As we all know, product selection is the key to selling goods on the Amazon platform. Above, we have determined how to choose product categories and specific products. Now we will help sellers from the initial selection of samples to the process of determining products from the perspective of sample evaluation, cost and profit calculation, and finding suppliers.
(I) Sample evaluation
After the new seller has learned about the price, category ranking, market capacity, trademark brand and other information of the target product in the early stage, the next step is to evaluate the physical product. If necessary, you can also purchase a variety of samples and use them yourself for testing, so as to find out the design differences, quality differences, and user experience differences between different samples, and select the product with the best comprehensive user experience or the product recognized by other sellers.
(II) Calculation of cost and profit
After selecting the product category and confirming several samples, the seller begins to calculate the cost and profit of the product, and judges whether the product is worth developing by price and profit margin.
Here are several cost and profit calculation formulas that need to be noted.
(1) Product cost = procurement cost + platform commission + logistics freight + other costs
Among them, other costs include promotion costs, operating costs, warehousing costs, etc.
(2) Net profit = product price – product cost
(3) Profit margin = net profit / product price
Generally speaking, what is a reasonable profit margin? The average profit margin should be 40%. Of course, the profit margins of different categories or products vary greatly. For example, the profit margins of jewelry accessories and gold and silver jewelry products are relatively high, while the profit margins of single popular products may be relatively low.
(III) Finding suppliers
If after comprehensive calculation, a certain product still has considerable profit margins, then the next step for the seller is to start looking for suppliers to solve the supply problem. If the seller can produce within the controllable cost range, of course, there is no need to consider this. For most sellers, they can also look for manufacturers or brand agents to cooperate with, such as looking for suppliers on Alibaba procurement and wholesale website, which is a good choice. At the same time, because Amazon attaches great importance to intellectual property and patents, sellers need to consider whether the supplier’s products are original and whether there is any possibility of infringement when choosing suppliers, and require suppliers to provide product purchase invoices, brand authorization letters and other information in order to successfully pass the Amazon platform’s review of products and stores.
Amazon positions itself as a bridge from “factory to consumer” and has launched a series of account types for manufacturing companies, including manufacturing + accounts, commercial enterprise procurement accounts, exclusive sales accounts, fashion category (FA) supply accounts, suppliers (Vendor Central, VC) accounts, direct import (Direct Import, DI) accounts, and accelerator accounts. The Amazon platform is constantly subverting the traditional trade model through continuous trial and error, and is also constantly guiding sellers and traders to keep up with the pace and adapt to the new market demands every year. Factories still have advantages in product development, and Amazon product development is also one of the keys to promoting big sales in the future.