How do you know this product is going to be a winner?
From Margin to Size, in this article we will compare a good vs a bad product on Amazon.
Tip 1 Sales Volume
Even though revenue may be high for a product, when you are first starting out – looking for products with a good sales velocity is key.
A great product will sell 300 to 1000 units or more a month. To hit this kind of number you need the top five products for that niche to be selling at least 3000 units a month in total.
If the volume is less than 300 units a month, or 10 a day, it’s very hard to get good bulk discount pricing from your factory. Also the sales are two small and slow to make a good profit.
Watch out for niches where the number 1 and 2 products are selling a lot and everything else is selling less than 300 units a month. Usually there is a reason why only a couple of products in the niche are performing.
It is much better to focus on niches where the sales are spread out across multiple products. That way you will have more chance to also sell well.
Tip 2 Price
There are lots of additional costs in selling on Amazon, from pay per click to your own overheads.
To be able to support your business and make enough profit, you need to be targeting items that sell for $20 or more. The ideal range is $15-80, with a sweet spot around $30 plus.
If an item costs 100 bucks it’s unlikely to tempt many buyers, especially if it’s a brand they don’t recognize. If you are just launching your first private label product try to keep it simple to minimize the risks.
Would you buy an unknown brand of a product for $200? Probably not. You would research it first. But if it is a quick home purchase for $30 you might not think twice and just buy the first item that matches what you are looking for.
Tip 3 Margin
You want at least 75% margin on your products. So if it sells for $20 it shouldn’t cost you more than $5 including freight, packaging and labeling. If you’re selling 500 units a month with this kind of margin you should be netting at least $4000 a month in profits.
Any lower and growing your business becomes hard. Why?
Imagine your sales double – you now have to buy double the stock. If you have a high margin item, you can buy the extra inventory using profits.
If you only make 10% profit each time but are now selling double – you now have to put in more cash into the business even though it is performing well. Cashflow is one of the biggest restrictions on growth for new sellers.
Tip 4 Keyword Searches
Using Google, check how many people are searching for the item you are planning to sell on Amazon.
If the top 10 keywords are under 100,000 searches then the volume may be too low. Check sales to be sure.
Also you can see how competitive the keywords are using your AMZ Tracker account.
I have sold some items with very low google keyword volume before. Why? Because these items were very popular “also bought with” items on Amazon – i.e. items that customers had to buy together with other popular products.
Tip 5 Competition
Just because a product sells a lot, has great margins, and goes for your target price range doesn’t make it a good product.
There might be too much competition for you to be able to rank.
To understand the competition you need to analyze the number of reviews, the keyword competition, the listing quality and the trends in the niche.
Use a tool like AMZ Tracker to run promotions to get more reviews and increase your sales velocity. Over time this will help you outrank the competition.
Tip 6 Expansion
Before you order your first product, think about whether it’s possible to sell related items to the same target market.
If it’s a one-off item like a garage door opener, then you have to restart from zero on the next product. It’s better if you can cross-sell all your items as this will help to boost your profits.
It also means you can potentially expand your brand off of Amazon into other markets too.
Tip 7 Complexity
The more complex an item, the more likely it is to go wrong. This will lead to more returns and can end up penalizing your account. So to get going, start with something simple.
Especially if you are new and starting out, keeping it simple will also reduce the amount of investment you need to put in at the beginning.