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If you’re interested in starting an ecommerce business, Amazon’s Fulfillment by Amazon (FBA) business model is one of the most attractive options available, especially for those new to selling online.
The FBA model allows you to control what you sell — you find the manufacturer, coordinate the manufacturing or fulfillment and then send it to an Amazon fulfillment center. From that point on, they handle everything on the backend. You not only position your products in front of a massive audience, but Amazon handles all of the backend work — from customer service to order fulfillment, shipping and returns.
But before maximizing success with the FBA model, you need to find a winning product.
Pick a niche based on interests and passions (with massive market potential)
The best starting point is often found by looking at opportunities that align with your interests and passions. Not only will you have more insight into the different product possibilities, but building a business based around something you are interested in makes the entire journey more enjoyable.
Also, if you already have an audience relevant to the industry — whether that is on social media, a blog, or an email list — you have an audience to market to and gauge interest off in the easy stages.
It’s also highly beneficial to know the niche inside and out to properly determine whether or not the potential is there in terms of the target demographic for the products you sell on Amazon.
While you might be into rock climbing, there might not be a large enough audience to make launching a related product financially lucrative enough to warrant the effort. A product for those interested in working out, however, has unlimited potential based on the market size.
Related: How to Start a Private-Labeling eCommerce Side Hustle Business on Amazon FBA
Identify potential products
This step can be time-consuming because you want to be sure you find great products. When it comes down to it, the products you start with will either make or break your FBA business. It’s important to choose wisely.
Little to no demand for a product means little to no sales, whereas an in-demand product that is highly competitive can also result in very few, if any, sales. Manufacturing costs and shipping costs also need to be factored in.
There isn’t a top-secret method to speed up this part. Be as calculated as possible while brainstorming, researching and looking into all available manufacturing and supplier options. Rushing through this step results in miscalculations and mediocre results.
If your first product isn’t a home run, don’t get discouraged. Take your time during this phase — even if it’s not a wildly successful product, your setback will be minimal. Rushing, however, can be more costly.
Related: How to Find the Holy Grail of Product-Market Fit
Conduct extensive market research
Once you have a niche identified, it’s time to dig deeper and conduct market research. Search for popular items within that niche on Amazon and the other major ecommerce retailers like eBay, Walmart and Target. Additionally, you can perform Google searches to find other retailers.
You want to focus on a few key points:
- Price: Look for products that fall into the $25 to $250 retail price range, as they tend to be more of an impulse purchase decision.
- Competition: Are there a lot of different sellers or is there one big name brand in the category?
- Consumer Feedback: Are there a lot of reviews on the products? If so, that’s a good indication that it’s a high-demand product and category.
Now you need to check the Best Sellers Rankings (BSR) on Amazon. While these are important, they don’t paint the entire picture, so don’t let them be the sole determining factor. However, they are a reliable indication of whether or not there is demand for a product. Low BSRs across a category means competition is extremely high. A category with high BSRs is a better option since there will be less competition.
Finally, you will want to calculate the FBA fees that you would need to take into consideration. These vary depending on the category and other factors. Amazon has a resource available that will help you with this.
Don’t attempt to compete with brand names or category dominators
Competing with brand names is very difficult, especially when you’re just starting your FBA business. You should be able to determine whether or not you have any name-brand competitors based on your market research.
Seeing a product category with several brand names and no-name brands will often give a false sense of potential. Yes, there may be high demand for a product, but the chances of a new product listing being chosen by a consumer over the other more established options is unlikely to happen.
What many new sellers fail to take into consideration are category dominators, even if they are no-name brands. For example, if there is a product that is a no-name or generic brand, yet has 10,000 reviews and ranks on top for the specific product search term, you are going to have a very difficult time competing.
Related: How to Make Your Brand Explode Rather Than Your Brain: Tips for Choosing the Right Name for Your Company