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How to do Profit Oriented Amazon Product Research and Budgeting

profitable amazon product research

The first thing which comes to mind when someone thinks of starting to sell on Amazon is how to begin and another major thought is about what to sell on Amazon and make a profit. In this article, I will list down all the possibilities with their respective pros and cons which will help you to engage with Amazon product research in the right and the most suitable way.

What has motivated you to think about selling on Amazon?

If you are thinking of Amazon as a quick money machine, then you have to STOP NOW! It is not as carefree as sipping a pina colada on a sandy beach. While this might have been the case around 2013-2014, it does not hold true in today’s times. I am telling you the truth right off the bat so as to get you acquainted with reality.

But things have gotten more streamlined on Amazon and you just need to understand a few basic but key concepts to rise above the crowd in order to be successful. You may fall into one of these categories of current or prospective Amazon sellers:

  1. SIDEKICK – Want to create an additional source of income on Amazon while doing your job.
  2. FULL-TIME HUSTLE – Want to quit your job in the near future and want to be a full-time e-commerce entrepreneur.
  3. TRANSFORMER – You already own a store or a business and you want to take it to Amazon like many others due to COVID-19.

For the sake of clarity, I will refer to different categories hereon by their nicknames given above.

In the following sections, I am going to give you all the information you may require for budgeting, Amazon Product Research, and a few basics of Amazon marketing i.e PPC with some gorilla techniques.

SIDEKICK

Sidekick is the best option if you want to start out or just want to give it a try. This option will not require much cash but it will require a lot of effort as you may have to go to stores and find the best product to sell on Amazon. So, let’s start with the first piece of the puzzle.

How much money do I need to start – BUDGETING.

There is no upper limit to this but you will need somewhere around $500-3500 to start. Bear in mind that almost 40% of the amount will go into advertising, depending on what option you choose in the next part of this article.

Method 1 – Flipping

The easiest way to start selling on Amazon is Retail Arbitrage. In retail arbitrage, you walk into stores like Costco, Walmart, or others and try to find products that are on sale or on a great deal. At times, you can find a product that is selling at a dirt-cheap price due to closeouts, end-of-season sales, or stores that are left with a single size in the case of shoes or apparel. To give you an example, a towel that is selling for $5 on Walmart might be selling for $15 on Amazon. Due to some extra overheads or other costs (which are beyond the scope of this article), prices can vary a lot.

In this method, you most likely will not need Amazon sponsored ADS or PPC as you will be buying products that are high in demand and which will, in turn, be used regularly by customers. But make sure to not pick seasonal stuff at the end of the season like christmas decoration in mid December or holiday sweaters at the fag end of winters.

Product Economics

No business can survive without making a profit, it’s the cardinal truth, and you have to keep this in mind each time you think of starting a business on Amazon. So now the question arises that how to make sure you are making a profit in the case of SIDEKICK?

Amazon has made things very convenient when it comes to both buying and selling stuff on its platform. They have an Amazon seller app, using which you can perform most of the basic tasks which are required to run your business. And the one task in which we are interested is scanning the barcode of products and seeing the existing Amazon selling price if the product  exists on  Amazon . 

You also need to consider what  you will get in your pocket after deducting the Amazon fee.  Another important thing that is important to think about is that you will also be paying to ship it. In the case that you are doing Amazon FBA, then you will also have to bear the Amazon fulfilment fee which includes the packaging and shipping to customer. You can check here details about Amazon fee here.

Method 2 – Finding Diamonds In Coal Mines!

Doesn’t it sound weird to you? But trust me, you will get the same feeling of finding diamonds in coal mines when you will find products on Alibaba.com. Alibaba has millions of products and finding one which suits you will be an uphill task. You will experience the complete process of the supply chain right from pricing negotiation, handling import logistics, warehousing at Amazon, and at last, selling on the Amazon platform and making profits. It’s the same process that the big fortune 500 companies follow for the procurement of products. Isn’t it amazing?

Doing an exhaustive Amazon product research on Alibaba is a very vast topic that is beyond the scope of this article but a basic rule of thumb is to find something which is fast-moving and that you have at least 100% ROI on the products when you sell them on Amazon. For the first time, to minimize the risk, you can try to start with the products in the price range of $20-30, as these are easy to sell and if they get stuck somehow, you can simply reduce the price and they will start selling again.

This method will make more sense to you if you want to graduate to a FULL-TIME HUSTLER eventually, as in this process you can use only ⅓ of your capital (money you saved for selling on Amazon), as the other ¼ will go to logistics. The remaining amount will go to Amazon marketing which includes professional Amazon product listing, imaging and Amazon PPC.

In the end, I would say do things logically by 70% for deciding the price of your products, finding in demand products and leave 30% to itself. You can’t judge the depth of the water by sitting on the sidelines, it can be measured only by going into the water.

FULL-TIME HUSTLE

Work from Anywhere Not Just Home.

Tired of a monotonous routine and sick of the rat race? If yes, then Full-Time Hustle is perfect for you where you want to feel free to do whatever you want and wherever you want. But before that, you need to save, in order to buy a ticket for your liberation from the rat race slavery. Oh, man! This is too exciting.

“I will have my own brand on Amazon and I will be my own boss”.


Is Amazon FBA going to burn a hole in my pocket as a full time hustler? – BUDGETING

I can think of a few paths that may have pushed you out of your comfort zone and forced you to think about doing something on Amazon. You may have heard from someone that they are making good bucks on Amazon by selling on it or come across articles on some website. But finding a profitable product by doing extensive Amazon product research and figuring out the right budget can prove to be a big challenge. You require at least $7k-10k to start a private label Amazon FBA business and can then visualize replacing your full-time salary with it.

Method 1 – Digging a rabbit hole

By digging a rabbit hole, I mean to find a product that will take you towards the completion of your goals. If you are a SideKicker and have used Method 2 from above, then you will be much more likely to understand this method. Let’s say you want to earn $1000 per month from your Amazon FBA business, in that case you need to figure out the ideal selling price of the product and the units required to sell in 30 days while keeping your budget in mind.

Let’s say you are selling a $40 product with 28 units daily with a profit of $10 and if you earn the same amount for the whole year you will make little more than $100k/ year, exactly that comes to $102,200.

I generally suggest finding reasonably priced products around $20-25 that are fast-moving yet need some value addition which can make your product a no-brainer buy for the customer. The next big question is where to find the product? The first stop needs to be on Amazon itself, try to find a product that appeals to you, and once you find it, see what customers are saying about that product by going through the reviews. Make sure that when you source your product it must have all the attributes that are appreciated by customers in reviews. For example, if your product is a placemat, make sure the size of placemats is appropriate. Try to solve the problems which are mentioned in the negative reviews of products sold by the other sellers. If reviews are pretty bad plus you are not able to solve the problems mentioned in them and it’s hindering to perform the basic function that it is supposed to, then you should drop that product. As it will attract negative reviews and those attract fewer sales.

Generally, I would recommend a high volume product that you can make better in quality than what’s available in the market or add value to it then try to list  on Amazon.

Product Economics

Like I said before, you must keep an eye on the profit and prepare a timeline of what you expect in terms of sales and profit. No matter how hard you try, you can’t make a profit if you don’t have a unique product to sell or you haven’t added any value to an existing product which will have a current or a prospective demand.

Dividing the budget smartly.

Let’s say that you have $10,000 with you and I will show you the division of the budget below:

Cost Description%age of Cost
Product Cost to Amazon Warehouse40-45%
Product Packaging Design and Listing Cost5-10%
Giveaway Cost 20-25%
Amazon PPC 25%
Unforeseen Expenses10%

Product Cost – It’s a cost that you will need to pay when the product reaches the Amazon warehouse.

Packaging Design Cost – This is a cost which is incurred to design the packaging of the product as it will help you to increase the perceived value of your product. And it reduces the chances of negative reviews. Professional listings can help you to increase the chances of your sales and help you to rank on relevant keywords.

Giveaway Cost – There are a lot of ways to rank on Amazon and one of them is giveaways. This is where you will reimburse the cost of the product to your buyer and you will ask them to search for a certain keyword and buy your product. This is called Search Find Buy technique to rank on Amazon. For this, you can use third-party services or Facebook Ads.

Amazon PPC – The thing which will come the most handy to you is Amazon PPC. You can be visible to potential customers instantly through this. And the best thing is that it is a post-paid system as you will need to pay the ad cost after serving and payment will be deducted from your Amazon balance(the amount which Amazon owes you from the sale of your products), so you don’t need extra capital if your sales are good.

Unforeseen Expenses – Life is full of uncertainties so Amazon’s business is these expenses include hiring extra help in case you have a high influx of orders. .

Pro-Tip – A successful business on Amazon is with at least 80% ROI on product cost after all costs including Amazon PPC.

Method 2 – Wholesaling

Amazon wholesaling is another way you can make money on Amazon. You can make bulk deals with big companies like Nike, Puma and grab their merchandise at a cheaper price and sell it on Amazon. Or you can approach local popular businesses and get into a contract with them for selling on Amazon by yourself and buy in bulk. This another topic for Amazon Product Research with different attributes.

TRANSFORMER

If you already own an online store or a physical store, then this is for you. With no investment, you can simply start selling on Amazon, even if you have a grocery store or some clothing store you can start selling your inventory on Amazon in no time. Just register your account, get verified and that’s it, you are all set to enter the world of Amazon.

Physical Store Owner

If you are a physical store owner you can sell anything that you want. Just scan it and start selling on Amazon but there are a few things that need to be taken care of first:

  • Make sure to use a POS connected with your inventory management system of Amazon. So that whenever you are out of stock in the store, you can automatically get stock out on Amazon, as Amazon takes order cancellation very seriously and can result in account suspension. If by any chance you get your account suspended, read here to know how you can get reinstated.
  • Amazon takes 15% in most categories as commission to sell on Amazon, so you need to account for that in your selling price.
  • Shipping cost mainly depends on the weight and dimension of the product so you need to make sure they have attributed the correct shipping charges.

Online Store Owner

If you are running an online store and you want to start selling on Amazon you can do it easily. Shopify has a free app for connecting to Amazon once to connect to your store. Your orders on Amazon will be automatically synced with Shopify and you can fulfil it like any other order on Shopify.

You can also list your product with a single click to Amazon but as Amazon is an ever-changing platform so sometimes Shopify either does not send the data in the proper format or a new field is added on Amazon which is required to list your product. This can result in a failed product listing or the listing will be suppressed which will be not visible on Amazon.

The simple workaround to the Shopify listing issue with Amazon is to list on Amazon first and then map your SKUs on Shopify and then map it with Amazon SKU. You can control the number of days required to process the order also there.

Another popular shopping cart is Woocommerce and you can use this plugin to connect your Amazon store and fulfil your orders from Woocommerce itself. 

Conclusion 

Amazon is a good place to start your online entrepreneurship journey as it doesn’t include a cost to join and you are in front of millions of customers from the word go. The most crucial part of this journey is to find a good product by doing Amazon Product Research which not only in demand but also comes in your budget. You can start this as a sidekick with your job or do it full time to be successful. You need to understand the product economics else failure is imminent. If you want us to do an Amazon Product Research to start you off, contact us.

Author:
Gaurav is an Amazon Seller Success Consultant, with vast experience in managing every aspect of Amazon Selling from Listing to Sponsored Ads.

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