This guide will tell you everything you know about doing Amazon FBA Product Research, from the principles you should follow to the tools (both free and paid) that you can use to ensure your success. We’ll give you a systemized process to aid you in evaluating products and niches so that you can find lucrative opportunities, make the right decisions, and avoid costly mistakes.
What is FBA?
First, what the heck is FBA and why should you sell on Amazon this way? Skip to the next section if you already know the answer, or stick around if you need a refresher.
FBA is an abbreviation for Fulfilled By Amazon. What this means is that you ship all of your items to Amazon’s warehouse, and then the Amazon worker bees ship your goods to the customer. Each product is assigned an ASIN (Amazon Standard Identification Number) which allows them to take care care of the packaging, shipping, and customer service.
Four Ways to Sell with FBA
The next step is choosing your business model. There are pros and cons to each. If you decide to go the retail arbitrage route, the Amazon FBA Product Research process is simplified. However, if you use one of the other three ways to sell on Amazon, then this guide is for you.
1. Retail Arbitrage
How it works: This method is the epitome of “buy low, sell high.” Retail arbitrage involves buying clearance items or underpriced goods in a retail store or online and then selling them for a higher price on Amazon.
Advantages: It’s easy to get started and requires minimal investment, and you have a clear idea of what your profit will be before you buy a single item.
Disadvantages: It’s labor-intensive and challenging to scale. Also, because there’s no value created and you’re doing all the work, there’s little chance of you being able to sell the business.
How it works: As a reseller, you buy items in bulk at wholesale prices and sell them for a profit.
Advantages: Once you find profitable niches and products, this business model is easy to set up. One of the best ways to get started is to find brands that aren’t currently being sold on Amazon and offer to sell them. While this tactic was a slam dunk five to ten years ago, domestic brands and manufacturers have gotten savvier, and the competition continues to increase.
Disadvantages: If you’re strictly a reseller and not adding value, your business may suffer stiff competition when similar products arise. It’s also risky to be 100% reliant on the Amazon marketplace.
3. Private Label
How it works: You take an already existing product and relabel it with your brand. You may also make incremental changes or improvements to solve a problem or add uniqueness.
Advantages: You can develop a brand, which adds value to the marketplace and provides opportunities to expand your offering. You may also have higher margins by working directly with the manufacturer.
Disadvantages: Private label products take longer to get established because you are now creating a brand from scratch.
4. Proprietary Products
How it works: You design and develop a product from scratch.
Advantages: This business model has the potential for the highest profits because you are the only business with access to a specific product. If you are successful, then you could sell the business later for a large profit.
Disadvantages: It can be time-consuming and expensive to develop a new product and brand
Amazon FBA Product Research Success Blueprint
The goal of Amazon FBA Product Research is to take the guesswork out of what will be successful. We’ve condensed our checklist down to an easy-to-remember blueprint.
- Average monthly sales: The top ten sellers should have a combined sales volume of at least 2,000 units per month (you can use Jungle Scout to track this). This threshold indicates there’s enough demand for you to be potentially profitable.
- A number of reviews: Within the top ten sellers, three or more of the sellers have less than 50 reviews. This signifies that the competition is reasonable.
- Selling price is higher than $18: Typically, this is the magic number that will allow you to offset Amazon fees and costs while leaving enough profit margin.
- Low ratings: One or two sellers that sell more than 200 units should have a 3.7 rating or lower. This dismal rating shows that people are still purchasing these items even though they’re poorly rated. Look for opportunities to improve the product so that you can enter the market with clear differentiation.
Finding Potential Top Sellers
Now that you know what to look for in a winning product, how on earth do you find these winners?
1. Guess: This is the mistake a lot of new sellers make. They make a decision based on what they perceive as a gap in the marketplace or what their neighbor’s coworker’s girlfriend said she was looking for on Amazon but couldn’t find it.
2. Manual Analysis: Before Amazon FBA product research tools were invented, we had to go into stealth mode to get information about the sales volume and the strength of the competition. Here’s one of the most accurate (and tedious) ways to get information about how many units a seller is moving:
- Go to their listing.
- Add the item to your cart.
- Connect the cart to go to your cart and modify the order quantity.
- Click quantity, 10+, and then enter 999.
- Click update.
- In most cases, the seller won’t have 999 in stock, so you’ll get an error that says, “This seller has only XXX of these available.”
- Then, check back each day for 7 days and go through the same process. You’ll get an idea of how many units are sold each day, which will allow you to anticipate demand.
3. Automated Tools: Thankfully there are both free and paid tools that allow us to get accurate data about product demand, competition, and profitability without pulling our hair out.
We’ve looked at a variety of tools on the marketplace, and our favorite is Jungle Scout. These tools provide a surprising amount of functionality, so you can get some of the information you need for your analysis without having to spend anything. If you’ve ever tried to look for profitable products manually, then you know what we’re talking about.
For example, you might create a filter that has the following criteria:
- At least 200 sales per month
- Product price of at least $15
- A review score of less than 4.0
- The product has at least five reviews
Here’s a sample of what the Jungle Scout interface looks like:
Categories to Avoid
You’ll hear a lot of advice about products you should stay away from. We think some people are overly conservative and avoid very profitable niches like topical beauty products and high-ticket grocery items, but the experts generally agree on avoiding the following:
- Media such as books, CDs, vinyl, movies, music, software, video games
- Clothing, shoes, jewelry, handbags. People prefer a brand name or well-known entities. This category is also subject to high returns.
- Watches, electronics, computers, and appliances. They tend to be difficult and go wrong.