How I found a $168,000 Amazon niche in ten minutes
This case study will take you step-by-step through my journey as a prospective Amazon seller as I find a profitable niche using Catsnatcher — an Amazon data analysis tool specifically made for private label (creating new custom products).
Catsnatcher is different from other tools in that it actively presents product ideas based on criteria, rather than having the user think of an area and then test it. The latest version is built on the Metabase analytics platform with the ability to sort, filter and search through metrics on 40,000+ specific subcategories that align with product ideas.
I created it last year when I was looking to get into Amazon Private Label selling earlier this year. I found other product research tools useful for when I had an idea I wanted to research, but I’m not terribly original, so pretty much everything I thought to search had already been crowded out. Also, other tools focused on single listing-level metrics (only useful if you’re looking to be a reseller of someone else’s product) rather than showing me the stats for an entire niche that I could create a new product in.
Today we’re going to find a profitable niche by filtering on Amazon pricing, popularity and competitive data.
Step 1: Getting rid of top level categories (sections) that are unsuitable for private label (e.g. have a high degree of faults or returns). Returns can waste 100% of the product price, this can ebb away margin quite fast:
Step 2: Selecting only the categories that have an average rating of 3.9 or lower. Reviews this low are usually a sign that something can be done better in a market — an opportunity for a private label seller to come in with a tweaked offering and win business:
Step 3: Setting the average item price between $40 and $100 ensures that there’s margin, without a huge risk of losing money on large returns:
Step 4: Although its not always relevant to private label, reducing the seller count per product to 4 or less helps us avoid categories where the competition is high. This way, I can lessen the likelihood of race-to-the-bottom price wars and rivals going to our supplier and crowding our listing:
Step 5: As well as filtering out more competitive markets, aiming for lower review counts can help ensure that you won’t struggle too hard to get up the search ranking when you start:
Step 6: Another important consideration is how expensive and difficult it is to ship an item; as measured by the FBA fees. Remember this can hit you twice, as the seller will be expected to cover returns in many cases. Aiming below $6 should prevent delivery hammering our margin:
Step 7: Ranking the shortlisted results from highest to lowest average revenue per product (for obvious reasons 😄):
Scanning the result list its clear that some categories are more suitable than others. For example, I know from experience that some sections, like Beauty & Personal Care, are dominated by a handful of major brands that spend a lot in manufacturing. For this reason, competing would be incredibly difficult.
One strong example I see here is Hitch Lights within Automotive. The average top 20 listing in this niche makes over $14k per month ($168k per year) on one product alone, despite not pleasing customers entirely (3.7 star rating) and not yet being too competitive (not many reviews or sellers per item).
It would be a bonus for future expansion if the existing products had a higher variant or accessory count, but this is quite rare so not to worry. It also doesn’t mean that its out of the question for your offering to be the first to go SKU wide or deep!
Step 8: To drill down further in this market and see more detail on what listings I’m up against, I’ll click into the category id and see related items:
Here I can see the real items mirror the niche averages quite closely. Though the top products have strong sales and a low cost of delivery (FBA), they don’t have perfect reviews. Perfect opportunity to create a new private label offering!
Now that I’ve found a high-profit, low-competition opportunity, the next step would be to read the Amazon reviews of each product to see where the feature or quality gaps lie. This would put you in a good position when talking to potential suppliers of Hitch Lights about what they can provide in terms of features and quality. It would also be prudent to figure out the cost of production for this item by comparing quotes from several suppliers.