This post is by Greg Mercer, the founder of Amazon product research tool Jungle Scout.
The formula to finding a perfect product to sell on Amazon is deceptively simple: find a product with enough demand, limited competition, and enough profit margin at the end of the day to make it all worthwhile.
Through my experience researching and launching dozens of products, I have learned many lessons the hard way. There’s no need for you to go through my learning experiences yourself. In this post, I will outline five mistakes that Amazon sellers make when they research products.
#1. Undifferentiated Product
The “land grab” days of Amazon are gone. It is more competitive and saturated today, where you can’t just private label yoga mats, BBQ gloves, and silicone wedding rings and collect your hefty checks. These days it would be hard for you to sell products if you are putting up an undifferentiated item.
These gloves are an example – there are dozens of products with nearly the exact same features and benefits:
As you can see, it is hard to determine any difference between these three gloves, except maybe the price. Which segues into the next common mistake I see…
#2. Priced Too Low
The minute that you as a seller start racing to the bottom by offering a cheaper price than your competitors, you are putting yourself in a world of (financial) hurt. Your pricing decisions should not be based on your competitors’ pricing, because you don’t know their sourcing costs, their profit margins, or the rationale behind their pricing scheme.
But if you price your product below your intended price point based on the competition, you undermine your business. Your unit economics are all out of whack as a result, and perhaps even worse, you position your business in the “low-cost and low-quality” quadrant.
#3. Not Calculating Profit Potential
One dangerous oversight new sellers make while doing Amazon product research is underestimating the impact of Amazon’s fees. You can use an FBA calculator to get an accurate estimate based on a similar product or ASIN.
Jungle Scout also pulls this information and calculates the net profit (retail price minus Amazon fees). For example, this is what the net column looks like for cell phone car mounts:
You can take it one step further and calculate what your profit will be, after you incorporate your Cost of Goods Sold (COGS).
For the first result at the top, WizGear, you can see a breakdown of the costs and add in your Product Cost. Assume it costs $1.00 to manufacture and ship to Amazon warehouses. The profit per unit sold is $1.92. This does not account for promotions, marketing or ads, or returns.
#4. Not Improving the Product
Relating to the first mistake I mentioned (not creating a differentiated product), sellers have a gold mine of customer feedback if they just look at the existing poor reviews of competitive products.
For example, one product that I sell had good sales (more than 300 units per month), but poor customer reviews. I knew that if I could improve the product, I could quickly sell more than the existing brand with an inferior product.
After reading through the one and two-star reviews, I noticed a pattern of complaints that a plastic feature kept breaking. I worked with my supplier to create a version with a metal piece to replace the plastic piece. I crafted my listing to emphasize this metal feature, and it has been selling quite well for over a year since launching!
#5. Choosing Too Small a Niche
What happens if you put a billboard in the desert? No one sees it, no one cares. Make sure you put yourself in an active market! The same applies to product niches on Amazon.
I sometimes see people who get too niched-down, in obscure categories. Take for example a “decorative fish net”, used to decorate home aquariums:
Look at the “Product Information” on the listing, and note the Best Seller Rank. In this case, the BSR is #35,509:
You can plug that number into our Free Sales Estimator to get an accurate estimate of how many sales per month the product generates. You can get the estimates for several products in a given niche to get a good idea of how many sales the niche typically gets in a given month. I like to see 3,000 sales every month for the top ten products in a niche.
You can see here that those decorative fish nets are selling only around 188 units per month.
These are just five tips that can help you avoid pitfalls that plague new Amazon sellers.
I am a firm believer that anyone can achieve great success on Amazon with the proper strategy, work ethic, and tool set.
I am currently running a case study where I have shown every step of the launch process of our product “Jungle Stix” with complete transparency to show you how the whole process works, in every detail.
We are now selling about $18,000 per month, more than half of which is profit.
This post was by Greg Mercer, the founder of Amazon product research tool Jungle Scout.