In Bezos’ 2014 letter to shareholders, there is a passage: “A fantastic business generally has four attributes: one is customer rigid demand; two is that it can grow to a large scale; three is that the return on capital is high; four is that it can resist time. When you find such a business, you should hold on to it tightly.”
To summarize Bezos’ words from the perspective of product selection, it is to choose products with rigid demand, large market capacity, high capital turnover rate and slow replacement. Combined with years of operating experience, the success of product selection is attributed to three important underlying thinking, namely, rigid demand wins, Tian Ji horse racing and stay away from infringement. Let’s explain them separately.
1. Rigid demand wins
What is “rigid demand wins”? It means that in the process of product selection, it is necessary to give priority to analyzing whether the product is rigid demand. Only by selecting rigid demand products can the probability of successful operation be greater.
So how do we define “just need”? Does it mean that all necessities of life belong to the “just need” defined here? Not really.
Combined with the requirements of Amazon platform operation, the definition of “just need” is that consumers’ demand for the functionality of goods is greater than their demand for all external attributes such as color, appearance, style, size, etc. In other words, when consumers intend to buy a product, it depends on whether the consumer cares most about the function of the product or its external attributes. If the consumer’s demand for the product is “I need it”, then the product is defined as a just need product; if the consumer’s demand is “I like it”, then this product will have a purchase choice due to the consumer’s aesthetic bias, and it does not belong to the defined just need product.
For example, in daily life, each of us needs to wear clothes, and clothes are just needs in life.
But From the perspective of Amazon platform operations, referring to the definition given above, clothes do not belong to the rigid demand commodities in operation. Why? The reason lies in the consumer’s choice of clothes. When consumers plan to buy clothes, the first thing they consider is not just warmth, but also their own preferences. Consumers’ requirements for color, material, size and style far exceed their expectations for warmth. Each consumer’s unique preferences run through the entire process of buying clothes. When they see a piece of clothing, if it is the color they like and there is a matching size, consumers will be happy and place an order to buy it; otherwise, even if it is warm enough, but the color is not what they like and the size does not fit, the possibility of consumers buying it is almost zero. Through the above analysis, we can see that consumers’ behavior in buying clothes is based on “I like it”, and different consumers “like” different styles, which will cause sellers to need to stock up in scattered quantities and have multiple SKUs. The distribution of goods will also cause a large amount of unsalable inventory, which is contrary to the Amazon platform’s model of creating hot-selling products and will cause financial pressure in operations. Therefore, clothes are not “urgently needed” products in operations. On the contrary, some consumers often buy goods because of their functional needs and necessities, and will not consider their external factors too much. This type of goods is suitable for us to create rigidly needed goods. For example, a screwdriver, just imagine, what do consumers want when buying a screwdriver? A tool that can tighten screws. As for the color, style, etc., consumers generally don’t care too much.
Through the above analysis, we can also see that the so-called “rigid demand” is to start from the demand and think about product selection from the perspective of consumers. If we can cultivate and maintain this thinking habit when selecting products, and think from the perspective of others, then the product selection will be half successful.
2. Tian Ji’s horse racing
Readers are very familiar with the story of Tian Ji’s horse racing, and its moral is to use relative advantages to win. The same is true for competition in the operation of the Amazon platform.
Many sellers blindly pursue “the best quality” when selecting products. In operation, they find that because of the high cost, the selling price is high, resulting in few orders.
Although we all know that the Amazon platform has high requirements for the quality of goods, and consumers on the Amazon platform also have high expectations for the quality of accompanying products, it must be emphasized that for different products, consumers have different expectations for their quality.
For example, if there is a small scratch on the screen of a mobile phone, most consumers will not accept it. But what if you buy a flower pot? Even if there is a scratch, most consumers should be able to accept it. This is the different quality expectations of the same consumer for different products.
As mentioned in the previous article, as a seller, you should cultivate the habit of empathy, and the same applies to product quality. When we select products, we must understand what consumers’ requirements and expectations are for their quality. As long as the products can meet consumers’ expectations, it is good enough, and we call it “just right” product quality.
Choosing products with “just right” quality can ensure that we have moderate or low procurement costs on the upstream supply chain side, which can be reflected in the sales side. We can sell them at competitive prices and ensure that we get more orders and a larger market share.
It should be noted that in order to sell products with “just right” quality well, high-quality pictures and optimized product details are also required. Only when the product optimization is done well can it be easily searched by consumers, attract consumers to click, and competitive prices can stimulate consumers to buy. When consumers receive the goods, the quality of the goods just meets their expectations, which forms a sales cycle with high conversion rate and high satisfaction. This cycle is the result of using the “Tian Ji Horse Racing” thinking to select products.
Under the “Tian Ji Horse Racing” thinking, the product selection differentiation strategy that can be done also includes selling more batch combinations of goods at the same price as competing products; selling the same number of goods at a lower price: selling the right quantity combination at a lower price.
3. Stay away from infringement
In the process of store operation, infringement is a red line. Infringement mainly includes trademark infringement, patent infringement, copyright infringement and stealing picture infringement, which are all sellers should try their best to avoid when selecting and operating.
Many sellers sell infringing goods because of neglect or fluke mentality, and they start to sell well, but they are complained in the middle and are also recognized by the system, resulting in the deletion of goods, account restrictions, and funds being frozen. Not only is the normal operation rhythm disrupted, but the early profits cannot even fill the “pit” behind. There are even more serious ones, because of product infringement, being held legally responsible is really not worth the loss.
Therefore, in the process of product selection, you must try your best to avoid selling potentially infringing goods. To minimize the risk of infringement, we need to improve our understanding of the industry, increase our familiarity with the products, consult suppliers, communicate with experienced sellers, and check and verify on intellectual property inquiry websites. In the process of market research, we must stay away from any products that involve infringement or have the potential for infringement.
There are many ways to select products on the Amazon platform, and there are also many products to choose from. Only by adhering to the three underlying thinking of “winning by rigid demand, Tian Ji’s horse racing, and staying away from infringement” can we increase the probability of successful product selection. Only in this way can we make operations more stable and long-term.