Ultimate Guide to Choosing a Product for Amazon (Strategy)

When you're starting an Amazon FBA business, one of the most important decisions you'll make is what products to sell. There are so many factors to consider: your interests, your target market, your competition, and more.

Let's get started! This guide will walk you through choosing products for your business. We'll break this guide into separate portions, starting with product selection strategy, then discuss paring a target market to your passion, after we confirm the numbers with some Amazon research tools and finish off with sourcing basics.

Choose the Right Strategy

When starting an Amazon FBA business, you first need to decide what direction you want to take in your product development. And this can be a daunting task because there are so many options. But don't worry, we're here to help.

The first step is to choose the right strategy to place your product in the market. I'll explain this with the help of a term coined by Chan Kim and Renee Mauborgne known as the Red Ocean vs. Blue Ocean strategy.

Red Ocean vs. Blue Ocean

Imagine an ocean red with blood from war. In a red ocean strategy, you would choose a product based on existing market demand and attempt to beat the current competition by offering a product with a strategic choice of differentiation (slight improvement in product or additional feature) and additional value (lower cost). This strategy is characterized by hyper-competition, constant price wars, and volatile market conditions.

Contrary to the red ocean strategy is the blue ocean strategy, where you would create a new market space, making the existing competition irrelevant, and creating new demand with a revolutionary product (market disruption- think the iPhone). Blue Ocean Strategy is all about creating uncontested market space. What does that mean? It means finding a way to do something different, something better than what's currently out there.

How do you do that? By breaking the rules. By thinking outside the box. And by not being afraid to challenge the status quo.

It's not easy, but it can be incredibly rewarding. When you're able to carve out your space in the market, you can control your own destiny. You're no longer at the mercy of others.

Red Ocean Examples

Replication

The replication strategy is to source an existing item on Amazon and attempt to steal market share by charging less than the current competition. Unless you plan on selling massive volume to benefit from economy of scale, I strongly advise avoiding this strategy. You will not be able to operate at a lower cost than a Chinese or Eastern European business.

More identical items can be found in the graveyard on page 2 and beyond.

Improved Replication

Similar to the replication strategy, you make a slight improvement to your product, so your offer has more value than the existing competition's. Although better than a replication strategy, this still should be avoided since established sellers can quickly replicate your improvement. Once your advantage is lost, unless you had explosive growth where your listing surpasses an entrenched product's organic rank, you will have to slash prices to remain relevant. This strategy is also best to avoid.

The seller on the right attempted to add value by including a funnel.

Differentiation through Substitution

Similar to improving on an existing offering, you create a new product that substitutes the current products with preferably improved characteristics that deliver more value to the consumer. This is an acceptable strategy with proper branding, engaging digital assets, launch execution, and maintenance operations. Except competitors in the category to follow your lead if your product takes off; this is why it is imperative to entrench yourself in the top position of the 1st page on Amazon before others copy you.

Only mini hand-held grinder set, and it is 5th organically under a very competitive keyword even at a medium to high price point for mechanical grinders (not electric).

Complementary

An alternative strategy is to create complementary products for an existing market with high demand. This strategy requires an extensive advertising campaign to pull traffic from popular items your product complements. This is a profitable strategy since you are making a niche, where volume may be less, so some competition may overlook your product.

Staying in the realm of salt pepper grinders, this wood tray is a complement to most salt pepper grinder sets (apparently majority are made from the same design).

Blue Ocean Example

To execute a blue ocean strategy, you must focus on creating value for your customers. This means looking at things from their perspective and figuring out how to make your product or service more appealing to them in an outside-the-box way.

You will need to focus on a fresh and creative way of differentiation. How can you make your product stand out from the competition? What can you do to make it unique? And finally, you need to focus on innovating. How can you change the status quo and create something that's never been done before?

I love the iPhone example because this is what an ocean strategy is all about. Let's rewind our thinking to 2007 when successful cell phones at the time were the BlackBerry, Razor, Motorola Q's, or Ericsson P1. The phones at the time were primarily for calls, email, and messaging, with minor ability to interface with the internet.

When the iPhone launched on June 29, 2007, Steve Jobs described it as the internet in your pocket and a good value because it was a phone, iPod, and the internet combined. This represented a new-market disruptive innovation. Even though cell phones could access the internet at the time, the user experience could not rival the iPhone's large touchscreen interface. Apple developed Safari and installed Google maps to provide an experience you couldn't get on any other pocketable device. 

The iPhone allowed Apple to thrive in an uncontested market, charge premium prices for their products, attract new customers to their brand, and increase profits and market share in the telecommunications industry. To this day, Apple is a juggernaut in what soon became the smartphone industry.

With these strategies in mind, let's move to the next step in narrowing down your product selection process by choosing your target market and discovering your passion.

Stay tuned for the next section of this article…