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With online shoppers in the billions, venturing into the ecommerce realm undoubtedly opens vast opportunities for entrepreneurial success. But with thousands already selling online—how can you beat the competition?
It starts with one crucial step: product research. It provides valuable information about a product, from potential niches to profitability, using various data points. In short, it’s a vital process in creating a user-centric product.
If you're entirely new to product research, you may think a Google search or combing through Amazon listings can do the trick. While those steps might be involved, you'll still do a lot more than that. So, without further ado, here's your guide to finding a profitable product to sell online in 2023.
The product research method you should use depends on whether you want to sell a completely new product or introduce new features to an existing product.
If it’s the latter, you can study customer feedback to identify how a new feature can address pain points, satisfy changing needs, and how customers respond to new features. On the other hand, you won't have customer feedback to utilize if you're developing a brand-new product. In that case, you should analyze your competitors and focus on a target market.
Here are some methods to conduct product research.
Conducting surveys lets you learn how existing and potential customers feel about your product. You can send surveys via email, link, website, app, or social media. Using a surveying platform may also be convenient since it streamlines the process.
The essential questions to ask are:
Once you’ve got the answers, you can compare your findings with competitor products to gain more insights. You can also conduct a Net Promoter Score (NPS) survey, which asks one question such as “On a scale of 1-10, how likely are you to recommend this product to a friend or colleague?” The NPS survey can gauge how customers feel about a product without taking much of their time.
This method is similar to surveying as it asks customers how they feel about a product. However, it’s more suitable for a brand-new product idea since it asks customers if they would be willing to buy the item if it were available.
You can perform testing and feedback online or through in-person interviews. Online is more convenient; you can try a customer feedback tool to get as many insights as possible.
Once you've developed a product prototype, you can conduct a usability test with potential customers. You can also demonstrate the product yourself if you don’t have beta units to distribute for testing. Ask for feedback to discover your product's strengths and weaknesses and whether it can sell.
A focused group discussion can work for both existing products and brand-new products. If you’re researching a new product idea, gather people who use an item like the one you’re developing. Ask for their opinions, how much they are willing to pay for the product and its key features. Inquire about any improvements they would like to see as well.
This product research method can help you better determine your budget, strategy, expenditures, and profit margins. It will also highlight the qualities that will make your product stand out.
Amazon, eBay, and Walmart are three of the most popular online marketplaces. Many online retailers sell on all three platforms, but that doesn’t mean they’re the same. Each platform has its own policies, advantages, and disadvantages.
Amazon offers superb convenience for sellers and buyers. Creating a seller account is free, but you must choose between two paid plans: Individual and Professional. The Individual plan costs $0.99 per sale, while the Professional plan is $39.99 monthly.
You can easily list products on Amazon, but you need to optimize your listing to boost its visibility. This can be challenging, especially if many other sellers already offer your product. In that case, you can leverage Amazon’s advertising tools to stand out, but they incur additional fees.
Using Fulfillment by Amazon (FBA) can also help market your products better, but, again, it incurs costs. However, it might be worth it since your products can be expertly handled. FBA can process orders, address customer inquiries, and manage returns for you. Moreover, Amazon offers seller services and programs like Handmade and Merch on Demand, making it a fantastic platform for artisans and artists who want to sell their art.
Overall, Amazon is an excellent platform for selling products, but the competition makes it challenging to succeed. Making considerable investments to promote your products and hit your targets may be necessary.
eBay provides an outstanding space for selling homemade goods, handicrafts, collectibles, and other consumer goods. The first 250 listings each month are free, and the succeeding ones cost $0.35 per listing. Once your product sells, eBay takes 10-15% of its final value.
eBay’s fulfillment service works differently than Amazon's. On eBay, you can choose your preferred carrier and shipping method, then use eBay Labels to save on shipping rates and subscription fees. You can use your own packaging or get free boxes from your courier. Another option is to buy eBay-branded packaging.
eBay also offers marketing tools for sellers, like eBay Ads. It lets you create promoted listings to reach your target audience faster.
One thing to consider before selling on eBay is its performance, however. The company posted a 12% decline in gross merchandise value (GMV) during the fourth quarter of 2022 ($2.51 billion). Meanwhile, Amazon’s global GMV was roughly $693 billion during the same period.
Clearly, Amazon outperforms eBay, but if you have a potential audience on this platform, you should include it in your options.
Walmart doesn’t charge monthly fees like Amazon, making it a more cost-effective option if you’re a new seller. You can also use Walmart Fulfillment Services, which follows the same principles as the FBA. However, Walmart Fulfillment Services are cheaper since it only charges for the product weight, unlike FBA, which charges for various factors.
Another advantage of choosing Walmart is the lower competition volume, allowing you more page views. However, not every seller can join the Walmart online marketplace. You must apply and get approval to sell on their platform. You will be assessed based on your sales performance, previous marketplace experience, and fulfillment methods. Therefore, Walmart may not necessarily be an ideal option for first-time online sellers.
Now that we’ve covered the best online marketplaces to consider, it’s time to discuss market trends. They are essential in your product research because they can help determine the right marketing strategy.
Here are some market trends for 2023 according to HubSpot:
Before deciding on a product to sell, consider if its potential users can be persuaded through influencer marketing. With consumers now relying on content creators for product recommendations, partnering with an influencer can help boost sales.
You don’t need to work with a world-famous influencer to accomplish this. In fact, micro-influencers, or those with less than 100K followers, get higher engagement than A-listers. That's because they're found to be more relatable and, therefore, more trustworthy regarding product recommendations. Just find the influencer within your niche; for example, if you want to sell a travel essential, focus on travel content creators.
Influencers and brands are starting to ditch long-form videos where they talk about a product in detail. What’s in today is filming short-form videos to promote a product.
Short-form videos are faster and easier to produce, effectively capturing audiences with short attention spans. So before choosing a product to sell, ensure that it can be explained or demonstrated quickly. Remember to highlight the problems it solves and the experience consumers can get from it.
TikTok will continue being a top marketing channel not just among Gen Zs—but also among Millennials and Gen Xers. Whatever your product idea may be, it’s best to make it appropriate for TikTok to be able to tap its vast audience.
Identifying niche markets is a critical step in calculating your product’s profitability. It also ensures you’re targeting the right audience with the proper marketing strategy. Targeting the mass market is possible, but you'll face tough competition. By focusing on niche markets, you can gain more social proof and become your customers’ top choice.
Examples of niche markets include:
Identifying a niche market allows you to form a product idea based on particular interests, problems, lifestyles, and more. For example, if you want to sell a product to remote workers, work-from-home essentials like desk mats, attractive coffee mugs, or laptop stands could turn a substantial profit.
You can also concentrate on just one product but with variations. Take a look at The Container Store. It only sells storage containers where you can put different stuff, from food to linens. You can choose among various materials, like acrylic or rattan. This product can target young adults who have just moved out of the nest or new parents who need storage for their children's things.
Remember to test your product before launching it. You can create a landing page or Amazon listing and determine how customers respond. Do they immediately add the product to their cart or exit the tab and move on? You can also give free samples to your friends in your niche market and ask for their feedback.
If the tests don’t yield the results you’re hoping for, don’t abandon your idea immediately. Take a few steps back and identify areas for improvement. Perhaps you need to optimize your listings more or implement new features.
Even if you find a niche market, it doesn’t automatically mean they’ll buy your product. If a similar product already exists in the market or your item doesn’t offer a significant benefit, customers have little reason to buy it.
Demand analysis helps you determine if customers need your product. It also has four more objectives, such as:
You can conduct a demand analysis after identifying your niche market. Start by evaluating the three business cycle stages: emerging (high demand, low supply), plateau (supply meets demand), and declining (lagging demand). Then, create the product that meets your niche, define its advantages, and determine your competitors. Completing this process allows you to move on to the sourcing stage with a clear grasp of the market.
If you’re not creating your product yourself, you need a supplier. Your sourcing strategy depends on your business model. As a retail and online arbitrage, you can order wholesale products from retail stores or online marketplaces and then resell every unit at a higher price for profit. You can also establish a partnership with brands or distributors to be an authorized reseller of their products.
If you want to be a private-label brand, you can source products from marketplaces like Alibaba. Private-label manufacturers can customize items, but the most inexpensive ones may come from overseas. You have to account for shipping costs before choosing an overseas manufacturer.
If you want to try dropshipping, you don’t need to hold inventory. You only need to partner with another seller to be able to list and sell their products on your online store. When a customer orders a product, you buy it from the seller, who gets the product from a third-party supplier and ships it to the customer.
Dropshipping can be a cost-effective business model if you're still testing out a product idea. Without inventory, you don’t need to spend hundreds of dollars on suppliers. Private-labeling can also be profitable if you've thoroughly researched the market.
Most online sellers use the flat-rate pricing model. Since various factors influence a product’s flat rate, here’s a step-by-step guide on how to price your product correctly:
Step 1: Determine variable costs, like the prices of raw materials and shipping supplies. These costs are easily identified if you source your product from a manufacturer. If your products are self-made, the variable cost is the price of bulk materials divided by the number of items you produce.
If you employ workers to produce your product, factor in their hourly or daily wage to the variable costs. Divide that by the number of items they make hourly or daily. Then, include packaging, bonuses, and shipping costs in your calculation. If you offer branded add-ons like coupons or thank-you cards, add their prices to the variable costs as well.
Step 2: Calculate your profit margin. A healthy profit margin for Amazon sellers is between 15% and 25%. You can determine the profit margin with this formula: Net Profit Margin = [(Total Revenue – Total Expenses) / Total Revenue] x 100%.
Suppose your product’s variable cost is $12, and you want to sell it for $15. In that case, Net Profit Margin = [($15 - $12) / $15] x 100%. That would be a 20% profit margin, which is considered healthy.
Step 3: Consider fixed costs. You can still stretch your profit margins by accounting for your business’s fixed costs, if applicable. Fixed costs include rent, insurance, wages, licenses, and permits. Calculating fixed costs in a given period will let you identify the sales you need to reach to hit breakeven.
Step 4: Test and adjust your prices accordingly. Compare your prices with your competitors, then list your product after determining a competitive price. Monitor how customers respond to your pricing within a period. If sales are lower than you hope, use various data points to determine if you need to price up, down, or cut costs.
You may encounter these risks when finding a profitable product to sell:
Competing with hundreds of sellers offering the same product makes your business less unique. You can sell your products lower than your competitors, but it could shrink your profit margin. You'll have to depend on sales volume to offset costs and increase profitability.
Market oversaturation can occur on a macroeconomic or microeconomic scale. Macroeconomic market saturation happens when the demand for a particular product declines, usually because new technology makes it obsolete or when the product has already satisfied all the needs of its customers. For example, when Netflix became commoditized, people stopped renting DVDs, driving DVD rental shops out of business.
On the other hand, microeconomic market saturation happens when the demand for a particular product disappears altogether. It could be due to a new competitor offering a better, more value-for-money version of your product. You may be more exposed to this risk than macroeconomic market saturation as an online seller because new sellers sign up to popular online marketplaces every day.
If your research indicates that a profitable product to sell is possibly restricted on Amazon or any other marketplace, you face the risk of penalties if you proceed to sell it. While Amazon can approve certain restricted products, the process can be time-consuming. Additionally, you need to constantly consider your customers’ safety and well-being.
On the other hand, selling products without restrictions allows you to start listing and marketing your items sooner. You don’t have to spend considerable time and resources trying to find trustworthy suppliers and getting marketplace approval.
Product research shouldn’t be done in a rush, but you can streamline the process using marketplace management tools. Here are three platforms to consider:
Threecolts is a trusted marketplace management solution for Amazon, eBay, and Walmart sellers. Its product research tool, Tactical Arbitrage, combs through thousands of stores with customizable filters, so it only shows results based on your specified profit and return on investment (ROI) criteria. It also provides in-depth competition and sales velocity analyses to help you determine how many units to order from your supplier.
Once you find a profitable product, you can reverse search against thousands of websites to identify sourcing options with the best price. As such, Threecolts and Tactical Arbitrage can save you months of extensive product research and testing.
ZonGuru offers a suite of product research tools for Amazon brands and agencies. It uses customizable filters to find profitable product niches across various criteria, including revenue, competition, demand, and more. If you have no idea which niche to target, it can generate random product niches to fuel your research.
ZonGuru also offers a sourcing solution called Easy Source. It pulls up a list of reliable manufacturers filtered by location, verifications, and shipping capabilities.
Jungle Scout provides various eCommerce solutions to first-time, existing, and established Amazon sellers. Its product research tool, Product Database, determines an Amazon item’s price, rank, sales, revenue, rating, and reviews. You can export the search results to a spreadsheet for easier data access.
Product research is vital for your success in the dynamic ecommerce landscape. By understanding various online marketplaces, market trends, customer demand, financial factors, and potential risks, you can grab the right opportunities and position yourself for success. But the process doesn’t have to be manual and inefficient—make sure to consider a marketplace management solution like Threecolts to streamline your product research and constantly be updated on the market.
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