When you’re starting with Amazon FBA (Fulfillment by Amazon), one of the biggest challenges you’ll face is finding profitable products to sell. It’s not just about choosing something popular or trending; it’s about finding a product that has the potential to earn you money, even after fees and shipping costs are deducted.
In this article, we’ll dive into the strategies you can use to identify profitable products for your Amazon FBA business. Let’s get started!
1. Start with Market Research Tools
Before you even think about picking a product, it’s crucial to understand the market you’re entering. Luckily, there are many tools available to help you with this research. These tools can give you insights into what’s selling, how much it’s selling for, and what competition you’ll be up against. Here are a few tools that can make your life a lot easier:
- Jungle Scout: This is a must-have for Amazon FBA sellers. It helps you analyze product demand, competition, and profit potential. With its product tracker and sales estimator, you can get a clear picture of which products are worth pursuing.
- Helium 10: This toolset offers a wide variety of features, including keyword research, trend tracking, and a profit calculator. You can even track products in real time to see how they perform.
- AMZScout: Similar to Jungle Scout, this tool gives you data about sales volume, competition, and reviews. It also offers a Chrome extension to analyze products directly on Amazon’s website.
While these tools are powerful, remember that they’re just the starting point. Use them to gather data, but rely on your instincts and other strategies to refine your choices.
2. Understand Profit Margins
A common mistake many beginners make is focusing solely on the sales price without considering the costs associated with selling on Amazon. Profit margin is one of the most important factors when selecting a product for Amazon FBA. After all, a $20 product may look appealing, but if it costs you $15 to manufacture and ship, you’re left with just $5 in profit.
Here’s how to calculate your profit margin:
- Sales Price: The price at which you plan to sell your product.
- Cost of Goods Sold (COGS): This includes the manufacturing cost, packaging, shipping to Amazon, etc.
- Amazon FBA Fees: Amazon charges fees for storage, picking, packing, and shipping your products.
Use an online FBA Profit Calculator to determine your profit margin before you commit to a product. Aim for a profit margin of at least 30% after all expenses, including Amazon’s fees. The higher your profit margin, the more flexibility you have in pricing and marketing your products.
3. Look for Low Competition
You may have found a great product with high demand, but what about the competition? If the market is flooded with sellers, it might be hard to stand out, even if your product is good.
Here’s what you need to look for:
- Number of Reviews: A product with thousands of reviews might seem like a tough market to enter. On the other hand, a product with only a few reviews could indicate low competition but may also have low sales volume. Aim for products with moderate competition—around 100-500 reviews.
- Review Quality: Not all reviews are created equal. Look at the review ratings to see if there’s a consistent pattern of complaints. If customers are unhappy with specific features, there could be an opportunity for you to improve on the product.
- Bestseller Rank (BSR): Amazon assigns a Bestseller Rank to every product, which indicates how well it’s selling. A low BSR (below 10,000 in a given category) typically indicates high demand, but it could also mean you’ll face stiff competition. On the flip side, a high BSR (above 100,000) could mean low sales, even if the reviews are positive.
4. Consider Product Size and Weight
When it comes to Amazon FBA, the size and weight of your product matter. Larger and heavier products cost more to ship and store in Amazon’s warehouses, which eats into your profit margin. The goal is to find a product that’s lightweight, easy to pack, and affordable to ship. Here’s why:
- Shipping Costs: If your product is heavy, shipping costs can become prohibitively expensive. For instance, shipping a 5-pound item from China to Amazon’s fulfillment center is more expensive than shipping a 1-pound item. Choose products that are small and lightweight to maximize your profits.
- Storage Fees: Amazon charges monthly storage fees based on the volume of your product. If your product is large and bulky, these fees can add up quickly, especially during peak seasons like Q4. Consider products that don’t take up too much space in Amazon’s warehouses to keep costs down.
5. Assess Product Seasonality
One of the most important things to consider when choosing a product for Amazon FBA is whether it’s seasonal. Some products experience spikes in demand during certain times of the year—think Halloween costumes or Christmas decorations. While these products can be profitable during peak seasons, they might leave you scrambling for inventory during off-seasons.
To avoid this, look for evergreen products—those that sell year-round. These are usually in demand consistently, and you don’t have to worry about fluctuations in sales due to seasonality. If you do decide to sell seasonal products, plan ahead and make sure to stock up in advance to capitalize on peak seasons.
6. Find Products with a Unique Angle
Sometimes, the key to finding a profitable product is to look for opportunities within existing markets. Instead of going head-to-head with top-selling products, find a way to improve or differentiate the product.
For example, if you’re interested in selling water bottles, look for products that address specific pain points—perhaps bottles with built-in fruit infusers, or bottles that keep beverages cold for an extended period. This unique angle can help you stand out from competitors and attract more customers.
7. Check for Intellectual Property Issues
Before you get too excited about a product, make sure there are no intellectual property (IP) issues that could cause trouble down the line. Amazon is strict about IP infringement, and you don’t want to risk your account being suspended for selling counterfeit or patent-infringing products.
Here’s how to check for potential IP problems:
- Trademark Search: Search the U.S. Patent and Trademark Office (USPTO) database to ensure the product or brand name isn’t already trademarked.
- Patent Search: If you’re dealing with a unique product, check whether it’s patented. Selling a patented product without permission can result in legal issues.
- Copyright Check: Be mindful of any copyrighted materials that may be included with a product. This is especially important if you’re selling branded products or items with copyrighted logos.
8. Stay Up-to-Date on Trends
While you want to focus on evergreen products, keeping an eye on market trends is also important. Trends can help you spot emerging product categories before they become oversaturated. Look for products that are growing in popularity but haven’t reached the peak of competition yet.
Here are a few ways to stay up-to-date on trends:
- Google Trends: Use Google Trends to track product search volume and gauge consumer interest in different categories.
- Social Media: Platforms like Instagram, TikTok, and Pinterest are great for spotting trends early. Pay attention to what influencers and content creators are promoting.
- Industry News: Follow blogs, podcasts, and newsletters that focus on eCommerce trends. These can help you stay informed about the latest product categories and industry shifts.
9. Test Small Before Scaling Up
Once you’ve found a product you think is profitable, it’s time to test it. Don’t go all-in by placing a large order with your supplier right away. Instead, start small and order a limited quantity. This allows you to evaluate how well the product sells on Amazon, without risking a lot of money upfront.
- Test Marketing: Run ads on Amazon or other platforms to see how well the product performs. You can also tweak your product listings to optimize conversions and improve your product’s visibility.
- Monitor Sales: Pay close attention to sales performance and customer feedback. If the product doesn’t perform as expected, it’s better to pivot early than to invest more money.
Finding profitable products for Amazon FBA requires a combination of market research, financial analysis, and creativity. By using the right tools, understanding profit margins, assessing competition, and testing small, you can significantly improve your chances of success in this highly competitive marketplace. Whether you’re just starting or looking to scale, taking the time to choose the right product will set you up for long-term success. Happy selling!