How to Find a Niche on Amazon That is Right for You
If you are a beginner Amazon seller or you are in the process of launching your first product, by now you are aware of how important finding the right niche is. Finding the right niche comes before finding the right product. Niche as a word has many definitions and many meanings but in this article we will stick to what it means in terms of selling on Amazon. A niche is a segment of a market, a segment which offers a solution to a problem or a need with a type of product or a variety of different products. This definition can be broader but this one works perfectly well to describe the niches as we know them on Amazon. This is due to the fact that on Amazon the niches are already neatly organized for us. We all know that Amazon has 11 major departments (not including the ones that are only for products made by Amazon), which on their own are niches as well. Each one of them has a subsection, which also has a subsection and on and on it goes. It can go on into smaller and smaller segments until you reach the smallest unit of Amazon – a single listing for a product. For example: we can go to Amazon.com and from the departments list pick the Beauty & Health category and go to the All Beauty subcategory. From there we can choose Hair Care and a subcategory of that, Styling. At that point we can find a single listing for a particular Hair Spray.
All those levels, going from broadest to the most specific (being a listing) represent a niche. If we take this hair spray as an example we can clearly tell that there are more niches on Amazon for it, like just Hair Spray, Hair Sprays in a certain price range or Hair sprays for a certain type of hair. The last 3 examples are not pre organized subcategories such as the ones mentioned before. They are however keywords, keywords that have a number of listings related to them. This makes them niches as well since listings compete for an organic ranking on those keywords. Basically, a niche on Amazon can be represented by any standard subcategory or a relevant keyword with a high enough search volume worth competing for.
It’s best to start from the broadest possible scope and narrow it down from there. For an Amazon private label seller some departments are more realistic to enter than others. For a private label Amazon seller, especially one that’s launching their first product, it’s better to stick to a handful of departments. Those departments would be:
Home, Garden, Pets & Tools
Beauty & Health
Toys, Kids & Baby
Sports & Outdoors
These departments are most suitable for beginner sellers for 2 major reasons. The first one being that the products sold in these departments almost never require any special permit or documentation in order to be sold. In other departments you might find products that are made out of certain material or that need to be inspected by a licensed professional. There are things that can complicate and prolong the process of launching for legal reasons or otherwise. For a beginner seller you should be looking for products that will have no strings attached. The other reason is the fact that you will most likely be able to source products from those departments. In one of our earlier articles you can find the 3 basic guidelines to keep in mind while finding the first product you want to source. These are just some basic rules for beginners that make the process a lot easier, less likely to get complicated and most importantly, less likely to give you an unpleasant surprise. The point is that, in these departments there are plenty of products that are not complex, bulky/heavy, easy to manufacture and should give you no trouble moving them through customs. This doesn’t mean that you can’t make money on other departments or that you should only stick to simple products, this only means that doing things this way will be a lot less stressful and complicated for a new seller to start their Amazon business.
In the pursuit of the right niche to enter on Amazon you need to be aware of 3 crucial factors: the competition, the demand and the ease of entry. Basically you would want the competition to be as low as possible, the demand to be high as possible but the ease of entry is another story. This factor depends on the circumstances, since you want to be able to enter the niche but not for others to follow you easily. Ideally you would want to enter a niche easily and to expand to a point that your presence makes it hard to enter for anyone that follows. Needless to say all these factors are closely related and influence each other greatly, what you want to do is find a balance between them that you are comfortable with. Now, to get into the details:
How can you assess the level of competition in a niche? It’s easy to think you can have an idea of it just by taking a quick look at a section/subsection of Amazon, but it’s a bit more complicated than that. Here’s what to pay attention to:
The saturation. This is one of those aspects that you can see for yourself. The best way of doing this would be to simply go to a subsection of Amazon or type in a certain relevant keyword. It all boils down to, how many listing are in a subsection or many pages can you go through after typing in a certain keyword and see listings that are relevant to that keyword. More results means more competition and vice-versa.
The Price range. The price of the products can give you an idea of the competitiveness as well. The more competitive a niche (or a market) gets the first thing the competing products will do is to find a way to reduce their prices. This would lead to a small variation in the price range of the products as a result of their competition. A highly competitive market will discourage people to experiment with their prices (unless it’s to reduce them). So, the bigger the price range the smaller the competition and vice-versa.
The stability of sales and rankings. A niche doesn’t become competitive overnight. It takes a while for any market to stabilize and to establish market shares. A very competitive niche will have a handful of leading products that will have a stable rank and monthly sales. By studying the rank and sales history of a few leading products you can have a clear picture. A highly competitive niche will have very small fluctuations in sales and BSRs for the leading products. This level of stability will drop off significantly the further down the list you go for other products. In a certain niche a leading product will be on the very top of page 1 for months while there will be dozens of products that fluctuate between pages 15 and 5. The more stable the sales and rankings of the leading products in a niche are, the more competitive it is.
Why Do You Want to Be in a Less Competitive Niche?
For starters you will probably have to wait for a while before you reach profitability since you would be facing an uphill battle. In a very competitive well saturated niche you will have to constantly spend money on PPC Advertising. Your main issue would be exposure and not only that, you would also have to go through a lot of trial and error to reach a satisfactory conversion rate. This takes a lot of it. Becoming a better Amazon seller takes a lot of trial and error in general. However, as a beginner you would want to deal with it as little as possible. There is the added danger of having strong competitors that they might have the means to copy what you do if they see that you are on the rise. The advantage of a less competitive niche is that if you do your research right beforehand the hurdles you will have to face won’t be as steep. However, if you do manage to come on top of a very competitive niche you will get to make more money. So a competitive niche isn’t necessarily a bad one, it’s just much more reasonable to enter as an experienced seller.
It’s very simple you want to sell something that people want to buy. The most important part of finding that product that people want to buy is finding a way to listen to what the people are saying. However, selling something that in demand is not a guarantee of success, you need to find a niche that has a high demand that’s not being met. You need to find some space for yourself and the best indicator of a niche having a high demand that has not been met properly is by growth. The logic is simple: if products in a niche are constantly rising in sales month after month, so can you. The logic is that more and more people are coming to a particular niche in order to buy something; you can be another option that might be satisfactory to some of them. How to find a niche like this one?
A lot of sales and a lot of reviews - It’s simple: if people are buying a certain type of products a lot there’s a demand for it. It’s never a good sign that the top product in a niche or on a certain keyword has a small number of reviews. A niche that’s in high demand will have dozens of products with a very large number of reviews. This is something we can notice just by simply taking a look at it.
A constant rise in sales – By taking a few listings from the niche we are considering and if we notice that most of them have had a constant rise in sales, we know we are in the right place. This trend is even more powerful if we notice that products of varying listing quality and prices have this common upwards trend as well. This would suggest that people are flocking there and buying whatever they find. This would only mean that you can find a way to establish yourself easily on that market with a new product.
A high keyword search volume – By studying the number of sales we can know how many people come to a certain niche and make a purchase. By identifying some relevant keywords and observing their search volumes we can know how many people come to a certain niche in total. The disparity between these 2 numbers is the demand that’s not being met. Certainly it’s very hard to know exactly how many sales in total are in a niche but we can know enough. By comparing two niches we can easily deduce which one of them has more of a gap between the supply and the demand. This works just fine, since while you are doing product research this is the situation you are in. You will be always making comparisons. The same as with sales, a constant rise in a search volume of a certain keyword is a great indicator of high demand. This would mean that more and more people are searching for something and not necessarily finding it. You just have to make sure they find you.
The Ease Of Entry
What’s going to stop you from entering a niche? It’s money. Unless of course you have decided to source a product that requires some special permit or certifying or testing by a third party or a government agency, then it’s money. To be more precise, a barrier to entry into a certain niche is going to be a lack of ability to make a large investment. This is something that a new Amazon seller most likely isn’t able to do, but more importantly - shouldn’t do. Making a large investment before even having any experience with Amazon would be extremely unwise to say the least. This is precisely why a beginner seller shouldn’t spend a lot of money launching their first product. Which is one of the greatest things about selling on Amazon – you can start a full-fledged international business with just a little bit of cash. There are 2 major issues that can make a niche hard to enter and they are both financial in nature:
A single unit is too expensive. Even if everything else checks out, a beginner Amazon seller should not sink in a large amount of money on sourcing expensive products. It is very unwise for a beginner seller to try to sell an item that costs a 1000$ to make and it sells for 1800$. Not to mention that inexperience can cost you a lot, but also expensive items need proper quality control. This will also cost more. A single return of a very expensive (most likely heavy too) item can kill your business before it even takes off. Even if you can afford to make a sizable investment you should first try with a smaller product that you can ideally sell for between 15 and 70$ with at least a 50% margin. If you are interested in learning more about margins and related issues there’s an article on that topic as well. Even if you strongly believe that your expensive product will succeed on Amazon, possibly because you had success retailing it, you still shouldn’t do it. It’s still best to start with regular products to learn the ropes of Amazon. Amazon will throw surprises your way constantly until you understand what you’re doing, you shouldn’t be gambling with an expensive item that you can go through it all.
You cannot order in high enough quantity. If you come across a niche where the margins seem to be slim to none, you’ve most likely came across this barrier. When you are looking for manufacturers on Alibaba you will come across something called MOQ. This stands for Minimum Order Quantity. This means that there is a minimum you can order of a single product to be made; otherwise it’s not worth it for the supplier to make. What is also important is that making the minimum quantity means that you are paying the highest possible price per unit there is. The more your order the cheaper it’s going to be. The reason your margins would look slim would be because you are calculating the price you would pay for 100 units for example. Your potential competitors are making orders of thousands upon thousands of units. This leads to their price probably being half or less of what you would have to pay for a small batch. Of course you can invest in a big batch and try to make yourself competitive. This would be ill-advised for an inexperienced seller to do. In fact, this is something an experienced seller would never do as well. There are plenty of horror stories when people have a garage full of something that hasn’t sold and they cannot get rid of it for years. They learned that lesson the hard way, you don’t have to.
In conclusion, you should always try to look for a balance between these 3 major factors. It’s a bit tricky, especially considering the fact that they are so closely connected. Of course that high competitiveness is a barrier to entry, of course that higher demand can mean more competition etc… The point is to find a balance, but you will never find a perfect niche. You have to be your competitive edge. You will find a niche and you will conclude that something is missing or that something will be attractive to the people that spend their money there. You have to have an idea and go for it, there is no such thing as risk free business. Everyone launching a new product is taking a guess; all you can do is make a very educated one.
Another extremely important thing I would like you, the reader, to take away from this. THERE IS NO SUCH THING AS A BAD NICHE! As long as someone is making money there you cannot call it a bad niche. It just means that it might be harder for you (or anyone) to make money there. Hard and impossible are two very different things. So, whenever you think you’ve found a bad niche remember this:
It’s not a matter of how good a niche is, it’s a matter of how difficult it is to succeed in it.
We here at AMZScout are extremely aware of this, this is why we have developed a special feature in our Chrome extension that is there to assess a niche for you based on the 3 factors mentioned in this article. It’s a smart choice for making smart decisions.
Good luck sellers!!!