Planning on selling products on Amazon? Or maybe you already have a product but are struggling to make sales? With over 350 million unique products and millions of Amazon marketplace sellers, finding the right products to sell on this online platform can be challenging. This is where product market viability comes into play.
Take a step back and think about your favorite products. Chances are, almost all of them are available on Amazon. Now try and think of a product you wish existed. A quick search on Amazon may surprise you as it might already be available for purchase.
But let’s face it: finding low-cost, in-demand products to sell is not an easy task. After all, every other seller is trying to do the same thing. However, with the right strategy and research, you can find profitable products that will bring you a handsome profit with reasonable effort.
This article will guide you through the process of finding profitable products to sell on Amazon, explore the concept of product market viability, and provide a step-by-step guide to help you find the right products for your business.
- Product market viability involves assessing a product’s demand, competition, as well as potential profit.
- Perform thorough market research to identify low-competition products with high potential for profitability.
- Analyze niche trends and customer avatars to understand your target audience better.
- Consider cross-selling and bundling products within your current catalog for increased convenience and sales.
- Continuously monitor and adjust your strategies to stay competitive and successful on Amazon.
What is product market viability?
Before diving into how to find profitable products, it’s essential to understand the concept of product market viability. Simply put, it refers to the potential success of a product in a particular market. There are two aspects to consider when assessing product market viability: market viability and product viability. Let’s break them down further:
Market viability involves analyzing the demand for a specific market’s product, service, or business model. A few factors come into play when evaluating market viability. These include:
- Market size: Does the market have enough potential customers to support your product? What does the future market growth rate look like?
- Competition: How many other sellers are offering similar products? Are there established brands or new sellers entering the market?
- Trends: What are the current trends in the market, and how do they affect your product? Are there any emerging niches that you can tap into?
- Customer demographics: Who is your target audience? What are their needs and wants? Understanding your customer’s persona can also help you determine if there is a demand for your product in the market.
While conducting market viability research, you should aim to identify a niche with low competition and high demand. This will give your product the best chance for success.
Product viability is equally essential when assessing product market viability. It involves evaluating the product and its potential profitability in the chosen market. Evaluating product viability involves rigorous research and analysis of various factors, such as:
- Profit margin: How much profit can you make by selling the product? Is your pricing competitive enough to give you a good return on investment? What are the costs of manufacturing, sourcing, and shipping the product?
- Unique selling proposition (USP): What sets your product apart from others? Is it an innovation or an improved version of an already existing product?
- Demand: Long-term success on Amazon depends on the demand for your product. Conduct market research to determine if potential customers are interested in what you plan to offer. If there is already a demand for your product, how can you differentiate it from competitors to stand out?
How to find profitable products to sell (step-by-step guide)
With about 60% of sales on Amazon stores in Q2 of 2023 coming from third-party sellers, it’s evident that selling on Amazon successfully is achievable. However, finding profitable products to sell still requires thorough research and evaluation. Here are the steps in an effective product market viability to identify the right products for your Amazon business:
1. Perform market research
Online market research is the first crucial step in finding profitable products to sell on Amazon. Ultimately, market research gives you a better understanding of your product and its potential customers’ problems, needs, and desired solutions.
It also gives you an insight into what your competition is offering, allowing you to identify any unique selling points, market gaps, and areas for improvement. Once you have a good market overview, you can aptly craft your product or business model per the market demand and trends.
However, with a large source of information available on the internet and target customers’ preferences constantly changing, it’s almost impossible to manually gain insight into your market. But, you can easily perform extensive market research with the right tools and techniques. One such method is by conducting a SWOT analysis.
Conducting a SWOT analysis technique
SWOT (strengths, weaknesses, opportunities, and threats) analysis is used in assessing a competitive environment by identifying external and internal factors of a business. It helps you accurately evaluate direct and indirect competitors, identify gaps in the market, and capitalize on future opportunities a product or service might present.
Here is a good overview of what is required to conduct a SWOT analysis for your product market viability:
- What are your strengths? Before introducing a product, you should look at what your new product offers. Analyze the features and unique selling points that set you apart from your competitors. Does the price, quality, or value-for-money you offer beat your competitors? Is your product more easily accessible than others? Find out which areas you outperform the competition, and take advantage.
- Analyze your weak points. Conversely, look at the areas where you fall short compared to your competitors. What challenges do you face regarding sourcing, logistics, or pricing? Analyzing your weaknesses allows you to improve and become more competitive.
- What are the opportunities? Conducting keyword research on the Amazon marketplace can bring out opportunities you could capitalize on. Are there any keywords with high search volumes that your competitors aren’t tapped into? Can you package the product in a way that can appeal to new or existing customers? Opportunities come in different shapes and sizes; the earlier you identify them, the better.
- List down any threats. With about $386 billion in annual revenues on Amazon, it’s natural that competition will be fierce. New technologies and market trends are constantly emerging, which might affect product market viability. Take a look at who your competitors are and what they offer. Which emerging players in the marketplace could potentially threaten your sales or market share?
Consider overall market trends
Market trends are another important factor when conducting market research. A shrinking market should raise the alarm for you. However, if the market is stable or growing, there are opportunities to capitalize on and expand your business. Also, take note of new trends that are emerging in the market. Who are the biggest players in your niche? Where are the opportunities? Identify where your product fits within these trends and plan accordingly.
Consulting reputable websites like Fortune Business Insights or Statista can give you a good insight into market trends, industry growth projections, as well as major players in the market.
Analyze niche market trends and demand
With a sound and ready market, analyze every bit to determine potential products and match customer preferences. A good way to do this is by performing keyword research.
For example, if you want to sell office furniture, type the keyword in Google Trends and pick a timeframe. A graph will appear indicating the interest (search volume) in that particular term over time. You can also use Amazon product research tools like the Trellis’ Amazon Keyword Difficulty Tool to identify keywords with high search volume and low competition.
As a rule of thumb, prioritize products with a stable interest over time as they guarantee sustainable profits. However, staying up-to-date with trending products can provide additional revenues when done correctly. We’ll discuss more on this in the upcoming steps.
2. Determine product criteria
After conducting your market research, you should now understand the needs and preferences of your target customers. Therefore, choosing the ideal product for your business means carefully considering specific criteria that best matches your target market. Here are some factors to consider when determining product market viability.
Pricing is a crucial element in any business, and selling on Amazon is no exception. You want to ensure your product has a competitive price while maintaining profitability.
Research your competitors and see how they price their products. Analyze the prices of high-performing products in your niche and note any trends. Remember to consider any additional costs, such as shipping fees.
Pricing your product too high may discourage potential customers from purchasing it, while pricing it too low can lead to a pricing war with competitors and ultimately affect your profitability. Finding the balance between being competitive in the market and maintaining a healthy profit margin is crucial.
Product weight and size
While no product is too big or too small for Amazon, remember that heavier and larger products may cause logistical challenges, especially concerning shipping. Whether shipping products yourself or using Fulfillment by Amazon (FBA), it’s essential to consider the costs and complexities of shipping more oversized items.
On the other hand, smaller and lighter products might have lower profit margins, but they’re easier to manage and could cost you less in shipping fees. Consider the logistics and the expenses of shipping each product to determine the most viable for your business.
Consider your markup options
When choosing a product to sell, it’s essential to consider your markup options. This refers to the difference between what you paid for the product and how much you sell it. The higher the markup, the more profit you’ll make per sale. However, be mindful that a high markup may make your product less competitive.
Product seasonality and trends
Before finalizing your product choice, consider whether it is seasonal or evergreen. Seasonal products have peak sales during specific times of the year, while evergreen products tend to always be in demand. It’s also essential to balance both types of products within your catalog to ensure consistent revenue streams.
3. Analyze niche trends
Once you have narrowed down your product options based on pricing, weight, and seasonality criteria, it’s essential also to analyze niche trends within your market. This involves using tools like Amazon sales estimator to analyze what products are trending in your niche and their sales performance.
One way to do this is by conducting a competitive analysis. This involves studying your competitors and their products, pricing strategies, marketing techniques, and customer reviews. Trellis’ Amazon PPC Competitor Analysis Tool is valuable for this process, providing real-time and detailed insights into your competitors’ performance.
4. Identify your customer avatar
A customer avatar, or marketing persona, represents your ideal customer based on extensive market research. It is a key component in creating marketing campaigns, paid adverts, and developing products that cater to the needs and preferences of your target audience. While a customer avatar aims to create a single, fictional person, it is important to note that this is not your everyday customer, but an ideal buyer you want to attract.
Your ideal customer will most likely purchase your product and be loyal to your brand, offer you new referrals, make repeated purchases, and generate positive reviews in exchange for quality products. When creating a customer avatar, several factors need to be considered, such as:
- Defined wants and needs,
- Pain points,
- Demographic information (age, gender, income level),
- Psychographic information (values, interests, lifestyle).
Creating a customer avatar can help you better understand your target audience and tailor your product offerings and marketing strategies to attract and retain them. You may even have multiple customer avatars for different segments of your business, such as male and female customers or different age groups. Other benefits of creating a customer avatar for your product market viability strategy include:
- Help in personalizing your message to each customer segment.
- Improve targeting and conversions in marketing campaigns.
- Better understanding of your customer’s needs and preferences.
- Enhance customer loyalty and retention.
5. Perform competitive analysis
One effective way to identify profitable products to sell is by conducting a competitive analysis. This involves studying your competitors and their products, pricing strategies, marketing techniques, and customer reviews. By understanding your competition, you can identify gaps in the market and potential products that could be profitable for your business.
Below we’ve summarized the high-level details needed when conducting a competitive analysis:
Identify your main competitors
Start by researching the top sellers in your niche on Amazon or other marketplaces. Who are the rising stars that could jeopardize your market share? Are there any pioneers in your niche that you could learn from?
Analyze their product offerings
Take a look at the products your competitors are selling and how they differentiate themselves from each other. What is the demand for these products? How do they compare to yours regarding pricing, quality, and features? Note down any gaps or opportunities you could potentially tap into.
Examine their marketing strategies
Look at how your competitors promote their products. Are they using paid ads, social media marketing, influencer partnerships, or other tactics? Which ones seem to be more effective in attracting customers? If you notice a particular strategy is working well for your competitors, consider incorporating it into your marketing plan.
Read customer reviews
Customer reviews can provide valuable insights into what customers like and dislike about a product. By reading through competitor reviews, you can identify common issues or suggestions that could help improve your offering.
Leverage competitive analysis tools
As mentioned earlier, a competitor analysis tool can provide real-time and detailed insights into your competitors’ performance on Amazon. This can save you time and effort in manually researching each competitor.
The aim of competitive analysis is not to copy your competitors but rather to learn from them: what works, improve on pain points, and identify potential opportunities for your own business. The more you understand your competition, the better equipped you will be to make strategic decisions for your product offerings.
6. Identify traffic sources
Another factor to consider in product market viability is identifying potential traffic sources. This involves understanding where you want to sell your products and how you can reach potential customers.
Amazon itself offers various tools and methods to drive traffic to your products. For example, if you plan to launch a new product, you can use Amazon’s Featured Products and brand advertisements to gain visibility and attract customers. Other ways to drive traffic to your Amazon listings include:
Social media marketing
Creating a strong social media presence and actively engaging with your audience can help drive traffic to your Amazon listings. Whether through organic posts or paid advertisements, social media can be a great way to introduce your products to potential customers.
Off-site digital ads
Third-party platforms like Google, Bing, or Instagram can also be utilized to promote your Amazon listings and drive traffic. This is especially useful once you have established a strong presence on Amazon and want to expand into other markets.
Partner with influencers
Influencer marketing has become increasingly popular and can effectively reach new audiences and drive traffic to your products. A considerable advantage of influencer marketing is that it allows you to tap into the influencer’s existing following, giving your products immediate exposure.
While Amazon is an excellent platform for global reach, don’t underestimate the power of local advertising for your brick-and-mortar store or local business. Many customers still prefer to shop locally and are willing to pay a premium to support local businesses. Local advertising methods such as flyers, billboards, or radio ads can help drive traffic to your physical store or website.
When considering traffic sources for your products, it’s important to remember your target audience and their preferred platforms. Knowing this information will help you choose the most effective methods for reaching and converting potential customers.
7. Determine your margins and profitability
Before finalizing a product to sell, it’s crucial to understand its potential margins and profitability. This involves all costs associated with sourcing, manufacturing, storing, and shipping the product and any additional expenses such as marketing or Amazon fees, FBA fees, or taxes.
A profit margin involves calculating the percentage of income you keep after all expenses and is crucial in determining how viable a product is. To calculate the profit margin, use the formula:
Gross Profit Margin = ([Net Sales – Cost of Goods Sold] / Net Sales) x 100.
For example, If your product sells for $20, and all expenses associated with producing and selling it amount to $15, your profit margin would be ([$20 – $15] / $20) x 100 = 25%. This means you keep 25% of the revenue as profit.
When selling on Amazon, aiming for a profit margin between 25% and 30% before Amazon advertising fees and other costs is crucial, as this is considered comfortable and allows room for initial advertising costs. According to Amazon seller news, 89% of Amazon sellers report a profitable business, with over 50% operating on profit margins above 15%.
In addition to calculating profit margins, it’s also essential to consider the overall growth opportunity of a product. This involves analyzing a product’s demand, competition, and potential profit. By looking at these factors together, you can determine if a product has long-term profitability potential or is just a short-term trend.
8. Start implementing
Implementing all the above product market viability strategies and steps is crucial in finding profitable products to sell on Amazon. Once you have identified a product that meets all the criteria, it’s time to start implementing and launching your product. Some tips for a successful launch include:
- Have a well-designed listing: Your product listing is essentially your sales page on Amazon. Ensure it is visually appealing, informative, and optimized with keywords for better visibility.
- Utilize Amazon PPC: Sponsored ads can help boost your product’s visibility and attract potential customers. Test out different ad campaigns to see what works best for your product.
- Gather reviews: Positive reviews can significantly influence a customer’s purchasing decision. Encourage satisfied customers to leave a review and respond promptly to any negative ones.
- Continuously monitor and adjust: Monitor your product’s performance, sales, and reviews. Make necessary adjustments to improve the listing and drive more sales.
How to find products within your current catalog
If you already have an existing Amazon business or a catalog of products, there are still ways to find profitable products within that catalog. Here are some strategies to consider:
Synergies in cross-selling
Look for products within your current catalog that can complement each other and create a synergy. This will not only help increase sales for both products and make it more convenient for customers to purchase related items from one seller.
For example, if you sell kitchenware, you can cross-sell associated items such as utensils, cookware, or kitchen gadgets. This allows you to expand your product offerings without sourcing completely new products.
To better understand cross-selling opportunities, you can use the concept of the six Cs to give a strong sense of what a product is about and the type of customer it may appeal to. These include:
- Complementarity: How well does the product complement your current catalog?
- Capability: Can you handle the production and distribution of the product?
- Capacity: Do you have enough resources to sell the product effectively?
- Compatibility: How well does the product fit with your brand and target audience?
- Commitment: Are you committed to consistently promoting and maintaining the product?
- Competition: How much competition is there for the product on Amazon?
In addition to cross-selling, you can also consider bundling related products together for a discounted price. This can attract customers looking for a deal and increase your average order value.
When searching for profitable products within your current catalog, it’s essential to consider the logistics of sourcing and storing them. You want to ensure that any additional product you add to your catalog does not complicate or increase the cost of your current fulfillment process.
Consider the shipping and storage fees for each product as well as any potential delays in delivery. It’s also essential to have a reliable supplier who can consistently provide quality products on time.
Final thoughts on how to find profitable products to sell
Product market viability is crucial in determining the success of your Amazon business. While there is no guaranteed formula for finding profitable products, following the steps outlined in this guide can significantly increase your chances of success. By performing thorough market research, setting product criteria, and analyzing niche trends and customer avatars, you can identify low-competition products with high potential for profitability.
Where you already have an existing catalog, cross-selling and bundling can help expand your product offerings without sourcing completely new products. And remember, continuously monitoring and adjusting your strategies is also vital to staying competitive and successful on Amazon.
At Trellis, we offer comprehensive tools and resources for Amazon sellers, including Amazon competitor analysis, Amazon keyword research, and more. Book a demo to learn more about how we can help you find profitable products and grow your Amazon business. You can also contact us for a free consultation to discuss your needs and goals.