Amazon is the leading US online marketplace that allows up to 2.8 billion customers from anywhere in the world to make purchases and sellers to make a good profit. Statista demonstrates that Amazon reported a net income of 33.36 billion U.S. dollars in 2021.
This is one of the most valuable marketplaces in the world, no surprise many are interested in how to become a part of it. You will be able to successfully develop your brand here because Amazon is open not only for giants but also for small and medium-sized businesses.
Is There Enough Room for New Sellers on Amazon?
However, you will have to share the overall marketplace income with 6 million third-party sellers. This number may seem daunting at first glance, but luckily, it doesn’t reflect the actual competition you’ll be facing. The number of active sellers – that is, sellers with a product listing who receive at least 1 review a year, not just people with registered Amazon seller accounts – is only a million. Only a third of them check their listing at least once a month, thus, they are the only ones you need to worry about.
By now, you might have already understood the importance of Amazon. It definitely has enough money in it for anyone willing to work for it. So with this positive idea in mind, let’s take a look at what to start with to be able to generate income on this marketplace.
Why Sell Wholesale on Amazon?
The majority of Amazon sellers take on the wholesale model which implies the following: you buy items in bulk from the supplier and then resell them on Amazon to customers. Why sell products that belong to a well-known brand? Well, this business model has its pros. The main advantages of the wholesale business on Amazon boil down to the following:
- It’s easier to grow, to scale the business. In case there’s a steep increase in demand, you just order more items from the supplier;
- You can use the Amazon FBA program, which will free you up from many duties (storing items, managing, packing, and shipping orders);
- Supplier prices are not subject to strong fluctuations, so winning the coveted BuyBox is easier;
- You will work with big brands. Cooperating with an established brand means less effort put on the first stages of launching a business, less time devoted to product research, and earning a reputation. As for the latter, customers have already firm expectations of the product quality, which is why you only have to take care of processing, packaging, and shipping it in good faith;
- The previous point also implies that you don’t need to create a listing or brand from scratch. The product already exists on Amazon, the customer base is present, so all you have to do is to process the orders up to the customers’ expectations.
Challenges Wholesale Sellers May Face
Still, there are two prerequisites that may become challenges for new wholesalers. The first one is obtaining a license to get the right to sell wholesale on Amazon. The requirements vary from country to country, from state to state, so check whether you have to get it.
The second challenge is the need for a weighty upfront investment since you are going to buy items in bulk. For this reason, it’s vitally important to find the best-selling products so that your investments eventually pay off.
Amazon FBA Prohibited Products
The initial stage in product research is to check what products are prohibited for sale on Amazon. Otherwise, it will surely lead to blocking your account, withholding money transfers, etc. Thus, familiarize yourself with the comprehensive list of prohibited products and check the list with the most essential points below. The products that you can’t sell include:
- Products prohibited in some states or countries by law;
- Items that contain offensive materials or promote hatred, violence, discrimination of any form, or support organizations with such perspectives;
- Tobacco products, drugs, and illegal substances;
- Hazardous substances such as mercury batteries, industrial cleaners, fireworks, etc.;
- Gambling, lottery tickets, and coin-operated slot machines;
- Alcohol of unknown production and excise stamps for it. The exception is selling wine, which is allowed providing you have reached an agreement with the administration;
- Hacking, locking, or spy tools;
- Products that depict nudity for free such as amateur pornography, items containing nudity on the label, etc.;
- Sell patented goods or counterfeits (you may check “the list of prohibited brands” on the Internet);
- Firearms and explosives. Even if your product resembles a weapon outwardly or can be used as a weapon, there is a small chance of getting a ban for advertising, which means no opportunity to ramp up your business and promote your product.
What Pitfalls to Avoid in Product Research?
Apart from the products mentioned, it’s nice to keep a watchful eye over the products that are unlikely to conduce to a good business launch or bring you high revenue. Here is the list of unstable products that you’d better steer clear of:
1. Products That Need FDA Approval
There is rigorous control over particular Amazon categories. Thus, if you choose a restricted product without the proper FDA approval or without complying with listing guidelines for that category, you can lose your right to sell on Amazon.
2. Products in a Competitive Niche
Even if you feel like you’ve found a hot product to sell on Amazon, don’t overlook the number of competitive sellers in this niche. It’s noteworthy that the number of sellers is not the only thing that matters. What we look at is the number of competitive sellers, i.e. the ones with optimized listings and many reviews, mostly positive ones.
3. Products That Require More Complicated Logistics
It’s not the best idea to start with oversized or too heavy items, the storage, and delivery of which will be more expensive. There’s another category of products that can pose challenges during shipping. In the beginning, it’s better to avoid selling flammable and fragile products. They present a high risk of damage during delivery, which will often result in unexpected costs for refunds.
4. Clothing with Multiple Sizes & Colors
This is the category that requires variation to fit the majority of the potential customers. The problem here is that it’s difficult to predict the demand for a particular size or color, which is why it may not pay off in terms of additional profits.
Other Aspects to Keep an Eye On
We’ve considered the products that pose the greatest threat to your profits. But there are some more aspects to pay attention to:
1. When choosing a product, take into account the costs for its production, storage, delivery, etc. It will demonstrate what price to set to meet the expenses and whether the margin is high enough to generate revenue.
2. The average selling price of the product matters as well. The ideal price range is within $10 – $40. The reason is that such price is conducive to higher chances of a spontaneous purchase, which will have a positive effect on your profits.
3. Choose a product with stable demand. Products with seasonal demand may complicate planning and logistics, and cause unclaimed stocks in the warehouse.
4. A metric you can refer to when choosing a product to sell on Amazon is its Best Seller Rating (BSR). The BSR must be at least 3000 for three models from different manufacturers. This means that there’s a demand for a product and no one seller dominates the niche.
5. Lastly, don’t get started with the items that are already sold by Amazon. It’s a lost cause to compete with Amazon, especially for new sellers.
Amazon Product Research Tool – Go-To Choice to Find the Best-Selling Product
We’ve covered numerous categories of products to avoid and have given a number of tips to find the hottest products and skyrocket your Amazon business. However, manual product research and checking each point on your own is a very tedious and time-consuming task. Fortunately, Amazon sellers can leverage ScanScout – an analytics tool that will analyze a supplier’s catalog and help you stop at the most profitable items for your business.
In a couple of minutes, ScanScout will provide you with a comprehensive picture of the major aspects of a product. All you have to do is to search the product by its ASIN or name. As a result, the research tool presents you such information as:
- Whether it contains hazardous materials;
- Whether it’s intended for adults only;
- Whether it’s fragile;
- Whether it’s sold by Amazon;
- Whether you can sell the product right away;
- The current BSR of the product or for a particular period;
- The number of FBA and FBM sellers of the product;
- Its dimensions (size, weight);
- Potential profit, margin, and ROI;
ScanScout Chrome Extension performs an in-depth analysis of a product based on 50 parameters. The parameters help sellers calculate costs and margin, provide historical data и stock checker to make wise data-driven decisions. It also checks whether the product is prohibited or sold by Amazon; and makes it possible to add the products you liked to the Seller Panel.
The free version of ScanScout allows sellers to leverage the full range of its instruments with the only limitation on the number of inquiries per day. Paid subscription starts from $5, using which you get an unlimited number of inquiries.
If you want to ripe all possible benefits from automatic product research, ScanScout offers the version with the full set of instruments that costs from $49 to $89 per month.
Thorough product research is a vital stage in launching a profitable and scalable business. Thus, don’t overlook any of the points mentioned and use the ScanScout analytics tool to be able to quickly find the hottest products to sell on Amazon.