How to analyze the market on amazon
- June 14, 2020
- Posted by: Manju Rai
- Category: Business & Digital Marketing Tips
Whether you are just getting started as an Amazon reseller, or have the experience, you know that the marketplace is massive. How massive? Over 300 million listings are massive.
Disbursed over 36 categories, it is difficult the comprehend the sheer amount of items you could sell.
Don’t let this discourage you though, more is better! With almost a million new sellers joining the marketplace every year, this sheer volume of listings is a good sign. There’s still plenty of room for competition.
My company has over 10 years of combined seller experience on the Amazon marketplace, and are constantly strategizing new ways to tackle new products and listings.
We put a list together of 8 ways of analysis both on the platform itself and through your supplier spreadsheets.
1. Understanding your category targets
If you are a new seller on Amazon, you should start familiarizing yourself with the different categories on the marketplace.
Removing categories you have no interest in greatly speeds up the analytics process. There is a lot of ‘fat’ on the marketplace, so removing as much as you can only help.
You also want to make sure you understand any restrictions or rules behind each category. For example, if you wanted to get into Grocery, Amazon requires you to label expiration dates on every unit you send in even if it’s already labeled.
You should have a very good idea going in ahead of time on how much a product will cost to fulfill before you place the order with your supplier.
2. Best Sellers Rank
To continue on with the idea of categories, each category’s Best Sellers Rank (BSR) significantly.
An item that’s #100 BSR in Toys is a very different statistic than #100 BSR in Music when it comes to sales velocity. Everything is relative to each category, which is something to keep track of.
That being said, BSR is the best first filter to use when you are scanning for items. Once you have established a general idea of how quickly something will sell at various BSR levels, you can set a range on your list of items to buy from.
This can be done easily through search tools which allows you to filter your items with variables such as BSR ranges. Additionally, the tool has the capability of showing you sales estimates as well as doing the heavy lifting for you.
Remember, the key to analyzing the market on Amazon is to segment as much as possible at first.
3. Understanding your competitors
This topic goes in a couple of different ways:
a) if you are a private labeler, ask yourself: “How competitive is the niche I’m in?”. Competition isn’t a bad thing, in fact, it shows that there is a lot of consumer demand typically. However, your ability to penetrate the market is something you need to think about.
Are many sellers getting a small piece of the pie or are a few guys with thousands of reviews? Knowing where the opportunities are in your niche makes it easier for you to make that next purchase.
If you are coming into a cutthroat niche like fitness equipment, be prepared to go negative for a while to gain some initial sales traction.
The next two pieces of advice are mainly for wholesalers on the platform.
b) If you are a wholesaler ask yourself: “Will I be able to compete on this listing?”. Everything all comes back to the BSR in one way or another. If there are 9 competitors on a listing that only sells 100 a month, is 10 sales a month justifiable? Most of the time it’s not.
You want a mix between high sales velocity and low to the medium competition so that you can order enough from your supplier to get a price break. Learn the rules of the buy box to help with your sales estimations.
c) Ask yourself: “What are my competitors selling?”. The easiest way to get new ideas for brands or products is to see what brands your competitors are carrying.
Everyone is on an even playing field since any seller can look up one another. If there is an opportunity for you to establish the same relationships as your competitors, it’s worth reaching out to those suppliers.
4. Understanding Amazon Fees
The mistake we have seen most on Amazon are new sellers coming onto listings that don’t seem to understand Amazon fees. Fees are much more complicated than subtracting the buy box price from your wholesale cost.
An easy way to understand fees is by using an estimator tool. A free fee calculator is a good way to start, but once you need to upload in bulk, you’ll need software to assist.
Once you have calculated fees, you now have everything you need to calculate profit!
Before going to the final section, have you noticed we now have 4 major filters to identify opportunities in the Amazon marketplace?
To start, we pick our categories, we narrow down products more with BSR filters, check to see what the competition is like, then see if the fees result in a profitable listing. Easy right?
Now that we have identified opportunities let’s figure out how we can grow our brand and item database so that we can grow further!
5. Reaching out to new suppliers
Amazon is a numbers game. Only a handful of products are actually worth purchasing for every hundred products you have from a supplier. How do we attack this problem? Getting more brands.
This is where understanding our competitors come into play more. With our current competitors, we can now see who else to potentially purchase from!
Adding more brands is the only way to continue to grow on the platform so start recording the brands that are giving your competitors success and pick up the phone to form the relationship!
The last thing to note about your suppliers is their lead times and stock levels. A listing is only good if you are able to obtain the product in time. Timing is certainly an issue when a listing is seasonal so good communications with your suppliers are a must.
The key to being a successful Amazon seller is by taking things step by step and making sure you have a firm understanding of each piece mentioned above. It’s very easy to lose money on Amazon by rushing through and overlooking these metrics.