How to Identify Highly Profitable Products for Your Private Label Amazon Business | Part 2

How to Identify Highly Profitable Products for Your Private Label Amazon Business | Part 2
By Franz Jordan in Amazon Marketing Tips. Last updated on

Part 1 of this two-part post about identifying highly profitable products for your private label business covered the three key characteristics of the perfect private label product. This second part now introduces the three steps required to find the perfect product.

3 Steps to Find Great Products to Private Label on Amazon

The best way to find a great product to private-label is to follow our 3-step process:

  1. Develop product idea
  2. Evaluate market segment
  3. Perform in-depth market validation
Finding the perfect private label product for Amazon


1. Generating Good Product Ideas to Private Label

The goal here is to develop a product idea list that is well-suited for your private label business. Products don’t need to be perfect, only good enough to merit more research. There are two main approaches to come up with potential product ideas.

The data-driven approach focuses on using some type of product “database” and using metrics and filters to identify products that match your business’s ideal product criteria. The most common product “database” is the Amazon best seller list. What’s appealing about using the best sellers list is that it contains products that are already performing well on Amazon indicating an existing level of demand. Furthermore, by limiting target products by category, you can easily focus on categories of interest. By taking ideal product specifications (low weight, simple product, etc.) into account while evaluating your list, you can narrow down your search even further.

The second approach is unstructured, creative brainstorming. There are various techniques to help stimulate the brainstorming process. Write down everything you touch over the next 48 hours. List every object you see in a room. Page through magazine ads or watch infomercials. Or listen to conversations between friends or foreigners.

Both approaches can be effective, but we think the data-driven approach leads to better results since it’s systematic, repeatable and more comprehensive in its analysis. 

2) Analyzing Demand and Competitiveness in Your Private Label Niche

Once you’ve developed promising product ideas, continue with a niche analysis to evaluate revenue potential and competitiveness. The best starting point for the niche analysis is the main keyword for the niche/product. For example, if you’re evaluating a garlic press, then “garlic press” is the main keyword. Search for the main keyword on Amazon and review the search results. The segment analysis should answer the following question: Can my product reach the top 5 search results, and if so, how much money can I make?

The answer to the first part of the question depends on an existing product’s review quantity and listing quality. If all products on the first page of search results have more than 500 reviews, reaching a high search rank will take significantly more effort than if existing products don’t have many reviews. Next, look at product listing quality. Do they have high quality images? Does their title include the most important keywords? Do they use all five bullet points? Do they have a high quality product description? The more mistakes they make, the easier it will be for you to rank higher than they in Amazon’s search results.

The second part of the question (How much money can I make?) can be answered by looking at the sales ranks of the top products. If the top 5 products all have a sales rank below 2,000, you’ve likely found a niche with high demand. Another good way to estimate sales volume is to check search volume for the main keywords (you can use Google Keyword Planner or Merchant Words). You’re looking for numbers above 100,000 monthly searches for the niche’s main keywords. You should also try to get a feeling for profitability by using the Amazon FBA calculator to calculate your net profit after FBA (fulfillment by Amazon) fees.

If your niche analysis indicates a good market opportunity, you should take another look at product specs. Make sure that the top products match your ideal product specifications (low weight, simple product that requires low rate of returns etc.).

The entire niche analysis can be performed manually. 

3) Validating Your Results by Tracking Target Products’ Actual Sales Volume on Amazon

Congratulations – you’ve almost found the ideal product! So far, all your assumptions about the potential market size and product demand are based on estimates. You found a product with a strong sales rank and assumed that indicates a certain sales volume. Your estimates, however, could be wrong. How cool would it be to know the actual sales volume of a product or an entire niche before you source it? Extremely cool!

We recommend analyzing actual sales volume using a sales tracking tool. 

While you’re collecting actual sales data, you can spend your time identifying key features to differentiate your product from the competition. This will give you a significant advantage once you enter the market. The best way to find areas for improvement is to read through negative reviews for existing products. Is there a feature that users complain about again and again? If so, that’s a great opportunity of which you can take advantage.

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