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Amazon product research
Which categories should you focus on?
Avoid these Amazon product research mistakes” is the motto of this episode. Lorenz from eBakery answers your question in this video, “What categories should you focus on?” How do you research for the most profitable product? And what should you just not bet on. All that in this Amazon tutorial.
Amazon Product Research - Why is it so complex?
Amazon product research: New sellers get in and then realize relatively quickly that the whole organizational thing of registering a sole proprietorship / founding a limited liability company, that all goes according to recipe. That means you look online “okay, what are the steps”, kind of add them all in one by one, make yourself a to-do list and then you work through the whole thing, pretty easy. Also generally understanding about how does Amazon FBA work? What do I need in total? What are the big steps? Also easy. What’s not so easy is the product research. When you’re a new salesperson, or even an experienced salesperson, looking to launch a new product, the big question now in the room is, “What am I selling? What should I offer in the first place? There are millions of product ideas: What makes a product idea good now? What makes you bad? What do we need to pay attention to? We go now here times from our perspective anyhow as a long-standing also Amazon salesman and as Amazon agency, which are really criteria which are important, on which one should pay attention, where there are really understanding problems with new salesmen.
The basic rules for Amazon product research
To start with, the following actually applies to new sellers: Very important – do not necessarily consume content that is now ten years old, five years old. That means that when you watch videos on YouTube now – like today, for example – make sure that the topics are maybe relatively in time. So, when we learn about product research now, we have to look at what works today, what is current this year, and not what worked well five years ago in 2017, for example. Means: it used to be like this as a new Amazon FBA seller, has been drilled into you over and over again: The product must be small, light, cheap. So small, light and cheap, what has really been preached for years, and it makes sense too. It is relatively easy to understand for new sellers to say “okay, small and light so that shipping prices are not so big”, “cheap so that the product in the purchase price somewhere association with the smaller budget also makes sense”.
Problem is simply that the whole thing doesn’t work so well on Amazon. What do I mean by that? A small and light product, which you buy cheap, you usually have to sell cheap. For example, we now take here “product example 1”, EK (purchase price) let’s say now 1 €, VK is equal to 10 € – that would already be good, so it would be solid purchase to sales price, you can not say – but now happens the following: what costs do we have? Of course we have the 1 € EK, we have to deduct it. We have, I say rounded up € 2 VAT, because unfortunately we do not get around it. Then we have a 15% Amazon fee – in this case it’s 1.5 € Amazon fee, so it’s not the fulfillment fee, but the 15% sales fee in almost all categories – then we have the FBA fee, let’s say it’s just a small/light product, so it’s only two and a half euros, so it’s relatively little, comparatively little to other products anyway.
A negative practical example
Now let’s extrapolate that. We have quasi 10 € minus the above costs, would then be in profits bottom line must now enter more 10 minus 1 € EK, minus 2 € VAT, minus 1.5 € Amazon fee, minus 2.5 € FBA fee – makes a profit of 3 €. Sounds not bad so far, that would now be a profit margin of a whopping 30%. That is solid in theory the margin, so the percentage margin top. The profit € 3, why is not so good now? Because the margin looks good. We can’t complain about the margin at all, so why is this now maybe not a product we want anyway? Because the advertising becomes extreme. What does that mean? The advertising fee (the cost per click) is not dependent on the UK. That is what most sellers do not see, because they have not yet understood the advertising, do not know how often that must be switched, how much advertising actually spend and accordingly the advertising for most sellers in the product research does not play at all so purely, although that is actually perhaps already with Amazon nowadays the very biggest issue. Amazon advertising (PPC): the cost per click is not dependent on the VK, what does that mean? I can have a product that is €100 retail price and the click costs me €1 in advertising. I can also have a product like here with 10 € retail price and the click still costs me 1 Euro. Now it’s like, we’re actually doing an example now: €1 per click in PPC. Means so: 3 € win, we can afford a whole three clicks. We have this €3 profit, €1 per click in advertising, if three clicks, what does that mean if we continue to play the numbers game a little bit now? If we could generate a sale within 3 clicks, that would be a 33% conversion rate. Or in other words we would have to have a 33% conversion rate in advertising so that we don’t lose money in advertising. Problem is the fewest Amazon products convert with 33% very rarely, so some products do, but usually not. Means: we are with such a favorable product – from the fees and from the margin everything well, everything okay – but the bottom line is that we have only 3 € available and now Amazon wants to have with each click 1 € from us, or more, maybe less – we take now times 1 € as an example – if only 3 clicks available, we are super fast in the minus in advertising.
Amazon Product Research - Experienced vs. New Merchants
For experienced sellers, larger sellers or just sellers who really already generate sums and are profitable, such products are not wrong – so cheap, small, light products – because these sellers can cope with the losses in advertising, I say quite well, and also know directly how they have to advertise, how many sales we have to make, quite a few topics where you already have experience before. This does not apply to new vendors. Probably the product is not so well selected from other data to which we will return in a moment, then we have only 3 € win, then we have no idea how the advertising works. This is a recipe that ends in disaster, for sure. In any case, as a new seller, we will most likely not drive profits on a €10 product, simply because we lose too much money in advertising, and then most likely do not know how to adjust the advertising then to lose less money and gain more ranking, through which profits could come. So, this margin is okay, but the profit in Euro – the number of Euro we really have profit – should be higher. Therefore now here so a bit my recommendation for newer sellers:
A positive practical example
Criteria: There’s a lot and the product selection is difficult, in advance I would say everyone has their own strategy, that’s what works very well for us and our customers and that’s looks something like this. Selling price: 30 € or more. Simply for the reason I just explained. We would like to have a few more euros profit than 3, or 4 or 5. We would like to be able to have somewhere double-digit profit per sale, before advertising costs. So winning €10 or more, that would be quite good, then we also have a little bit of money available to do the advertising without it having to come directly off our credit card somehow.
Keywords: Or make categories first. I’m about to show you a list of categories that are quite suitable (see video). I’ll say this, of all the categories is there on Amazon, few are attractive to new sellers. Simply because there are often restrictions in the admission for the categories, the whole categories may be much too competitive, or already saturated, we may have problems with warranty. So things like baby products I usually don’t recommend at first, food anyway, electronics usually don’t, anything in health, skin care and things like that I wouldn’t recommend, seasonal products like garden or vintner products I wouldn’t recommend for a new vendor. Amazon sales are hard enough. We don’t want to make things more difficult for ourselves by adding a category.
Search volume vs. competition
The next is monthly sales average. That’s a little harder to explain. Simply under this product what do the other sellers sell in a month on average? If we have a product that sells 10,000 copies on average, we have no chance to play with it for ranking reasons. If we have product that I sell only ten times a month, it will not be able to bring us much profit. Here between 100 and 500 pieces a month is a good range, which also then fits our budget as beginners. Budget we can also still make a video to how much you should bring nowadays, but the normal beginner budget between 5 and 10,000 € as a rule, so we can buy enough products that would simply fall into this grid, this framework. Then the next, the price we have already said, above 30 or more euros.
Search volume: It is also best to have your own video on the keywords. Search volume keywords, here I would recommend the following: we want to describe several relevant main keywords, terms that describe our product very well, very precisely. And minimum 1000 search volume per keyword, so these terms that describe our product now super relevant for should also have at best at least 1000 searches per month. Why? If we have again search term with 50 search, there are no sales there, is simply not relevant, then no money is earned unfortunately. This is important. Then I say other sellers. The number is not so important to us, what is important is no strong brands.
We don’t want one brand to somehow offer the products for and bag all the sales, there shouldn’t be one seller who just makes all the sales and everyone else does nothing. We want to quasi the other sellers are not strong brands in it, is the sales are issued also means again. There should not be one seller with all the sales, but distributed among several sellers who all have such good sales. This is important. And then, of course, no patent or the like. We cannot sell a product now where there is a patent on it, unless we have the approval, of course.
Perform Amazon product research with analytics tools
How to evaluate the whole thing – in other words, how to find the product with a software solution, how to evaluate it – that’s a topic that goes into much more depth. In our opinion, the important thing is that we have to somehow set these main criteria for ourselves, i.e. which categories, which price, how many keywords are relevant to the sun, the search volume, the sales on average, everything like that we have to think about a bit first. Then we usually use Helium 10 or Jungle Scout to enter these filters. We then say in Jungle Scout for example “hey, show me all the product ideas that exactly match this parameter”, i.e. search volume, categories sales per day or per month, then seasonality etc.. Then we get a huge list spit out by Jungle Scout or Helium 10 with 2 – 3000 product ideas and then the difficult thing is: we have to go through these products and look in the head first on the basis of the name of the product idea or the idea itself, does it fit into our big criteria that we have set at the beginning, if yes, then you go into depth. Then we look at what the competition is for each product, are there strong brands? How much sales do the other sellers make? How much rating do they have? Are the prices somehow in a good range? Is it possible to offer variants? Does the sets or similar exist? Is the whole thing seasonal? How many keywords are there? How much search volume do the keywords have? And we can even look at how much we need to sell a day and generate ranking on those keywords. So the whole thing is extremely in-depth and it’s relatively complex. The important thing is that the first product must look good in terms of data. What does that mean? If the product does not fit the data, i.e. it is too cheap, too competitive, the market is too saturated, etc., then this foundation, the basis of the project, is relatively uncertain. The product you want to sell in the end is the basis of the project, so the whole thing has to be pretty good, because everything else builds on it. If you have a very bad product idea, you usually can’t make up for it with good PPC or good content like photos and texts. A bad idea usually stays bad. On the contrary, you can have a very cool product idea and even with not so good pictures, not so good marketing it can run, but the idea must be cool. Then there are the following possibilities.
Why you should rather not rely on cheap freelancers
Either you learn that yourself how to find and evaluate products ideas, that is a very cool way of course. However, it is very time-consuming and if you do not have a lot of experience in the field of Amazon, then it is possible that the evaluation that you make yourself is simply wrong, or not everything is taken into account that you should.
The next thing is that you can now book product research as a service on the freelancing platform of agencies, including us of course. Here it is important to note that we would not recommend buying products from freelancers who are very cheap. Why? A good product research with all important data on a specialized quasi with the own factors somewhere is quite time-consuming and costs thereby also at least a few hundred euros in the normal case. For really big projects it can cost over 1.000 – 2000 € the product research. If you can buy a product idea for 30 € on a freelancer platform, the following is done: the freelancer finds this product idea and sells the same product idea to countless customers, recycles it so to speak. That’s the only way you can offer product research for €50, selling the same product or idea over and over again. Here you have to pay attention, if the whole thing is too cheap, then it’s probably a recycled idea, which dozens of sellers virtually also get, which then leads to the fact that this idea this niche product will usually no longer be niche. Customer demand does not change, but the number of competing products does. If you have 40 new providers for a product with 1000 searches per month, you won’t get any more sales out of it. Then the sales divide or the costs in marketing become so exorbitant that I’m no longer worth it for anyone.
Amazon product research should be done by professionals
So that means: in the best case you would book product research, if you do not do it yourself at an agency or maybe a more expensive freelancer who can then also find something based on your data and ideas, and where the whole thing can also not be done within two hours, but sometimes takes a few days until something was found. This is to be noted, one sees again and again that new Amazon sellers simply buy product ideas, which is in itself also in order the problem is merely either the product ideas are often recycled, or the salesman of the product idea does not have even so much idea and gives a beautiful report all possible data, but the product is actually not good at all. This means that you spend money on something that is not solid in terms of the idea. As now for example here products the 10 € in the UK are for Germany, for the German market actually almost impossible as a new seller of the profitable to act. Simply because the advertising will bring you very strongly into the minus with certainty.
Amazon agency eBakery
Means either you can book for example coaching, so that you learn how to find products evaluated and analyzed, or you go to an agency or a service provider who has a bit more experience and also for this research then requires a sum that makes sense and is then not at 50 €.
Or you risk the whole thing of course and buy a cheap product idea, but as I said the product idea is the basis of the whole project, if this is not right, you have little fun later in all further steps, especially in sales and launch, the whole thing is then unpleasant. We will definitely make videos on product research itself, how it works with tools, product analysis, how we can look at and evaluate these ideas, and then a few more steps in the area of sourcing, how do I find distributors, how do I write to them, the producers in this case. I think that will happen again in the future. In the blog just a bit of explanation what you really should pay attention to and where you really should be careful too.
If you have any questions or if you want to leave the optimization to the professionals, please feel free to make an appointment with us. We are happy to help you as Amazon SEO agency, Amazon PPC agency, but also general Amazon agency.
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