How to Get Started Selling on Amazon

Picking a niche is how you find the right products to sell on Amazon

Introduction

“No niche is too small if it’s yours” - Seth Godin

The hardest part of selling on Amazon is figuring out where to start. We all want categories with high demand and low competition, but they are becoming increasingly rare. It might seem like trying to find a needle in a haystack, but opportunities still do exist, and I will walk you through how to find the right niche for you. 

What is a Niche?

A niche is simply a specialized subset of something. This can range from fans of a soccer club to a type of running shoe or anything in between. As sellers, we want to go where the money is so it might seem counter intuitive to focus on a niche rather than a larger category. The reason why we are focusing on finding a niche rather than a broad category is competition. It is hard to overtake an incumbent with 1,000’s of reviews and an established customer base, so we will target areas with higher probabilities of success.

Where to Start?

There are *a lot* of tools that claim to help sellers optimize their Amazon business. These tools span from virtual assistants to FBA inventory recovery to PPC automation and everything in between. I use a handful of tools to help manage my business, but my go to tool¹ for finding new niches and products is Jungle Scout’s Opportunity Finder. I will walk you step by step through the process and show you how to find the right niche to exploit.

Opportunity Finder is a SaaS based tool that scrapes data directly from Amazon and reformats the information into an easy to use UI. Here is what Jungle Scout had to say about their products…

“Opportunity Finder helps you determine if you should pursue a specific niche based on the top 1 million user searches on Amazon each month.

You can use these data points to discover new niche product opportunities and then use Extension or the Product Tracker to validate these ideas.” - Jungle Scout 

When you begin researching, you will want to focus on categories that are easy to operate — Consumer Goods, Health & Household, Office Products, and Toys & Games. We want to avoid overly complicated products where deep domain expertise is needed to develop products and manage the business. Now, let’s get into a real world example...

• Step 1: Select your categories. This is where you select the major categories of Amazon’s taxonomy that contain your niche(s). In this example, we will limit our focus to Health & Household.1 When conducting diligence for your business you should select as many categories as possible where you have enough expertise to manage the operations of the business.

• Step 2: Determine average monthly units. We will want to focus in the 200–500 unit range. If we assume an average price of $20, you can stand to make $4K-10K in monthly sales, making the endeavor worth your time.

• Step 3: Slide the competition bar to very low. I am going to assume that you are new to the Amazon Seller universe, and want you to be positioned for success. Over time we will want to enter more competitive categories, but it is not an ideal place to start.

• Step 4: Determine the price range. The items you are producing need to have a low enough price point that there is no hurdle to purchase, while still being profitable for you to sell — set the range to $20-40. When you get to the point of pricing your item you will need to look at a few factors. You will first need to do a competitive analysis to ensure that you product is in-line with market expectations. Next you will need to understand the fully landed cost of the product. The math that my team uses to ensure that we are profitable on a unit-economic level is shown below.

Price -(Product Cost + FBA Fees + 15% Commission + Avg. Marketing Spend) = Profit

• Step 5: Determine your niche score…we will want our niche to have a score of 7 or greater. The higher the niche score the lower the competition. Once you have a better understanding of how to sell on Amazon you should start to lower the niche score. Depending on the strength of your brand, your ability to sell on Amazon, and your financial position you can enter into the most competitive categories on Amazon and have success.

Once we configure the opportunity finder, we will hit the submit button and start to review the results. You will now want to sort the list by search volume² and ignore any branded searches to start and narrow in on our target niche.

In our example, we found that the supplement, luteolin has the attributes required for us to be successful including…

• Niche score of 7 or better

• Medium or low seasonality

• Strong search volume (3.3K)

• Very low competition

Validating Your Category

Now that you have identified a potential niche to exploit, you will want to stress test the decision. Here is how you will review your findings…

• Review the top items within the category. In our example, the category is Flavonoid Vitamin Supplements — how many reviews do the top items have? Is the market fragmented, are multiple sellers having success?

• Check the sales for the category. We need to make sure that customers are converting and not just searching and browsing.

We will use Jungle Scout’s browser extension to review this data.

• Sales: All of the top items are doing more than $100K in monthly sales meaning there is significant demand within the category. If there is not enough current demand, you need to do some additional research. Determine if you are early to the trend or if the market is smaller than you had expected. If you are early, that can be a major tailwind for your sales, but if the category isn’t big enough you will want to keep looking.

• Price: Our assumption of $20-40 per unit is in-line with the category. My person experience has been that with the $20-$40 sweet spot, but Amazon is working to help sellers improve their AOV. Brand owners are now able to launch virtual bundles which should help to put upward pressure on AOV and Amazon recently announced a partnership with Affirm to allow customer to buy now and pay over time.

• Reviews. Outside of the #1 ASIN, most items range from a few hundred to a few thousand reviews. If you look at more established categories, the top 10 items can have 10,000+ reviews which can function as an insurmountable lead.

Conclusion

To keep the article digestible, the process outlined above was as straightforward of an example as possible. However, when researching and finding the right niche for your business you should review and analyze as many keywords as possible. Make sure that you are being as detailed and data driven when selecting a category to position yourself for success.

A common mistake that first time sellers make is looking at a niche as an all or nothing proposition. Don’t be frustrated if you are unable to find a full assortment to fill out a brand. Many successful sellers use a hunt and peck approach to selling on Amazon, where they find individual sub-categories and micro-niches to exploit and build their business.

Now that you know how to find a niche, the hard work starts. You will need to source materials, find manufacturing partners, and develop your launch strategy. While this might feel like a daunting task, don’t worry - we will be here with posts to walk you through each step of the jounrey.

Want to start researching a niche? Sign up for Jungle Scout for a Free 7 Day Trial.

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1. It’s the most popular niche discovery tool and it’s not particularly close.

2. The more searches the better as this is a gauge for customer interest in the category.