Updated: Sep 13, 2021
Selling on Amazon can be extremely profitable, but if you don’t know what you’re doing then it can also be a giant disappointment.
When attempting to pave your way to success in the world of product arbitrage, part of your job is finding great products to sell.
While it’s tempting to throw up something very basic like cheap Chinese electronics, this is a surefire way to fail.
Many niches are heavily saturated. In fact, some drop shippers will even be competing against you at profit margins you’ll never be able to match because they manufacture these goods themselves!
That’s why you need to strike a balance between finding a product which is both in high demand and not full of competitors who can steamroll you on price. In this article, we’ll be talking about some helpful tools and some methods that you can use to identify profitable products to sell.
How to research a profitable niche
The first step to successful product arbitrage is finding a niche. If you choose the wrong niche, then you’re likely going to have a bad time.
You’ll need to do some good old fashioned hard work to accomplish this, but there are a few key metrics you can stick to that will make your job easier.
Pro tip: Get a list of 30 profitable products sent to your inbox for just $7.
How to search and scan for potential winners
There are a few ways to find products, but the rules always stay the same. You make the decision on niche and products/price point/sales rank, you figure out how to source these products most effectively, and then you teach others how to do it via your method.
Unless you get super lucky if you try to hire an army of VA’s who you think will source better than you, have better tactics and can perform at a high level from day one you will be very disappointed.
You will spend time, money, and energy and have nothing to show for it.
There are two ways to source products: Manually or Software
This is all right to do in the very beginning but will become tiring very quickly.
You will literally go through items between the source site and Amazon by hand and hope that there is profit to be made after all the Amazon fees.
You won't last long here, its good if you want to be frugal at first, but don't forget being cheap with the tools you use to build your business will often times cost you money (it will surely cost you time).
Sourcing with software:
This is where you are eventually going to want to be. Using software will give you a level of automation which will help you to source faster, recognize which products are profitable or not, match products in bulk by scanning entire pages or categories, and then create condensed, but profitable lists in a fraction of the time!
Pro tip: Learn more about the OAGenius sourcing tool.
Your product of choice should have a good sales rank
You’ll want to carefully examine the sales rank for the product you want to sell. This indicator will help you to understand how popular an item is on Amazon.
The lower the sales rank, the higher an item’s sales are. The goal here is to choose something that makes sales but is not overly competitive.
You should aim for a sales rank of less than 100,000. The closer you get to 1, the more likely an item is to sell.
Don’t forget that every category has its own ranking scale too, so items set at 100 in some categories may actually sell faster than some in another category depending on its popularity, even if the sales rank looks the same.
Sales are the best way to evaluate a product’s potential, and if you need a little help, then you could try the Unicorn Smasher or Junglescout. These extensions pull relevant data for you and makes it easy to analyze products.
It will allow you to quickly compare similar products based on sales rank, reviews, ratings, and estimated revenue so you can pick a winner more easily.
They couple really nicely with a sourcing tool since they will give you an idea of how many times the item will sell in a 30 day period based on its sales rank.
What do the product reviews look like?
Make sure to read customer reviews carefully. You don’t want to arbitrage a product with poor reviews, as this could lead to a lot of returns.
Look for products that are highly rated, but be wary of trying to sell something with tons of reviews, because that likely means that it’s going to be very competitive.
Even if your product is a dud, don’t forget to browse Amazon’s suggestions for “also bought” on the page, as these suggestions could lead you to better products with nicer ratings.
How competitive is the listing?
Once you’ve found a good product you’ll need to make sure that you can compete on the listing. If there are too many sellers providing the product, then it will be difficult to compete.
Many of them might be bigger businesses than you, giving them access to better pricing and allowing them to undercut you into oblivion. Take a moment to make sure that you really have a chance to compete here before proceeding.
You do have some room to experiment here fortunately if you’re a dropshipper because listing items carries no fee. You should aim to have your product appear within the top 5 sellers on the listing page, even if you’re not number one, don’t worry.
Listings get pulled all the time for various reasons such as out of stocks thanks to poor inventory management, and that can leave you sitting in the top position, especially if you have better inventory management, and repricing software than your competitors.
Don’t get left behind, be the fastest and the best.
Choose a product with high cash back potential
If you’re planning to use drop shipping to make money on Amazon, then you can squeeze more profit out of your listings by taking advantage of cashback offers.
Cashback offers are offered by many credit cards and rebate websites which will give you back a nice percentage of your purchase price for buying something through them.
Sites such as ebates or Befrugal provide generous offers to consumers when you buy from online retailers that they partner with, and in many cases, you can secure even more profit by drop shipping from these sources to Amazon.
Try stacking an ebates rebate with your credit card’s cash back (2% cards) program to gain even more profit from your arbitrage routine.
Which products should you stay away from?
Some items are a poor choice for sellers, and in most cases, this is because there could be legal consequences for listing them.
However, in some cases, you could also be forced to show documentation for where you bought the items, and if you’re dropshipping you may not have an easy time providing this.
Brands restricted by Amazon
In some cases, you may actually need to apply before being able to list specific items, and Amazon can actually deny your listings if they want. So, it’s typically better to avoid these categories altogether.
There’s a huge list of these manufacturers and it includes items from manufacturers like Beats by Dre, Apple, Maybelline, PetSafe, Kong, Nintendo, Kitchenaid, Vans, Rosetta Stone, Microsoft, Yeti, Columbia, and many others.
The best way to avoid these things is to use a list that tells you all of the restricted brands since there’s so many of them.
Pro tip: Download our crowd-sourced restricted brands list for free.
Brands where infringements are being enforced
You should also avoid items with trademarked imagery. This could include shirts, home items or other goods featuring popular characters or logos. Also may include wording in the offering, or imagery that belongs to the brand.
The rights holders don’t always like people making money off of their products, even if the products are legitimate, they might go after you if they want to be the only seller of their official merchandise on Amazon.
This is becoming more of a concern recently either because the brands are afraid that since you are not an authorized reseller you may have counterfeit products or because they are trying to sell the item themselves and want to make all of the sales on the listing.
Be wary of products with designs or logos from franchises like Disney, Harley Davidson, Harry Potter, Pokemon, and other recognizable characters.
Trademark infringement cases could give Amazon reason to ban your seller account. If you’re unsure about whether the product you want to sell is trademarked, you can perform a search here.
If you are sourcing from a legitimate supplier then there is a good chance you are protected by the first sale doctrine. Although you will be cross referencing lists and trying to avoid rights owners complaints, it is inevitable that you will receive them eventually.
The key is to address them immediately. Sometimes, though unlikely you will be able to reach out to the rights owner yourself and they may agree to retract the complaint if you agree not to sell on the listing. In most instances it is a waste of time to go up against them yourself.
Have your lawyer write a legal letter asking them to send the retraction to firstname.lastname@example.org with your legal counsel CC’d.
Don’t let these stack up as it will eventually lead to suspension. The quicker it is addressed the better chances you have for removal.
If you need a recommendation for a lawyer who has helped hundreds of Amazon sellers with these complaints, please reach out to email@example.com
Products where the brand owner is your only competition
If you come across a product that looks amazing but the only competition is the brand owner themselves, then you’ll likely want to avoid selling it.
This is likely for a reason. Brands can actually establish themselves as the only authorized seller of their product on Amazon.
You’ll either be denied the ability to sell this item or get your listings removed with a rights owner complaint on your account.
How to scale up your business
Once you’ve found a successful product, you’ll no doubt want to scale up to make more money. This is also where you’ll learn that juggling a ton of different products can get stressful very quickly.
Retailers can change the prices of their products frequently, and you might find out a little too late that your listings are no longer profitable. It can also be a pain to keep up with out of stocks at your drop shipper to avoid angering picky Amazon consumers.
Fortunately, there are many tools available to help you out with this.
Using a business management platform to run your Amazon business allows you to automatically manage stock levels, keep tabs on price changes and even allows you to easily outsource mundane tasks to virtual assistants to improve your workflow.