Intro to Product Selection
There is nothing worse than launching a new product on Amazon and having it completely flop. Trust me, because it happened to me. I had followed all the steps to pick the perfect product and I thought I had selected a winner. Unfortunately so did 100 other people selling the exact same item as me. I chose a garlic press as my first product when I decided to get into the FBA game and it was a train wreck.
SO…what can you do to make sure your product doesn’t flop? Here are the things I look for in my new products to give them the best chance of success. If you can find products that fit into all of these criteria, you’ll make a LOT of money. Most of the time you won’t be able to check off every box but as long as you can hit the majority of them you should be able to give yourself a good jump over the competition. We’ll use a garlic press as the example for the criteria below just to make things simple.
1. Bestseller rank for the #1 Product in your Category
Go to Amazon and search for garlic press. Go to the first listing and scroll down just past the product description to the section labeled “Product Details”. Here you will see multiple ranks, but the main one to look at is the Best Seller rank in the category, not the specific subcategory. As you can see below this product is ranked #389 in the Kitchen and Dining category. This is the so called ‘top level’ category because it is the most broad category this product fits under. In addition to that ranking you see 2 more. This item is ranked #1 for Food Preparation Equipment and #1 for Garlic Presses. Don’t worry about the subcategories. Your main focus should be on the top level category and you are looking for the top selling product in your category to be somewhere in the top 2,000 or so, depending on the category.
FBAToolkit is a handy website to get an idea of the sales volume in a category. When doing product research I will usually consult the graphs and look at the product ranking to get a rough estimate of how many sales per day the top item is doing. However, keep in mind that category is very important. #2,000 in the Kitchen category is going to sell way more units than #2,000 in Office Products. I’ll cover product selection in further detail in another post but for now just keep in mind ranking and look for the top selling item to be in the top #2,000 so you can be sure there is sufficient sales volume there to support a successful product.
2. Bestseller Rank for the Competitors
In #1 we made sure the top seller in our niche was making enough money to justify entering the market. The next step is to look at everyone else in that niche to see where the money is flowing. That is, the #1 seller may be doing well enough to justify researching further, but they may be doing so well that they are sucking up all of the money leaving the rest of the competitors to fight for the scraps. Just as in tip #1, there are no hard and fast rules for what rank to look for, there is even less guidance when looking at the competitors. The general quality you are looking for is somewhat consistent rankings as you go down the list. So if the top seller is #389 in kitchen and dining but the next 15 people are all below #10,000, then that should be a sign that the top spot may be locked up and dominated in which case you would have a VERY difficult time getting up there to claim a portion of that revenue.
Here is a screenshot from a tool called JungleScout. It is an extremely handy tool for product research as it does the grunt work I described above for you. It will automatically pull bestseller rank in the top level category (i.e. Kitchen & Dining), estimated sales, estimated revenue, # of reviews, average rating (out of 5 stars), and fulfillment channel. I will break those down later but the important one to look at right now is rank.
As you can see there is a pretty even rank distribution. Between the top 16 spots (which is the number of results Amazon will show on page 1), There is a relatively good spread from #389 through the low 3 thousands. There are a few at #7,000 and some as high as #19,000 and #23,000. In the top 5 listings you can see a very small spread where all the top competitors are ranking in the top #3,000. Based on the estimate we get from FBAToolkit, we can see that there is some pretty solid sales volume if you can get onto the first page of this category. Now JungleScout does some of this work for you with the estimated revenue but from my experience their estimates are very low. I would expect the revenue of the top sellers to be at least double what JungleScout is showing here but that’s a topic for another day. For now just keep in mind the rank spread and make sure there isn’t a huge gap between #1 and #5 which could indicate a monopoly in that niche.
3. Number of Competitor Reviews
Let’s go back to that JungleScout screenshot and look at the number of reviews. Like I said in the intro, a garlic press is a bad product for many reasons, one of which is the review count. See how the top sellers (with the exception of the Oxo which is coasting on brand recognition) have a minimum of 300 reviews, with the top dog hitting almost 2,000? It will take you a VERY LONG time to even come close to that number, and while you are chasing down those thousand reviews the top seller will continue to rake in more and more due to their huge sales volume.
Think about the last 5 things you bought on Amazon. How many did you leave a review for? I don’t have any exact data except my limited amount, but if you’re able to get even 5% of your customers to leave a review you are doing something right. So assuming 5% of people leave you a review do the math to figure out how many reviews you need to be competitive with the other sellers on page 1 of your niche. Reviews are not the be all end all, they are just another signal to take into account. The lower the review count of your competitors, the easier it will be for you to stand out and get a leg up on them. One of the ways Amazon ranks products is by their conversion rate, that is out of 100 people that visit your page, what percentage of them complete the purchase and buy your product. The higher your conversion rate, the higher you rank. One of the single best ways to improve your conversion rate is to get more ratings. Think about it from the customer’s standpoint. When you are looking to buy a garlic press you don’t know what’s good and what’s not, and frankly, you probably don’t want to waste your time researching it either. So you go by the reviews. If you see 1,692 other reviews with an average of 5 stars you can’t help but give that product the benefit of the doubt. Even if there are other products for sale at 1/2 of the price as the top seller, customers will trust reviews and put their faith in a product with a strong backing from other people.
4. The Number of Private Label Sellers
One of the best ways to stand out with your product listing is to take great photos and have great descriptions. Go to Amazon right now and search for garlic presses. Click into the top few listings and read their product bullet points and descriptions. Try to feel what the tone is in their message. What are they promising with their product? How is their listing styled? Does it seem very wordy and detailed? These are all trademarks of good private label sellers and in general these are competitors you will want to avoid because they are very good at what they do. But hey, so are you (or you will be soon!). Let’s look at what a stereotypical private listing looks like.
1 – Quality Product Photos.
They are very well done and make the garlic press look incredibly new and shiny. In fact, the main image looks so good it is hard to tell if it is computer generated or just an exceptional photo. There are also 5 pictures. In truth, this is more than you will see from a lot of sellers. The more pictures you have, the higher your conversion rate, so many private label sellers will stuff their listing with as many pictures as possible since it can only help. Think back to when you buy stuff on Amazon. Have you ever decided NOT to buy something because there were too many pictures? No way.
2 – List price, price, and sale price.
Have you ever shopped at Koh’s or any other store where everything is 50% off? Except you can’t believe anyone would ever pay $50 for a t shirt in the first place so when you see it’s on an 80% off sale for $10 it just makes you think that’s probably what the original price should have been all along? Well most people’s brains don’t work that way. When they see something is on sale a light goes off in their brain and it draws them into the product because they think they are getting a deal. Does this garlic press actually list for $43.95? Hell no. Nobody in their right mind is paying $43.95 for a garlic press. However, Amazon knows this helps conversions so they encourage you to enter a high list price so they can act like you are getting a great deal. This is a common tactic among almost every seller on Amazon, but I would bet it’s nearly 100% utilized by private sellers.
3 – Product Description
This is the real test to see who separates themselves as a private label seller. In a private label listing you will almost always see some type of a 100% satisfaction guarantee. The theory is that if the customer knows they can return the product and get their money back, it’s essentially a risk free purchase; a test drive. Have you ever bought something from a store then they hassled you when you returned it? Yah, it sucks. Amazon will take back almost anything as a return so putting this in your listing doesn’t actually set you apart from your competitors other than the fact that you are openly stating it. It’s kind of like promising 2 day shipping. Every other FBA item qualifies for 2 day shipping but if you can remind your customers about it then you will create differentiation in their eyes and make them more likely to buy your item.
Another component of the bullet points is the numbered list and the capital letters. Sometimes you will see stars instead of numbers, but the idea is to help the customer make their way through the listing. Most of the time when someone lands on an Amazon product page they will skim over the picture and scroll down to the reviews. Product descriptions on many large brand items suck and are not helpful. By creating a numbered list and using capital letters it immediately draws the customers attention and interests them. They know if they see a list of 1 through 5 they should start at 1 and read through to 5. Ever since AOL chat rooms were invented people understand that capital letters mean SOMEONE IS YELLING AT YOU BUT YOU CAN’T HELP BUT READ IT. It’s annoying, but it works.
If you read through some of the other listings in the garlic press category you will start to develop a feel for what a real private label listing looks like. These pages are heavily optimized for sales and it will be hard for you to beat them through SEO in Amazon’s eyes. It’s possible, but much harder to differentiate than if your competitors all have crappy pictures and no product descriptions at all. Your goal is to make this as easy as possible on yourself to try to find a niche where the competition is slacking and you can easily dominate by doing simple things like having quality product descriptions.
5. Market Price and Potential Profit Margin
One of the first things you’ll realize when you begin selling through FBA is that Amazon takes a pretty hefty cut out of each sale. No matter what, there is always a fixed fee for picking the item out of the warehouse and shipping it out, let’s round it to $4. On top of that, they charge a commission for each sale depending on the category, we’ll use an average of 15%. The general rule of thumb for selecting a product to sell is that you should aim for an item between $20 and $75 or so. The logic behind that is that below $20 you lose a lot of your profit margin to Amazon fees and above $75 you are getting into a higher price bracket where people are inclined to do a little more research before they purchase. By hitting the sweet spot of $20-$75 you are able to capitalize on people’s impulse to purchase while still making a decent amount on each sale so you don’t have to sell a million widgets per day to sustain a decent income. Take a look at the example below for the math behind this.
- You sell product A for $10. Amazon’s commission is 15% or $1.50 and the fixed fees are $4 (this isn’t exact but pretty close). Total fees are $5.50 out of your $10 sale price. You’ve already lost 55% of the sale price and you haven’t even covered the cost of production or shipping your product into Amazon! Say your product costs $3.50 to make and ship to Amazon and you are left with $2 on each sale as profit.
- You sell product B for $25. Amazon’s commission is 15% or $3.75. Fixed fees are $4. Total fees are $7.75 plus $3.50 to produce so your take home is $13.75.
Product A costs the customer $10 and you get $2. Product B costs the customer $25 and you get $13.75. Out of the $15 increase in price, you get to keep almost all of it except for $2.25 that you pay in increased fees.
Now the flipside to this is that your inventory will be more costly. In general if you are selling a product that sells for $75, you are likely paying about $20 to have it produced. If you are selling something for $15 your costs are probably closer to $3. So when you place your initial order of say, 1,000 units, your higher priced item is going to require $20 x 1,000 = $20,000 while your cheaper product would only cost $3 x 1,000 = $3,000. Many people getting started selling online cannot afford 20k up front ( I know I couldn’t when I started) so if you are going to be constrained by your starting funds then keep that in mind as you may want to select a slightly cheaper product until you are able to build up your sales.
To get an idea for what you can charge, just look at the price range of the top sellers. Generally you will be able to sell your product for a similar price. Use that as a starting point to calculate your margins and see if it makes sense for you.
6. Uniqueness or “Private Label Potential”
This is one of the biggest reasons that selling a garlic press is a bad idea. Unless you come up with a revolutionary concept, you are basically selling the same thing as everyone else. What differentiates the #1 selling garlic press from the #50? Not much. The top seller sends you a free e-book with your garlic press. The #2 guy will send you a brush to clean it out. Beyond that, what the hell can you do to differentiate yourself from the million other sellers?
When selecting a product, look for something you can tweak to make it your own. Some possibilities include:
- Bundle this item with another product people often use together or some type of an accessory related to the main product. Examples would be a garlic press + brush or a garlic press + free knife.
- Change part of the design. When you’re talking to your supplier, see what they can customize. Maybe you can create a garlic press with a longer handle so it creates more force to crush garlic. Maybe you can make a garlic press with padded grips so it’s more comfortable. Just think of some way you can tweak an existing product to make it better. How do you know what to tweak? See the next bullet.
- Check the competitors reviews. Read through the 1 and 2 star reviews for your competitors. Find out what people don’t like about the product and fix those. Do people complain that it’s too hard to clean out? Insert a brush with your garlic press. Do people complain that their garlic press fell apart and started to rust? Ask your supplier for high quality stainless steel and run it through the dishwasher 50 times in a row to see how it holds up. People will pay more money for a quality product.
7. Your Gut Instinct
Finally, you need trust your gut instinct. If something in your gut is telling you that the product is a bad idea, you should trust yourself. That’s not an excuse to avoid taking action and spend 6 months searching for the perfect product. Almost every niche is going to have competition from other high quality sellers. The best way to learn is to jump in and start selling. You’ll hit some bumps and probably pick some losers, but the experience will help you in the long run. It can be hard to trust your instincts when you are starting out, mostly because you probably don’t have a good idea of what a good product feels like. That’s fine, it will come with time. But if something about your product or your supplier or any other aspect of your supply chain seem sketchy, don’t be afraid to back out and find an alternative. It’s better to be comfortable and wait a little while than to paint yourself into a corner with no way out except selling of your stock at a loss (like I’m currently doing with all of my garlic presses!).
Leave a comment below if you have any questions or need help with your product selection!