What Products to Sell on Amazon FBA - The 6 Secret Ingredients Revealed

Sale Volume

The best and most reliable metric for demand is sale volume. Once we find a product type that might be viable, we always run an Amazon FBA tool commonly referred to as the Chrome Extension. Just search the main basic keyword for a product on Amazon, then run the extension. It will pull all the sale data for each product on the Amazon page. It tells us organic ranking, sales per month, revenue per month, review count, and best seller ranking. The sale volume we are looking for is 4 or more organically ranked competitors selling over 300/month (10/day). As we talked about before, to remain in the goldilocks zone, its also recommended that no competitor is selling over 1500 units per month (but thats a risk assessment you’ll have to make for yourself).

Selling price

In our first blog we went over the concept of the rule of 3rds, which outlines how your revenue is divided with FBA. With 1/3 going to product costs, 1/3 to amazon fees and storage, and the remaining 1/3 to you. With this in mind, we're aiming for over $8 profit per unit sold. To meet this goal, you want to find a product selling for over $25. Over $25 because after taking ⅔ of the revenue, we will just meet our $8 profit goals. It's also recommended to avoid products with a selling price over $50. $50 is the upper limit people will spend on a product with little to no knowledge of the brand or quality.

Size

Ideally small light products with a high selling price are optimal for a high margin. That being said, most other sellers think so too... possibly making the niche more competitive. What a lot of FBA sellers neglect are the larger and heavier products; making them a viable option to source. Remember, as long as the numbers in the revenue calculator work, we’re golden. Where we run into trouble with larger products is when we start planning for the unplanned. For one, so many people neglect or outright completely ignore emergency inventory restocking costs. Normally with small and light products, this wouldn't be much of an issue. However, with oversized items, it can cost you thousands. One of the worst things you can do is to run out of stock, and doing so for even a couple weeks can entirely brick your ranking and advertising campaigns. However, by the nature of the business, some things are beyond your control. You may suddenly ramp up sales, exceeding the sellout rate you previously planned. In order to restock in time you’ll have to air ship a portion to not completely run out of inventory before the remaining sea shipment arrives. To air ship just 20 units of a 2 lb <12 inch product can be over $15 per unit! Essentially eating the entirety (or more) of your profits (Air shipping small products (<0.5lb and <6in) only being ~ $2-4 per unit).

FBA storage fees increase during Q4 for all products in the warehouses. Amazon raises storage costs during the holiday season in hopes to deter sellers with old inventory from occupying essential space. Play around with the FBA revenue calculator to verify product profitability in and out of Q4, particularly for oversized items.

Reliability

We are looking for products that have a significantly lower chance for customer returns. Return rate is a very important amazon metric that we want to take seriously. It's important for the health of your account, as well as the rankings of your products to keep returns to a bare minimum. Whats the most common return reason, you ask? Damaged products - damaged either en route from overseas, within the warehouse, or on the way to the customer. It's advised to avoid products that are in any way fragile, easily cracked, shattered, etc. As well as products that have complicated mechanical parts that can be snapped off. If anything has even a hint of vulnerability, have your supplier add additional protection. Extra bubble wrap it's usually free, and adds a negligible amount of space/weight, and does not increase shipping costs.

Functionality

Do not source a product that straight up doesn't work! There are so many products on Amazon that are just a legitimate scam. I won't name any names, but there's a few I can think of in the fitness niche.... Not only are you going to get all kinds of returns from customers, but you’re also setting yourself up for a lawsuit. Same goes for complicated items prone to malfunction, including electronics. These products are possible, but require a lot of quality control.

IP Protected

Intellectual property claims are one of the most frequent ways sellers find themselves stuck with a whole bunch of inventory, with no way to get rid of it (on and off Amazon). Its extremely important to do your research and confirm 100% you can legally sell it before sourcing a product. Not only can Amazon ban your account for life, you can also find yourself in serious legal trouble.

Make sure your potential product are free from copyrights (original artwork), trademarks (logos, taglines, slogans), and patents (unique products or components). Helpful websites to verify these are uspto.gov and google patents, but if you want to be 100% sure there are affordable IP lawyers on upwork.com. They can approve your next product idea for a reasonable price.

Dangerous/Banned

Reduce liability and avoid hangups and setbacks by avoiding particular problem products. As a general rule of thumb - nothing ingested, injected, topical, sharp, illegal/borderline illegal. Basically if you wonder if it will be ok, chances are its not. Amazon has a list of products that are banned to sell, as well as products that require pre approval. You can find a full list of these products and categories here.

Seasonality

When thinking of potential overlooked fees, we have to cover long term storage fees (LTSF). These are fees charged for each unit that remains in the FBA warehouses over 6 months. They can cost a staggering amount per unit depending on your product's size tier. No one expects to have leftover inventory sitting in the warehouse, but things happen and you need to have a plan of action if they do.

Number of competitors

One way we identify competition is the number of sellers already offering a similar product. Search the most basic/targeted product keyword in the Amazon search, and verify at least a few sellers offering a nearly identical product. For example, if you're looking to source a yoga mat, search “yoga mat” and verify 3-4 existing TARGETED yoga mat competitors. What wouldn't count would be something like a gymnastics mat. Sometimes related products will populate in the search, so it's important to not count these products. The presence 3-4 targeted competitors can be an indication of a healthy FBA product. On the contrary, if there is only one or two sellers offering a product, it can indicate a few things. Low demand, or a patent protected product which we need to avoid at all costs. It can also indicate a very new to market product, so in this case it's advised to write it down and keep an eye on it for the future.

Reviews

Number of reviews per competitor is the best base indicator for competition. Review quantity is a good quantifier of sale volume. Once a seller reaches upwards of 1000 reviews, its an indication that they’ve been around awhile taking a large share of the market. Continuing with our yoga mat example - When we search for “yoga mat” we’re looking for the top 10 competitors to have an average rating quantity of less than 500, with no one over 1000. Simply put, this shows that the product is still fairly new to market and there is a good chance you can differentiate.

Market share

To verify market share viability, we want to see that of the top 10, at least 3 have less than 50 reviews total - with over 300/sales per month. This tells us that the new to market sellers with low reviews are still getting a proper share of the market sales. It also tells us that these new sellers are able to convince a buyer that they've made a better product. They proved that they were able to differentiate and compete with little to no reviews.

Make a better listing

If this 1000 review competitor has a star rating of 3.0/5, and the listing looks terrible (blurry photos, poorly written copy, etc.) its a major opportunity for improvement. Offer a better product to the customer by providing a better sales pitch. Properly sell the product to the customer with a professional A+ listing. - how does your product differ from what's available? How are you solving their needs? What value are you providing? .. etc.

Make a better product

What's wrong with this 1000 review product? Why does it have 3.0/5 stars? All you have to do is just read the reviews. Reading critical product reviews is the best way you can research ways to develop a better product. Maybe it's made of a fabric that easily rips, maybe the handle is too sharp, maybe people wished it came in black. Reading reviews will tell you all this useful information, and all you have to do is tally up what customers would change and develop a solution. Ask your supplier how much it is to make the changes, then figure out what works best to support your margins.

Add value

Another way we can differentiate is by adding value. Looking at the frequently bought together items on the Amazon listing page and include a relevant accessory to package with the primary product. For products that make sense, an instructional ebook is a great way to add value when margins are tight. If you’re creative, you can do it yourself for free, otherwise it's just a one time investment in a freelancer.

Incoming Competition

As we discussed, a sexy home run product will have a massive influx of competitors that want their piece of the pie. Being that it's in our best interest to steer clear of this, it's important to evaluate products on the rate of new-to-market sellers.

When a seller doesn't differentiate their product, they’ll try and compete on price alone because they don't have any other option. The same is true when every differentiating/value adding idea has been done already. Theres a “race to the bottom” effect when poor selling/low review competitors will drop their price in order to convince a buyer to purchase their low-reviewed product without any social proof. Lowering the selling price does work to an extent, until other low-reviewed competitors have the same idea. Before you know it there is a race to the bottom, tanking the average selling price for most of the competition (fortunately, the top competitors are relatively unchanged). To avoid this situation entirely, we can look at the price history for the top 10 organic sellers and verify the price is either constant, or slightly rising. A rapidly rising price is an indication of hype, another potential issue.

Hype

New trending, and hot selling products are great, but trends are what they are… trends. It's not going to rise forever, it will abruptly correct, then settle. We need to identify these trends and be cautious to not be fooled. If you get to market early, then you’ll be rewarded, but if you’re late, you may find yourself trying to compete in an oversaturated market.

Consistency

To identify consistent market trends for a particular product type, you can evaluate the top 5 competitors best seller ranking (BSR). BSR is a numerical amazon ranking that identifies how well a product is doing in its category. Typically, a consistent ranking of 10,000 and below for 1-3 months shows desirable market trend.

A BSR that is sub 10,000 for 1-3 months and with a sharp rise for the remaining 9 months is an indication of seasonality. Seasonal items may look perfect at the time, but it's only for a short window. Sales will drop off almost entirely until the same time next year. Sourcing seasonal products is not recommended until you’re more experienced. These products need careful planning to calculate inventory properly. The last thing you want to do is end up with excess inventory accruing long term storage fees.