(This post was last published on May 23, 2017. We have updated it for accuracy and completeness.)
Over a million new sellers join Amazon every year, but less than 10% of those sellers are able to achieve $100,000 in yearly sales. Only 1% of Amazon sellers achieve $1 million in sales.
So, what’s the difference between a failed and successful Amazon business? Most often it comes down to the products you sell.
The problem is that it’s hard to find profitable product ideas. You have to consider a lot of factors like sourcing methods, product margins, and forecasting customer demand.
While you don’t have to reach $1 million in sales to be successful, it’s important to choose products based on your own business goals and what works best for you. Keeping that in mind, use this guide to learn how to research and source profitable product ideas for Amazon.
How to Find Products to Sell on Amazon
Before you source any products to sell on Amazon, it’s a good idea to first understand what categories sell well on the marketplace. This can help you discover product ideas that you may not have thought of.
Here’s a current list of top selling categories on Amazon:
- Toys and games
- Gift cards
- Camera and photo
- Video games
- Clothing, shoes, and jewelry
Check out this constantly updated list of best-selling items as you research.
How to Compare Product Ideas
Next, narrow down a few product types to look at more closely and compare the following:
Demand: Is there enough demand to make it worth selling? You can also use a tool like Google Trends to see what’s popular.
Competition: If you look for the product on Amazon today, what’s the competition like? Pay attention if Amazon sells the item through their private label, Amazon Basics. It’s hard to compete with Amazon itself.
Product Margins: Margins will differ by the product and directly impact profitability. For example, you’ll have to sell large volumes of low-margin products before you make any significant profit.
Regulations: Be aware that you can’t just sell anything on Amazon, including popular items like CBD oils. Be sure to check Amazon’s list of restricted products.
Shipping costs: Some products are more expensive to store and ship, which affects profitability. For new sellers, it’s easier to focus on small and lightweight items like books to avoid any complications.
Availability: How easy or hard is it to source the product? Is there only one supplier available?
Seasonality: Relying solely on a seasonal product like holiday decor won’t bring in consistent sales.
Another helpful way to research and compare products is through these online tools.
- Jungle Scout: All-in-one platform for selling on Amazon that includes how to find products and sourcing suppliers.
- Camelcamelcamel.com: A free Amazon price tracker that helps you decide when to buy your inventory — it monitors millions of products and alerts you when prices drop.
- InventoryLab: A solution that syncs directly with Amazon Seller Central to help you research and source profitable inventory, and list and manage your current inventory.
- Amazon Scanner App: As an Amazon seller, you have access to their scanner app on iPhone or Android phones, which lets you scan an item’s barcode to see its pricing and selling history on Amazon before you actually invest in it yourself.
- Amazon FBA Calculator: If you’re an FBA seller, use Amazon’s FBA Calculator to estimate what your profits might be on a certain product, less your FBA and sourcing fees.
- SupplySpy: Analyze supplier wholesale price lists and calculate prices in bulk.
Did You Know? We recently conducted a survey of our customers to find the top selling items on Amazon. The top five product categories include Home Goods, Health & Personal Care, Toys, Kitchen, and Beauty — so keep these in mind as you’re buying inventory.
Before You Source Any Inventory, Test Your Products
It’s important to note that most inventory sourcing options require an upfront investment in product.
But, before you hand over a large sum of money, it’s important to test the products and make sure they meet expectations.
You can ask suppliers and manufacturers to ship sample items to you. This gives you first-hand experience of the product quality (and what it’s like to work with the supplier.)
If you skip this step, you might learn the hard way when you’re dealing with customer complaints and $10K worth of inventory in a warehouse that you can’t sell.
10 Inventory Sourcing Options for Amazon
Once you have an idea of what products to sell and how much you could make, it’s time to figure out the best way to source them. Here are the 10 most common sourcing methods for Amazon Products:
1. Retail Arbitrage
Buying discounted products from retail stores and reselling them on Amazon for a profit.
Sellers that follow the retail arbitrage model often scour the clearance aisles at big box stores like Walmart, Target, Big Lots, CVS, Walgreens and more. Liquidation and surplus stores are also common inventory-shopping destinations because everything they sell is heavily discounted — sometimes even 75% off retail.
Sourcing your inventory this way can be time-consuming, but it typically doesn’t require a large upfront investment since you’re most likely not buying in bulk. But, before you consider making purchases on your credit card, make sure you know the pros and cons of using business credit cards to finance your inventory.
(No matter where you go to buy your inventory, don’t forget to save all of your invoices and receipts.)
Pro Tip: Leonard Pearson, Payability customer and owner of Velocity Stores on Amazon, uses retail arbitrage for some of his inventory. He buys store clearance items at roughly 75% off and resells them on Amazon. He says, “With certain stores this is repeated because chain stores carry the same items and generally clearance them at the same time. This leads to a lot of driving around to get all of the items you can, but the payoff can be really good.”
2. Online Arbitrage
Buying discounted products online and reselling them on Amazon for a profit.
Online arbitrage is exactly like retail arbitrage, only you’re shopping online for your inventory instead of in person. To help you find the right etailer, check out one of these 17 tools for online sourcing.
3. Drop Shipping
Buying products from a retailer or wholesaler after you’ve made a sale on Amazon, and having the items sent directly to your customer.
If you don’t want the responsibility of managing inventory, drop shipping might be the right option for you. It’s a fulfillment method that allows online sellers to sell products without actually owning the inventory themselves. Instead, you rely on a third-party supplier like a wholesaler to ship products to customers. The best part is that the supplier remains invisible to the customer, so it appears they buy directly from you.
The main advantage of drop shipping is that you don’t have to invest in inventory upfront. You only pay for when you make a sale. This makes it a low-risk fulfillment method for new sellers.
On the other hand, drop shipping can cut further into margins. And, you don’t have full control over the customer experience. If your supplier misses a shipment, you’re the one who gets a poor review (remember the supplier is invisible to the customer.)
Before you consider it, read our informative guide on drop shipping to learn more about the benefits and risks of this fulfillment method.
Pro Tip: Mark Dorsey, Payability customer and owner of Najee Holdings LLC on Amazon, offers his three step approach to dropshipping: “1. I go on Amazon.com and find items that match the criteria I look for (sales rank, number of sellers, is Amazon a seller?, price history, etc.). 2. I look to see if I can find the product at another source at a discounted rate. 3) Once located, I check the numbers to make sure I can make a decent profit while also being in the top five spots of sellers.
Buy a large volume of products directly from the manufacturer/brand owner and sell on Amazon
Buying wholesale is a tried and true process for selling on Amazon. It has a low-barrier to entry and can be easy to scale. You’ll work with established manufacturers, and don’t have to worry about creating new ASINS. And, most wholesale items already have sales rank or demand.
Most sellers also have the opportunity to earn better deals in the future or negotiate better terms on purchasing inventory, once you establish a positive business relationship with the manufacturer.
When buying products as wholesale, you should go through the necessary approval channels to resell a particular product or brand. If you’re not an authorized seller, you risk getting flagged for copyright infringement and could be suspended from Amazon.
With the potential to sell in the millions annually, wholesale could be the right option for you. Just ask Dan & Eric, the wildly successful Amazon sellers behind The Wholesale Formula, a training program for other sellers to learn their secrets.
Pro Tip: It’s not uncommon for retailers to only pose as wholesalers, charge you retail prices for products instead of at a discount. Use sites like SaleHoo or Worldwide Brands for a directory of certified wholesalers and drop shippers.
5. Private Label
Buy generic products directly from the manufacturer, add your own labels and sell under your brand
Private label sellers still source products from a manufacturer, but unlike wholesale, you have some say in product design and use your own brand name. This means you have control over product quality, labeling, packaging, and more.
As Leonard Pearson says “Private labeling eliminates competition and ensures repetition of your sourcing efforts. This doesn’t cost as much as a lot of people think, it just takes some research and patience. If you can find an item that is not on Amazon, or not well represented on Amazon, or even one that you can make improvements on, this is a great business model. You may need to build a team to assist you with everything involved (photos, sales copy, package design, etc) but a lot of that can be outsourced.”
Pro Tip: Read our latest guide on how to get started with selling a private label brand on Amazon.
6. B2B Marketplaces (Like Alibaba)
Buy in bulk (and for a discount) from B2B marketplaces overseas
Many Amazon sellers source their products from B2B marketplaces, where they can find a broad range of manufacturers and apply for bulk orders and quantity discounts.
Top B2B Marketplaces include:
- Alibaba – Chinese-company that serves millions of buyers and suppliers globally.
- ThomasNet – Leading online platform for B2B seller discovery and product sourcing with over 500,000 suppliers on its platform.
- IndiaMart – India’s largest B2B marketplace with over 3.5 buyers and a selling model similar to Alibaba.
- eWorldTrade – This US-based platform is the world’s fastest growing B2B portal and services more than 220 countries.
Check out a full list of online marketplaces here.
Pro Tip: When researching products on B2B marketplaces, be on the lookout for knock-offs and counterfeits. If you feel like you found a deal too good to be true, it probably is. Scam sellers and buyers are still a widespread issue among marketplaces, including Amazon.
7. Auctions and Thrift Stores
A type of retail arbitrage that is specific to auctions and thrift stores
While the most common form of retail arbitrage is perusing clearance aisles and liquidation sales, some Amazon sellers have found high-profit items by going to auctions, garage sales and thrift stores. A good place to start is Auctionzip.com, a directory of local and online auctions.
Pro Tip: “When I began selling on Amazon, I went to auctions and thrift stores and found items that were not well represented on Amazon, and thereby commanded a high price. This requires a lot of hunting and research, but, the payoff is pretty good. The downside of this is that you rarely find more than one of a really profitable item, so you cannot duplicate your efforts every day.” – Leonard Pearson.
A type of online arbitrage that is specific to eBay
If you can’t make it to an auction in person, eBay is also an option. You could find one-of-a-kind items at discounted prices. Or at the very least, check out eBay completed listings to get a sense for items that aren’t yet on Amazon and that might sell well as a result.
Pro Tip: Read more about the differences between Amazon and eBay and each of their unique selling benefits.
9. Create Your Own Products
Fully control the manufacturing of a particular item
If you want to have total control over your products and brand, you can make your own.
For example, you could develop your own cosmetics line. You’d come up with your own formula for foundations, mascaras, lipsticks, etc., find a manufacturer that will make and package the products for you, and then sell them on Amazon. Learn more about finding your own eCommerce niche.
Of course, this is more expensive and time-consuming than wholesale or private label, but you’d be in total control.
Pro Tip: Look into trademarking your brand and/or products to protect yourself from counterfeiters and scammers.
10. Virtual Assistants/Outsource
Outsource your inventory acquisition to an employee or virtual assistant
Don’t want to do any of the work? On the other end of the inventory sourcing spectrum is outsourcing. Depending on the scale of your business, you might be able to hire an employee or a virtual assistant to source products for you via any number of the methods listed here. Check out our friends at Freeeup.
Pro Tip: If you’re not sure where to start on the virtual assistant front, you can start by applying for The Selling Family’s shared VA program.
What’s Next: How to Finance Your Amazon Inventory Expenses
Once you choose your products and see sales at a steady pace (and at a margin that works for your business), you’re ready to invest in your inventory on a regular basis.
However, most Amazon sellers struggle to keep healthy cash flow to pay for inventory, especially since Amazon can delay your payouts for weeks at a time.
This is a problem since keeping up with inventory is crucial to the success of your Amazon business. Otherwise, you risk stock outs, which means missed sales opportunities and penalties from Amazon.
To avoid situations like these, learn about different financing options for your Amazon inventory that can power the growth of your online business.