One of the most important aspects of successfully selling on Amazon is knowing how to do product research. Every type of seller on Amazon has to know how to do product research to make sales. Without proper product research, you will easily end up sending products that are not in-demand into Amazon and they will stay there and rack up fees. Once you really understand how to do product research, you can create systems in your business so that it’s not very time consuming. In this blog, we will explore why product research is important, how to do it correctly and some tools you can start using for free.
Why is product research important?
Product research is simply doing research on a product to make sure it’s in demand and profitable before sending it to an Amazon warehouse. Product research enables you to account for the cost of goods, how long it will take to sell on Amazon and ensure that you will have a healthy profit. Some of the main reasons why product research is important include:
- Managing risk: From your own observations, you can never know how if a product will succeed or flop. Product research allows you to use data to mitigate risks so you can select the best product for how much money you have. Doing product research enables you to take calculated risks and minimize the chances of you losing money on your product. Once you complete the research and a product is successful, you can just buy it again and send to Amazon
- Competitor research: Even if you find a product that is in demand, you need to do competitor research to make sure that you will be able to sell the product and make actual profit. If a product is making 1,000 sales per day and you see the competitor is Adidas, you should not buy that product because Adidas has a lot of capital and they will drive the price down and the margins are razor thin. Making sure your product has relatively medium to low competition gives you the best opportunity to make profits.
- Avoid issues that can come later: Conducting product research prevents you from picking a product that is seasonal or has a lot of regulatory requirements from Amazon. Nothing is worse than investing time and money in a product and to figure out that you can’t sell an item due to trademark issues or other legal things that can emerge. With product research, you can select a profitable product that you will generate sales and you can build a sustainable brand on
Product research varies by seller:
Product research is not an umbrella term for all sellers. Different types of sellers (retail arbitrage, private label, etc.) require different types of product research. The time and focus on product research varies significantly, let’s explore how below:
Retail arbitrage: Product research for sellers that do retail arbitrage is the simplest to understand. In retail arbitrage, sellers go from store to store to scour inventory for profitable Amazon items. Sellers that do retail arbitrage do product research in their Amazon seller app. The Amazon seller app has a built-in scanner that allows you to scan any UPC bar code. Once you scan the bar code, Amazon will tell you if the item is listed and any relevant information. Retail arbitrage sellers do brief product research with the information that Amazon provides on an item. The relevant information includes price, category, Amazon best sellers rank and potential profit.
This is great because retail arbitrage sellers scan hundreds or thousands of items so having that information easily accessible allows them to scale. The key data is the Amazon best sellers rank and price. The app will tell you if you are able to sell in a specific category, so you don’t need to think about that. The Amazon best sellers rank is a number that Amazon provides based on the historical sales data of an item; the number can go from single digits to millions. The lower that number is, the higher sales it has.
For example, a product with a number 1 Amazon best sellers rank in the home and kitchen category in the U.S. market makes 120,210 sales per month. A product within the same category and market that has a best sellers rank of 100,000 makes 300 sales per month. This kind of insight allows sellers to get a good feel for how much a product is in demand while they scan them.
The Amazon app also has an FBA calculator built in it. The FBA calculator allows sellers to put in the price they want to sell an item for and the calculator accounts for all of the FBA fees and it generates a net profit. That’s a brief overview of how retail arbitrage sellers use product research to find in-demand and profitable items.
Online Arbitrage: Online arbitrage is when sellers use software tools to scan online websites for products at a discounted price to sell on Amazon for a profit. Instead of using the Amazon scanner app like retail arbitrage sellers, online arbitrage uses software programs that allow you to input certain parameters and you eventually get a list of potential items you can source.
For example, an online arbitrage program can allow you to search homedepot.com. You can enter parameters like you want a best sellers rank of <100,000, with a price point between $10-50 and a minimum of $10 profit. The software program will then scan all the categories within homedepot.com and provide possible matches. This allows sellers to automate product research and spend their time looking at possible sourcing opportunities.
It’s important to note that most online arbitrage programs are not free. The really good ones are pretty costly (>$70 per month). If you figure out how to do online arbitrage correctly, then the cost is absolutely worth it. Many sellers use a combination of both retail arbitrage and online arbitrage to find potential products to sell.
Private label: Product research is probably the most important for sellers with private label products. Private label is the process of identifying a market need in Amazon, contacting potential manufacturers and creating a branded product within a niche. Product research is the first step of creating a private label product.
Since sellers are already ready to invest thousands of dollars for their first private label product, they have to invest money into getting the best product research possible. The product research for private label sellers is very time intensive and it can take weeks to find the right product to launch. Here’s a brief overview of the process goes:
- Brainstorming: A seller may be very knowledgeable in a specific niche so they might start with brainstorming ideas for a product. In the brainstorming phase, sellers can look at current Amazon offerings for that product and what they can do to make a better product. This is just a preliminary step because sellers often use software tools like JungleScout to make sure the math makes sense.
- Market research: Market research is what you think of when you think of product research. It’s the actual process of using tools to check out how in demand a product is (monthly sales), looking at specific attributes of your product, making sure your product isn’t regulated, etc. Market research can often take days to weeks to find the right product-market fit.
- Finding suppliers: After you find a potential product, it’s time to find a good supplier for your product. You can try and find local suppliers in the U.S., but it’s often best to look for suppliers in China because they have the best rates for products. Many sellers look on Alibaba.com to find suppliers who can brand and manufacture your product. In this time, sellers talk to several suppliers to negotiate price and eventually select one or two manufacturers to send them samples. Once the seller receives a sample and is satisfied, they can make the first order to send products into an FBA warehouse.
- Create Amazon listing: In the process of finding suppliers, sellers have to create a great Amazon listing for their product. This will likely take several weeks to perfect because you will need professional photos and copy writing for your products. This has to be done correctly or you will waste all the effort you put in if your customers land on a poorly done listing.
Once all of this is done, the listing can be optimized and it’s ready to launch. That is a general overview of how product research works for the different types of sellers on Amazon. These processes show just how important product research is to the success of your Amazon business. Without product research you are basically guessing randomly if a product sells or not. For new sellers, I recommend using the following free tools below to get a feel for product research.
JungleScout Estimator: Almost all sellers use JungleScout in some capacity. It’s a tool that allows you to do product research for any topic. The full product is not free, but the estimator is. The estimator allows you to search different categories in different Amazon marketplaces and estimate the monthly sales of a product. Here’s a link to the estimator, feel free to play around with it to see the differences in demand between each category.
Keepa: The Amazon best sellers rank often changes for a product regularly, so sellers need a way to see how stable the sales of a product is. Keepa is an Amazon price tracker tool that helps sellers look at the demand and price history of a product. Keepa gives sellers access to a lot of insights like price increases, drops, price history and more to help sellers make a calculated risk when selecting a product. It’s free, here’s a link to their site, you can test out different products to see different data.
Amazon FBA Calculator: The Amazon FBA calculator allows you to see the profit you can make on a product. It provides you with fulfillment costs, storage costs, etc. to see how much you can make on a sale of product. It’s free, I’ve linked it here. It requires you to sign in to your seller account before using it.