One of the questions we get asked over and over by Amazon sellers is “How do I know the products I choose will actually sell? I’m afraid they will just sit there forever.”
A lot of new sellers in particular are afraid of buying something that will never sell, and falling short before they really get started. It is a legitimate concern! However, with the proper information, you can avoid many pitfalls.
Today we are going to discuss some our tips for making good buying decisions. For more of our specific guidelines and suggestions, be sure to check out our Amazon Boot Camp.
Know The Categories You Are Allowed To Sell In
Before heading out to purchase inventory, it is important to get familiar with the types of products you can sell as an Amazon seller.
When you first get started, you are limited to selling in certain categories. As you continue and grow in your business, you can add more categories by getting approval from Amazon.
The good news is that there are more than a dozen unrestricted categories you can sell in from Day One, and there are a lot of great options within them.
We recommend three categories from that list that typically sell very quickly, are pretty easy to learn and that people report having really good experiences with. These include Home and Kitchen; Patio, Lawn and Garden; and Toys and Games.
There are thousands of products within those three categories alone, and they can easily be found in stores and by doing Online Arbitrage. They can range from oven mitts and garden hoses to board games and dolls.
Once you’ve sold for a little while on Amazon, you can get approved to sell in some other categories to expand upon your inventory choices. Our favorites here include Beauty; Grocery; and Health and Personal Care.
The bulk of the products we sell on Amazon, aside from Q4 (when it’s mostly about Toys!), come from these three categories. Here we document the approval process and is updated to reflect the most current steps needed.
If you install the Amazon Seller App on your phone, you can know right away whether you are approved to sell in a certain category. The Seller App is the only scanning app that is tied directly to your Amazon seller account, and it will alert you if you are prohibited from selling a product.
The Seller App is a good back-up to paid scouting apps. In fact, I will sometimes check the Seller App manually when doing Online Arbitrage, just to make sure I’m approved before making a purchase.
One situation to note is that sometimes, items will be listed in two categories. You might find that one is restricted and another is not.
For example, costumes are often listed in Toys and in Apparel. If you find one that’s listed in both, be sure to send it in under the category you are approved in. If you are approved in both, check out the rankings and profit to decide which one is the best choice for you.
There are also some brands that are restricted to third-party sellers. These have included Norelco, Dunkin’ Donuts and Gillette, among others. These change often and Amazon doesn’t keep a list; to keep on top of it, check out this post where we compiled our own list and update it frequently.
The important thing to note here is that, even if you are approved to sell in a certain category, you may still run into a brand that you can’t sell within that category.
Stick With Good Amazon Best Seller Rankings
Once you become familiar with the categories, it’s important to pay attention to how often the item you’re considering purchasing will sell. The faster your item sells, the faster you can re-invest your money and grow your business.
Amazon best seller ranks are one of the only pieces of information that Amazon provides us when it comes to knowing how often an item is selling. Ranks can be found on the product detail page or on one of your scouting apps.
This is not a perfect system, but ranks will help you make more educated buying decisions. The more an item is purchased, the lower the rank; a #1 ranked product is the most purchased item in that category.
It’s important to note that ranks are not treated the same for every category; a rank of 30,000 in Toys means something totally different than a rank of 30,000 in Baby, for example. This is because there are a lot more toys being sold on Amazon than there are baby products.
In The Selling Family Vault, we provide a list of our “comfort zone” rankings for different categories. These are the rankings at which we don’t second-guess a purchase.
You also need to understand that rankings are considered a snapshot. They are updated constantly and merely tell you how recently a product sold.
To learn more about an item’s historical rank, or how it performs over time, check out Keepa or CamelCamelCamel, two sites that provide graphs on rankings and Buy Box prices over time. We have a great blog post on how to read a Keepa graph over at TheSellingFamily.com.
Other Things To Consider When Making An Inventory Purchase
After categories and rankings, there are other things to consider when purchasing products.
You’ll see a lot of talk about profit margins and return on investment (ROI), which are important factors in your buying decisions. One simple rule of thumb we discuss is the “3x rule,” which is really a guideline or starting point more than a hard-and-fast rule
In this scenario, you’d aim to be able to sell a product for three times the purchase price. If you purchased it for $10, your sales price would be $30.
Ideally, this would mean you’d double your money. Amazon’s fees and other costs would account for about a third of the cost (in this case, $10); you’d subtract your purchase price (another $10); and your profit would be $10.
By using the 3x rule, you’re shooting for a 100% return on investment. Again, this is ideal but not always realistic. We typically recommend a minimum 50% ROI, but there are a number of factors involved, including the number of other sellers and rank.
Finally, one of the things we recommend to new and experienced sellers alike is to never go too deep right away. Buy 3-5 of a product and test it first. If you have more experience, you might go as high as 10, but do so sparingly.
As you gain experience, you’ll get a feel for what products to purchase. You’ll learn how to figure out what’s popular as well as finding niche products that sell consistently throughout the year.
Taking the chance on your first products is going to be the most intimidating, but once you have done it a few times it gets easier and easier. Then the fear of buying the wrong product will be a thing of the past!
What other suggestions do you have to minimize your risk of buying the wrong product?
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