To build your Amazon business, start by choosing a product based on what’s already for sale on the site. Here are six steps to finding a profitable one.
1. Choose the product category.
Do your research and only consider categories that are profitable, with enough sales volume. The most profitable categories are these: Beauty, Cell Phones, Grocery and Gourmet Food, Health and Household, Home and Kitchen, Home Improvement, Kitchen and Dining, Office, Pet Supplies, Sports and Outdoors, and Toys and Games.
Some software, laser pointers, hoverboards and other products require approval from Amazon first, and you may be subject to additional fees. The application process to sell these products can be lengthy and difficult. It’s easier if you already have a seller’s account in good standing, but I recommend avoiding these categories when you’re just getting started.
Focus on only one product in the beginning, even though you may want to create a brand with multiple products in the future. So when considering a category, think about whether you’d be interested in selling other products in that category. If you have a specific passion or expertise, zero in on that niche.
2. Understand what makes a profitable product.
The best product opportunities have high demand and low competition. You can measure this by looking at the number of reviews and the Best-Sellers Rank on each product page.
As its name suggests, the BSR is how Amazon ranks products, with No. 1 being the best-seller in its category. A low number means the product is in high demand and highly competitive. The ideal range varies by category, but in the profitable ones mentioned above, look for a product with a BSR between 100 and 6,000.
Products with more than 500 reviews are highly competitive, while those with less than 100 aren’t. A product with a low BSR and few reviews is a great opportunity because it’s popular but not competitive.
The sale price is also important because it influences profit margins. The sweet spot is usually between $17 and $70. For cheaper shipping, start with products that weigh less than 5 pounds and when fully packaged are considered “standard size” by Amazon.
3. Narrow down your options.
To find a product that meets these criteria, start searching for products in the categories you identified. Make sure you’re logged out of your Amazon account so you don’t see results that are personalized to you.
To see all the products in a category without searching for a keyword, type the minus symbol in the search bar, followed by random letters. You can filter the results by price in the sidebar. The products will be organized by BSR, with the most popular ones first.
Review the relevant product information from the search results, adding viable products to a separate spreadsheet. The goal is to find 10 to 15 products. This process is time-consuming and can be frustrating, so be patient.
4. Avoid certain products.
Fragile products can make shipping and returns difficult, so it’s best to avoid them. Textiles require higher import duties and specific labeling guidelines, so they can be more troublesome as well.
For safety and liability reasons, avoid hazmat materials, lithium-ion batteries, weapons and products that plug into electrical sockets.
Once you’ve narrowed down your list, check the U.S. Patent and Trademark Office to ensure they don’t have existing or pending patents. If you plan to sell outside the United States, you’ll want to check in those countries as well.
5. Test viability with competing products.
To ensure there’s enough demand for each product on your list, look for two competing products that meet the same criteria. To do this, search for each product on your list in “All Departments.” It’s OK if the competing products are in a different category, though the ideal BSR may vary.
Look for similar products with the same function and user experience; they may even be identical. For example, if the primary product is a bamboo cutting board, competing products should also be bamboo, as that’s what customers are looking for.
Make sure to read the reviews and adjust your search accordingly. For example, just because the primary product is a 13-inch nylon spatula doesn’t mean yours should be. Perhaps customers are complaining that the nylon melts, or the spatula’s too short and they’re getting burned as a result. If that’s the case, adjust your product accordingly.
It’s fine if one or two of the products have a lot of reviews, but if all three have over 1,000 reviews, it’s too competitive. If a product has a lot of reviews but competing products don’t, that’s a good opportunity.
6. Choose your product.
Once you’ve narrowed it down to three products, it’s time to calculate the potential profit for each one. Look for similar products on Alibaba.com, a marketplace for manufacturers. You’ll likely find several choices for each one, so calculate the average price.
To get an idea of the profit margin, subtract that cost from the product price on Amazon. Aim for a margin of at least 25%. To get a more accurate number, use Amazon’s Revenue Calculator for an estimate of profit after Amazon fees, inventory and shipping. Other than product samples, those are the only necessary costs.
Finally, choose your product! Order samples from suppliers on Alibaba to confirm you’re happy with your choice, keeping in mind that a successful Amazon business requires a quality product.
Congratulations, you’re on your way to starting your business. This is just the beginning, but it all comes down to choosing the right product.
