As we have argued in various other blog posts, spending enough time on your product research phase is the most critical step when launching a new E-Commerce product on Amazon or Shopify. In fact, it's the foundation for our "Formula For Success" in E-Commerce.
To provide Amazon FBA sellers with more guidance, we have decided to provide some our very own "Ultimate Guide To Choosing The Best E-Commerce Products For Amazon". Don't forget to claim your copy of our evaluation matrix by leaving a comment below. Here is the list of criteria we recommend our clients apply to their product selection process
Some merchants don't like competition, some love competition. Our standpoint is: Competition is healthy! Don't go for the product niches without competition. Likewise, don't go for product niches with a very high level of competition. Instead, try to find "Goldilocks Products", i.e. products with just the right level of competition. In the Amazon world, more product reviews usually indicate a high level of competition. We recommend finding products which follow these rules of thumb: In the top 5, 1 product has fewer than 50 reviews. In top 10 products, 3 products have fewer than 50 reviews. Each of the first 3 products has fewer than 400 reviews.
Our rule of thumb: Your product should have average sales of at least 300 sales per month (i.e. approx. 10 units per day). Likewise, the 1st-10th ranked items should add up to 3.000 units/month. We also like to keep an eye on the number of different sellers on page 1 of the search results. Ideally, we see 8-10 different sellers and we don't see any single brand dominating the niche. If you still see at least 450 units/month at position #10 or lower you know your product niche has "depth".
BEST SELLERS RANK (BSR)
The BSR indicates how well a product sells. The lower the number, the more units are sold every month. Our guidelines for the product selection process are 1. Make sure that the BSR of at least three products in top 25 under 1500, 2. The BSR for the 1st ranked product is lower than 500, 3. The BSR is lower than 5.000 for the 5th product. If your product ends up high on Amazon's SERP than you're guaranteed to sell many units.
At what stage of the product lifecycle are you entering? Are you launching your product at the beginning of a new trend? Is first-mover-advantage possible? To find this out you can, for example, use Google Trends. Example: In March 2018, it was bad time to start selling fidget spinners. However, in March 2017 it would have been the perfect timing! To further evaluate your idea, make sure your product passes the "Keyword Trends Test". In other words, only start selling products which we recommend have at least 5-10k "Exact Phrase Matches" per month.
COMPETING AGAINST BIG BRANDS?
Are you competing against many big brands? This could mean your category is entirely "brand-driven". Example: If you create your own sneaker brand, you are likely going to compete against NIKE, PUMA and ADIDAS. It's VERY unlikely you will ever rank on page 1. If page 1 of the Amazon search results is heavily brand driven you will most likely never be able to compete. We highly recommend staying away from such categories.
WEIGHT AND DIMENSION
Ideally, your product weighs less than 500g (=1.1lbs) and it's small in size (rule of thumb: smaller than a shoebox). Generally speaking, the more "value dense" your product is the better. Example: Jewelry is small, weighs close to nothing and is usually expensive. This is what we call "high-value density products". Jeff Bezos calls these products "High ASP, low cube" products. In addition, if you ever sell off Amazon via your own Shopify site, having a small size is also highly beneficial. You can ship items from China directly to your consumers, using a service called "E-Package". To find the right 3PL to help you, read our recent blog post on the best 3PL logistics provider [link].
While Amazon Fresh is growing in importance it's probably not the best category to choose for first-time FBA sellers. Ideally, your product never goes bad. Good examples: plastic cups, stationary, etc. Bad examples: all food-related items with a clear expiration date.
FAST MOVING / HIGH REPEAT PURCHASE
The holy grail of selling goods online is to offer products via a subscription model or to sell products which are consumed very quickly and therefore need to be re-purchased by consumer. The best products sell fast and customers come back quickly to repurchase the same item. Good example: consumable goods (e.g. vitamins, skin care, etc.), razor blades, shampoo, etc. However, the downside of these type of products is that they usually attract a LOT of competition.
Some people like seasonal items, others don't like them. We usually recommend selling items online which can sell during all seasons of the year. Ask yourself the question: Do my products ONLY sell during a particular season or equally throughout the year? Highly seasonal products can be risky! For example, selling a Santa Claus dress is great in the months leading up to Christmas. However, selling such a dress in the summer is a tough job. In our product evaluation matrix, these products receive a low score. How can you find out if your products are seasonal? Again, you can use the free Google Trends tool.
PRODUCT RETURN RATES
High product return rates can totally destroy your margins. If you are an Amazon SellerCentral merchant, high return rates can literally lead to an account shut down. We therefore strongly recommend picking products with a low likelihood of returned products. All products with different "sizes" e.g. fashion products like shoes, etc., bear a higher risk of being returned. In our product evaluation matrix, you will receive a high score for products with no or very low return rates.
Ideally, your products are non-breakable, don't have any moving parts and don't consist of many individual components. Risky products: anything made out of glass. The rule of thumb is: If you dropped your product carton from a 1-meter height, would the product break? If the answer is "yes", then think twice about launching this product.
RETAIL PRICE POINT
The sweet spot lies between approx. $20-50 USD as this is the price range in which people still make "impulse purchases", i.e. purchases not originally planned. If you sell an item below this price point you will struggle to make enough margins. If you sell items above this price point, you won't get many "impulse buyers". Having said that, your retail prices need to be competitive! If your product doesn't have a unique selling proposition (USP) and is 2-3x more costly than the competition it's unlikely to rank on page one on Amazon.
The more emotions are involved in a product the better! Alternatively, your products must solve a clear pain point. If it's meant to reduce a problem, then your product should be easy to find with a search term. Good examples of an "emotional product": Go-Pro camera accessories, kids toys, pets accessories etc. When creating images and infographics make sure you highlight these features and benefits.
Have your ever heard of the electric vehicles company called "Tesla". If you are reading this article, chances are you probably have. Believe it or not but this brand has never spent a single penny on advertising! How did they do it? The started off by having a truly amazing product and as a consequence they could rely on the best and cheapest form of marketing: "viral marketing". Does your product have something unique and will news spread via "word-of-mouth"? Would you tell your friends about it? If your answer to all questions is "yes" then your product scores high in this category.
Try to achieve at least a margin of 5-7x, i.e. when your landed cost (FOB price + shipping + handling + duty + import VAT, etc.) is $10USD, your SRP should be $50-70USD. This should leave you with a healthy 30-40% net profit. Stay away from products which don't give you these margins as you won't have any budget for any sort of marketing activities. Likewise, stay away from products you can't sell for the same retail price as other competitors who rank on page 1 of Amazon's search results.
Elon Musk has once said, "Any product that needs a manual to work is broken". Let's apply the same logic to your product selection process: Ideally, you don't have to include instructions or manuals. It should be easy to set up and it should work properly without reading an essay.
Many new Amazon sellers start their E-commerce journey by selling a "me-too" product. While for some merchants it works, it's not a strategy you should bet your savings on. Ask yourself the question: Is your product a commodity item or can you find ways to differentiate it? You get high scores for products with very unique attributes and even higher scores for products with trademarks or patents.
OTHER RETAIL SALES CHANNELS
As of 2018, retail E-Commerce sales (B2C) only make up approx. 10% of total retail business in the US. In other words, 90% of all sales are still happening in brick & mortar stores! If you already have existing business relationships with retailers / wholesaler in your product niche, then you should leverage them and NOT only focus on B2C. In our product evaluation matrix, you'll receive high scores for products for which you have retails channels!
If you'd like to get a FREE copy of our Amazon product evaluation tool just leave a comment below and let us know what you think!