No Niche Research as a Biggest Mistake to Avoid When Selling on Amazon

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Amazon is the largest e-commerce marketplace where anyone from over a hundred countries can sell products. And you’ll only need to have Internet access to create an account and make sales. 

According to Amazon, more than six million people in the USA shop on Amazon daily, while the marketplace makes up about 48% of America’s e-commerce market. Other surveys show that the platform offers about 350 million different products. Nevertheless, not all of them are in demand and help their sellers make money.

You’ll find it extremely hard to predict whether a given product will be hot to sell on Amazon.

According to our in-house statistics, seven out of ten surveys prove that a product shouldn’t roll out in its original form.

To cut back on your expenses and mitigate your risks, you must first analyze the niche. Read on to learn the details.

What Is Niche Research?

Niche research is all about analyzing commodity groups on Amazon to understand whether it’s worth entering the marketplace with an existing product. We carry out researches for both the USA and European markets, depending on the client’s needs. Our research helps answer the important questions about product launches, such as “Do I need to adapt my product or packaging?” and “Which product ranges do I need to roll out to make a profit?” 

Moreover, we assess the buyer interest, potential income, sales, profitability and competition on Amazon. Potential sellers can be sure that buyers on the platform need their products. Niche research is an investment in your future sales. At Disqover Agency, we carry out niche research for Amazon by taking a stepwise approach.

Steps to Carry Out Niche Research for Amazon

Step 1: Demand Analysis

In e-commerce, strong demand means a slew of relevant search queries, i.e., people really want to buy certain products. At Disqover Agency, we measure product demand using special programs. Over the years, we’ve developed some niche size metrics. Please take a look at our example: 

  • Large: 800+ thousand queries
  • Medium: 350–800 thousand queries
  • Small: less than 350 thousand queries

It’s not that simple, though. You must take into account your competitors who run ad campaigns for specific queries and use the right keywords in their listing texts.

After measuring the niche size and the competitor count, we analyze branded traffic, i.e., search queries related to specific brand names. For instance, the shampoo niche generates more than five million queries per month, but 25% of them are branded queries (“head and shoulders”, “biolage” and “kerastase”), while this makes the real niche size much smaller. The niche is large in terms of the query count, but at the same time, branded traffic makes up a quarter of its size.

The number of users who don’t care about brands is far less than initially estimated. Nevertheless, it’s important to take a holistic approach to analyzing each product and consider all factors. Even if branded traffic is enormous, you can always build your reputation and compete with existing brands over time.

Step 2: Competitor Analysis

Analyzing competitors on Amazon consists of several steps: 

Step 1: we collect and analyze competitor data from Amazon. This includes average monthly sales, price, price history, seasonality, fulfillment, BSR, product rating and review count.

Step 2: we outline the key parameters of each competitor product. For example, we outline such parameters as “application” and “volume” when analyzing the shampoo niche.

Step 3: we process the retrieved data. This is the key and most time-consuming part.

Pushing the analogy with the shampoo niche, we can give answers to the following questions:

  • Which price segment is the most popular and helps make more money?
  • Which hair types bring more shampoo sales and which ones bring less?
  • What volumes are in demand (sometimes these data are different from assumptions)?
  • What is the most popular shipping option among end consumers?
  • Is there an A brand (a key player who takes most of the sales in the niche)?
  • What is a threshold for entering a niche based on reviews, etc.?

Step 3: Calculating Unit Economics

This process comprises two key steps: measuring margins and choosing competitive prices. Over the years, we’ve managed to find the minimum margin level you must have to enter Amazon. Otherwise, you’ll spend all of your income on advertising. Besides, the lower the margin, the more sales you’ll need to make a profit. Consequently, you’ll have to be making investments for a long time if you have to make more sales.

Step 4: Preparing a P&L Forecast

Our team has drawn up a P&L statement template that covers all of the features for your business on Amazon: 

  • Product size tiers according to Amazon
  • ACoS (Ad Cost Over Sales), i.e., a metric that helps assess how efficiently and profitably you run ad campaigns on Amazon
  • Portions of organic and PPC sales

This step helps you figure out the investment period, break-even point and total investment with specific expense items, such as manufacturing, shipping to Amazon warehouses, marketing costs and Amazon commissions.

Keep in mind that Amazon is an extremely dynamic marketplace where forecasting sales is a hard thing. The marketplace regularly introduces new rules and commissions. Therefore, this forecast is rather approximate. It’ll help answer the question about whether sellers make sales with certain products on Amazon.

All in all, niche research consists of four steps that hide many subtleties and vital nuances. Disqover Agency’s team helps you get the best experience on Amazon at all steps, including researches on product niches before you enter the marketplace.

Should you have any questions about niche researches for Amazon, our experts will be happy to advise you on this matter for FREE. Please follow the link to leave your contact details, and we’ll contact you as soon as possible!

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