How to Sell Profitably on Amazon

Business.com / Strategy / Last Modified: November 20, 2017
Photo credit: dennizn/Shutterstock

Finding a quality product to sell through Amazon private label doesn't require that you go through countless pieces of confusing, numbers-driven data. Instead, you simply need to find a product that meets a few key criteria.

With Amazon's recent updates to its seller storefronts, it's become easier than ever for dropshippers and other ecommerce entrepreneurs to set up attractive virtual stores that appeal to potential buyers on one of the world's largest online retailers.

Of course, while the new Amazon Stores model makes it easy to customize your store's branding and create an attractive layout for displaying your products, none of it will do you any good without quality products to sell.

But how do you go about finding that first product that will appeal to potential buyers? And, more importantly, that will help you land a profit? This is the No. 1 challenge facing any dropshipping entrepreneur and will ultimately have the greatest impact on whether or not your ecommerce efforts can be sustained in the long run.

Thankfully, finding a quality product to sell through Amazon private label doesn't require that you go through countless pieces of confusing, numbers-driven data. Instead, you simply need to find a product that meets a few key criteria.

Look at the top sellers

At first, finding the right product can feel overwhelming, but there is a simple strategy to help you hone in on which items might be best suited for your store: looking through the Amazon Best Sellers list. As you go through multiple product categories, you can quickly get an idea of which items are selling well and which ones can generate ideas for complementary products you could sell. A good way to gauge demand and get ideas is to look at products that are a top seller in their subcategory but rank in the thousands in their main category.

When examining bestsellers, be sure to consider whether a particular product has consistent demand throughout the year or if its current "bestseller" status is merely seasonal. Selling seasonal products is rife with challenges, not the least of which is the fluctuating demand that can bring your sales to a halt in off-season months. Investigate your product's demand levels to ensure you can enjoy steady sales all year.

Small and light

The idea that bigger is better doesn't apply when selling through Amazon private label. This is because Amazon’s fulfillment fees are directly related to the size of the product itself. While per-unit fulfillment fees can be as low as $2.41 for small items weighing 12 ounces or less, the rates increase exponentially for larger and heavier items.

As convenient as it may be to have Amazon handle the packaging, shipping and customer service side of things, limiting your product selection to items weighing two to three pounds (or less) is essential for reducing your overhead costs. Because they increase your fulfillment fees, heavier items will require a higher selling price, which can make it more difficult to convince would-be buyers to take a chance on your product.

Simplicity and durability

The best products to sell via dropshipping are simple and durable. They don't require high quality standards or warranties. They aren't going to break if the box is accidentally dropped during transit. In other words, you can depend on them performing as they should.

The more complicated or fragile the product, the more likely you are to encounter manufacturing problems and see customer complaints and returns – and the harder it will be to find someone to manufacture your product in the first place. This means that you should try to avoid products with electronic components or moving parts.

Remember, 70 percent of customers trust Amazon reviews, and when dissatisfied customers leave negative reviews for your less-than-durable product, you'll quickly lose any chance of growing a strong customer base. In addition, the extra packaging needed to protect fragile or oddly shaped items will result in extra fees from Amazon, further hurting your profit margins.

Niche matters

Finding a good niche is important, but probably not in the way you think. While your first instinct might be to find a niche category, you will be far more likely to achieve sustainable sales results if you look for a niche product within a deeper market.

For example, necklaces would hardly be considered a niche market, but within that particular category, there are plenty of opportunities for unique niche products. A niche product will help you stand out in a popular category far more than a cookie-cutter item that doesn't differentiate itself from the competition. This will also make it easier to expand to new products later on.

When choosing a product niche, avoiding categories dominated by big-name brands can also play a role in the eventual success of your product. Generally speaking, consumers are more likely to trust a brand-name product, which can make it difficult for you to break into a market saturated with major brands.

The right price range

Pricing is another challenge that can affect Amazon sellers, as you need to balance your ability to generate sales while also maintaining a good profit margin. In general, it is recommended that Amazon sellers choose a product they can sell between $15 and $50, as the perception of a lower price is more likely to trigger an impulse buy.

To calculate your price, first consider your product acquisition costs, including the cost of manufacturing, all Amazon commissions and fees, and any additional advertising expenses you might accrue to sell your product. In general, a good rule of thumb is to select a product that can be manufactured for less than 25 percent of your planned sale price. This way, you'll still achieve a solid profit margin, even after taking additional overhead costs into consideration.

You will then need to mark up your selling price so you can make a profit. Be sure to make your pricing competitive with comparable products. Even if it means a lower per-unit profit margin, a discounted price could be key to rising above your competition.

Conclusion

The right product selection will help you lay the foundation for success with your Amazon Store. With some research, you can find a product which, though not necessarily "perfect," will meet the majority of the aforementioned criteria and help you achieve your desired sales goals. Once you've found your profitable product, you can then take the next step of finding a manufacturer so you can truly get your store up and running.

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