for small pets, the competition in the space would be far lower than pet clothing in general, or pet accessories overall.
By drilling down to a very specific market, you will limit your competition, and also expose your store to a client base that isn’t going to wander too far from the core of what you have on offer.
Here are some things to consider:
- Are your products special?
- Is the quality your store offers good in comparison to the rest of the market?
- Can you provide products at a reasonable price?
Other factors like brands, delivery costs, and time, should be considered in order to come up with a final offer that will draw attention from consumers. If you can’t find a good way to compete in one market, you should look for other ones that may work.
Carefully working through a number of possible markets may not seem like it will drive profits, but if you ignore the reality of demographics, your Amazon selling experience isn’t likely to be very rewarding.
What is a Good Product to Sell on Amazon?
When it comes to selling online, there are some differences from selling in a physical store. Consumer buying habits do change when shopping online, and the physical size and weight of an object also matters.
Let’s have a look at a specific price range, and how this may influence your target market. While selling loads of small items may add up over time, you will need to have a plan in place for handling a large volume of orders and shipments.
The price range we will cover below is a little higher up, but most people can afford to shop in this middle-ground. By focusing on a slightly higher priced item, you will cut down your workload, and be able to create real profits from fewer sales.
A Price Range from $25 USD to $50 USD – An Amazon Sweet Spot?
Selling on Amazon isn’t free. You will need to keep in mind that even as a drop shipper, there will be costs associated with your store. Unless you have a really great angle to sell loads of small items quickly, you may want to consider hitting the $25-$50 USD range of products.
Why this range – and not one that is higher?
If you are just starting out, selling luxury or high-value items might be a challenge as people are often skeptical when buying online, especially from a new seller. You may be able to push the price spectrum up to the $100 USD mark if you are dealing in bulk items, although shipping costs will add up if you are offering larger items to a national audience.
Compact and Light Items Make Sense
Small products that can fit into a little box are easier to pack and send – and this is a major benefit to any seller. By selling smaller items, the burden of delivery cost and time is minimized.
Even if an item isn’t small, say, a pair of pants, keeping the shipping in mind is a very good idea. If you are unsure about shipping costs, do some research before you decide to sell a specific type of item.
Durable Items are Great
Durable items are better than ones that can be easily broken. Eventually, someone in the logistics chain will be rough on one of your shipments, and the potential for breakage will happen. If you are selling fragile items, both you and your client may be upset when the item is damaged.
What you decide to sell is 100% up to you, but keep in mind that your business is based on shipping items all over the country or world, and bad things do happen in transit. Take this into account when you are deciding on what you will sell on Amazon, so you are prepared for when things go wrong in the shipping department.
Selling Seasonal Items?
Seasonality can be a great way to hit the market with specialty items, but it also creates a lot more work. On the plus side, many sellers are turned off by the work involved in seasonal sales, which is a good thing if you are working to break into the market.
On the other hand, there is a reason why many sellers avoid the seasonal sales angle. Your marketing efforts will have to change based on the time of year, and if you buy and store products, you will have to hold on to them for many months before they are likely to be marketable.
Avoid Amazon-similar Brands
Amazon’s own products or other big brands are to be avoided. A company like Amazon has the ability to take over just about any market that is featured on its website and has done so in the past.
If you see that Amazon or another major retailer like Walmart has great deals on a specific kind of item, it probably isn’t going to be a good choice for your business.
Researching Online Products that Work
There are several ways you can use to find great products for a new Amazon store. You will want to use a combination of the ideas listed below, and find out what could work for your new venture.
Conduct Research on Your Own
A good place to start is by taking a tour around the Amazon market sellers to see what is really being sold there.
Use the keyword function to search for items you want to concentrate on, or you can start from zero by looking at the best-selling products for each category, then work to focus on items that may work for you.
Don’t forget to check out recommended similar or related products, which could help you to generate more ideas of what is working in the market.
Once you have a list of products, you can continue collecting information via search engines. Use Google keyword planner to look for trends in Amazon’s traffic, interest in specific items, popular suppliers, and so on.
Preliminary research can be quick, but it provides an overview of what people are buying online.
Use Supporting Tools to Identify Niche Markets
There are a variety of websites and digital platforms that offer information for you to conduct keyword searches. In terms of Amazon product screening, Jungle Scout is a wonderful resource.
By inserting product names, the service will then show you every detail you wish to know, from monthly sales numbers, estimated revenues, prices, and other metrics that will help you identify winning products.
With Jungle Scout, you can combine multiple criteria to gain more insights and track items over time.
To look deeper into a particular segment, you can utilize the Niche Hunter function to scan through results for a specific category, then use Opportunity Score to see how well they are performing in the marketplace.
Jungle Scout isn’t free, but it is probably worth paying for given the analytical features it offers sellers. Otherwise, Unicorn Smasher is a free tool that be used like Jungle Scout, though it isn’t going to offer the same features or capability of Jungle Scout.
One very effective technique to identify a niche market is to read through reviews. Though it might be a bit time consuming, it is a direct way to learn about customer satisfaction, understand complaints, and also gauge expectations.
Learn from other big eCommerce websites
Besides Amazon, there are other global online marketplaces you can do research, such as Alibaba or eBay. You can use these other sites to spot market trends and also look for potential suppliers.
Normally, products on Alibaba are manufactured in China, which makes them comparatively cheaper. You can utilize those supplies to build a competitive pricing plan and hopefully attract more customers to your Amazon store.
Evaluate Market Demand
As we mentioned before, after making a list of potential core products, the next step is to estimate the potential demand among target buyers. At the planning stage, you can rely on statistics and data that can be found for existing products to predict the results of your store.
Be sure to use lower estimates, as a new store isn’t likely to have the same sales volume as an established store. Be sure to take a look at every item’s sales volume on Amazon to see how well it’s actually moving, and use real-world figures for all your estimates.
From the product search on Jungle Scout, you can sort out 10 or 20 stores with the highest sales volumes. Take a close look and count how many stores can sell a given number of products per month, and how the sales are distributed.
If almost all the sellers can make the same amount of sales on a monthly basis, you can have a higher degree of confidence that you can compete on a per-item basis. If you see that the sales aren’t evenly distributed, you will need to be more conservative in your sales estimates.
Take the Plunge
At some point, you will have to start selling on Amazon and test out your strategy-building skills. Competitiveness testing helps sellers evaluate their strengths as well as weaknesses when compared with other market participants.
Once you start selling, you will be able to adjust strategies in order to leverage any advantages you find, and also cut wasted time and energy. There are a couple of sources you can check to get data for your competition analysis.
When you just start selling, you will probably see that marketing goes a long way. If you are hoping to compete solely on the items that you are selling, be sure to pick things that are extremely popular, and can be sold at very competitive prices.
Otherwise, a marketing program will be necessary to drive interest in your store. Let’s go through more details on how you can gather data for competitiveness testing.
Amazon’s Best Sellers
Amazon offers its own Best Seller Ranking, which uses internal algorithms to calculate top sellers from its database. This service also lists the hottest products by categories, such as electronics, clothing, and books.
Theoretically, a product displayed on BRS is in high demand, but at the same time, there might be a lot of competition to sell those products.
On the other hand, if you can see the top positions are scattered among various brands with insignificant differences, it means that the market has no top sellers, and there could be room for you in that market.
Along with top brand names, the BRS table shows other details including price, rank, sales volume, revenue, review number, and rating. You can make comparisons between your pricing scheme and offered prices at popular sellers’ stores.
One important indicator you should always pay attention to is the number of reviews. Too few reviews aren’t great for a store. To some extent, sellers without lots of good feedback from their buyers will have a hard time competing with established stores.
If you search for a niche and find out that current suppliers haven’t got many reviews, it can be a good signal to jump into the market and build up your reputation without much competition.
Check Out The Reviews
Reading reviews is a direct way to evaluate the performance and potential of a product. It is likely that an item with a lot of reviews has been drawing more attention and attracting clients to both the item and the seller who is offering it.
Loads of reviews may be a good or bad thing, depending on how much experience you have selling, and if you can compete on price. If you are able to offer a popular item at a competitive price, the red-hot market could help you to gain fat profits.
For newer sellers who aren’t able to compete on a pricing basis, it could be a good idea to shift the focus onto other products with less than 100 or 200 reviews, as there will be far less competition in those areas.
You may also find that marketing goes further in less popular items, as fewer people will find them on an organic basis.
Although scanning through all reviews sounds time-consuming, it can demonstrate what buyers are feeling towards a product, and why they are buying. By using that information you can make adjustments for your own store, or find new markets.
Many customers express their expectations for a product in their notes, so there is a good chance you can collect useful information to verify new product ideas and develop them into good businesses.
If your business has already been established, and you are busy, it might be a good idea to hire a virtual assistant who can do all the research for you.
Tools to Help
Aside from Jungle Scout, there are numerous Chrome extensions that support listing products on Amazon and offer constant updates, such as Unicorn Smasher, SellerApp, AMZ Base, and AMZScout Pro.
With these tools, you can quickly access an up-to-date Amazon product database and analyze top stores and products based on hard stats. You can use the same principles described above, such as counting reviews and looking for the hottest brands.
These extensions allow their members to customize tracking settings, which helps to generate more meaningful insights over a longer period of time. Analytical tools are especially helpful when it comes to building a long-term strategy.
The Margin Matters
Additionally, there are other elements that you will have to consider, such as calculating and optimizing the profit margin range. You need to establish an optimal pricing scheme that is both attractive to customers and lucrative.
Here are what you should take into account when examining a product’s profit margin:
- Product Cost. This refers to how much you need to pay to import products from suppliers. In the best-case scenario, you will connect with stable sources for high-quality products at a lower cost.
- Amazon Fees. Basically, there are 2 plans for Amazon online stores, which are Individual and Professional. While the Individual plan comes without a monthly subscription fee, it charges a fixed $0.99 USD per one sold item, the Professional selling plan is offered at $3.99 USD/month and will vary based on a number of factors. Professional plans are better for big shops with higher sales volumes.
- Other Fees. These include other related expenses, such as storing inventory, delivery, and promotions. Adding up extra costs is the last step to creating a product cost structure. Think about marketing costs as well, as these may add up over time.
- Expected Gross Margin. The ratio you want to earn from each sale after deducting all the above costs. Normally it’s recommended to keep your margin in the 20% to 40% range, depending on different categories and your business tactics.
Selling on Amazon isn’t Hard – But Building a Business Takes Time
There are many different ways to roll-out a selling strategy on Amazon, and one thing that will require further research is a marketing plan. Unless you are running a store that takes advantage of hot items on Amazon, you will need to figure out how to get potential customers to your store.
For sellers that want to take a niche-market approach to selling on Amazon, marketing will be especially important. Something as simple as a YouTube channel can go a long way with customers, and also expose your products to users on another mega-platform.
Remember, there are already a lot of sellers on Amazon, and you will need to have a good plan together if you want to compete. Make sure you have a good idea of all the costs involved and ensure that you will be getting paid enough to justify your efforts.
One of the best parts of a big market like Amazon is that it already has loads of customers who shop there every day. If you are able to find great products that you can offer at good prices, you should be able to make an impact on one of the world’s largest single shopping portals!