Selling on Amazon can be a fantastic driver of growth, but the truth is that not every product is well suited to the platform.
Here are four diagnostic measures you can use to assess your product’s potential, as well as four categories that are a perfect fit.
What should you consider?
1. A healthy amount of competition
Look for a well established category with plenty of products, with top ranked products having 100+ reviews. While it might seem counterintuitive to seek out competition, a healthy amount signals viability. If your particular sub-category is sparsely populated on Amazon, it may be telling you that there is little to no demand for your product on the platform.
While users do explore Amazon for new products, the search bar is the primary method of finding products, meaning the selection effect is strong. If they aren’t already looking for your type of product on Amazon, a significant shift in awareness will be needed to change that.
Conversely, be wary of categories filled with big name competitors, as well as Amazon private labels. It may be possible to carve out a niche for yourself, but you’ll always be battling against big competitors and much sought after positions on the first page of search results will be crowded for the highest traffic keywords.
2. Amazon friendliness
What Amazon really sells is the customer experience. Shopping on Amazon is fast, convenient and reliable. From a consumer perspective, think about whether your products fit this model.
Amazon’s ranking algorithm is designed to promote products that are sold in high volumes, and fulfilled quickly and reliably (ideally Fulfilled By Amazon). For example, if you sell bespoke marble dining tables, it will be hard to satisfy these markers of performance.
Some products are better suited to online shopping than others. Consider the process your customers go through when buying your products. People are happy to buy a laptop based on technical specifications without physically inspecting the product as opposed to a blazer where finding the right fit is important.
Naturally, cheaper products carry less risk, so customers are more likely to gamble on them if they’d normally prefer to buy in-store.
3. Margins
Retailers accept that they give up a portion of their margin selling on Amazon, and do so because it allows them access to millions of active shoppers. Nevertheless, number crunching is required to assess viability.
Most categories pay a 15% referral fee of each sale, and there are additional fees for use of FBA (delivery + ongoing storage costs). If you’re using Amazon Advertising, you’ll also need to factor in ad spend.
4. Longevity versus popularity
Building your products up to ‘best seller’ status on Amazon takes time. You want near-evergreen products that won’t fall out of favour with changing trends. There’s a reason the Forbes 30 under 30 isn’t populated by fidget spinner moguls.
If your products have short lifecycles you will be in for a never-ending loop of launches, always trying to gain traction with brand new products. While some seasonality and rotation is fine, it’s very difficult to run a successful account if you start all over again every 2-3 months.
Retail categories that work well
1. FMCG
This might be the ultimate Amazon category to sell in. FMCG perfectly fits the Amazon criteria for success:
- There’s high demand for them on the platform, customers like the convenience
- Products are usually an appropriate size for FBA, making for fast and reliable delivery
- It’s also Amazon-friendly, no need to try in-store before you buy
- FMCG products are not typically one-time trends, they can become consistent best sellers for the long term
- At low price points as well, customers aren’t risking too much by trying something new
FMCG also lends itself to the ‘Subscribe & Save’ program, which is about as close to a win-win as you can get on Amazon. Customers get a small discount and the convenience of automated deliveries, whilst retailers get repeat customers.
The only area where FMCG is more challenging is the level of competition. There are some big players in the category, including Amazon private labels. There’s always a foothold somewhere for more specialised products that can differentiate themselves though.
2. Toys and games
Toys and games is another category in high demand. Toys and games on Amazon benefit from the homogenous nature of retailer’s product ranges. They all stock the same ranges from the latest kid’s movie or TV show. With all else being equal, the customer’s choice of where to purchase comes down to price, cost of shipping and (if they’ve left their present shopping a little late) speed of shipping. Amazon excels in these areas, bringing in plenty of customers.
The disadvantages of faster product life cycles for toys and games are offset on Amazon, as the desire for them is generated largely by external forces. This is perhaps the one category where you always want to be launching the latest trend, as movie releases and TV ad campaigns whip up demand.
They are brilliantly suited to promotion during events such as Cyber Week, which has become a near month long deal-fest on Amazon. Again though, competition is fierce. Even as a brand owner you will still likely be competing for buy boxes, which is typically driven by price.
3. Appliances
Home appliances thrive on Amazon. Demand is strong, and price points range from luxury through to bargain, so there’s room for everyone. Most are well enough suited to FBA, with the typically higher prices better for absorbing the increased costs of shipping and storage for larger items.
The life cycles of appliances are also generally quite long. New models are of course periodically launched, but that doesn’t generally entail a rapid decline in popularity of the predecessor, allowing more of a transition that keeps sales volume stable as the new version builds up steam.
Appliances are also very easy to shop for on Amazon. While the showrooms of IKEA are great for helping consumers visualise products in their home, appliance purchase decisions lean toward technical specifications and reliability. All product information is readily available on the detail page, images can be used to give exact scale, and reviews provide reassurance that the product won’t blow up on first use.
4. Gifting
Amazon does stand out for gifting, because the selection of possible gifts is huge, and you can have them delivered directly to the recipient (and if you’ve left it a bit late you can rely on the next day promise). There’s also specific ‘Gift Ideas’ and ‘Find a Gift’ sections to help users narrow down what to buy, often focusing on upcoming events like Mother’s Day or Father’s Day.
Gifts are naturally well suited to the massive sales that occur through Cyber Week and in the lead up to Christmas, and advertising strategy is often as simple as swapping out your seasonal keywords.
The best part of gifting on Amazon is the flexibility. You don’t so much need to fit into an already established category, as you gain visibility and create demand by targeting the gift related search terms that everyone uses. Create a new category and be the first mover, like one of our clients, Celebrate Gifts. Rather than just selling boxes of chocolate or flower bouquets, they sell bouquets of chocolate.
Selling on Amazon can be hugely successful
Launching your brand on Amazon can be a daunting prospect. Take the time to understand where your product fits into the unique Amazon ecosystem and identify what your best route into the marketplace is.
If you want to find out more and explore selling on Amazon, then get in touch and our Amazon experts can help.