Product Research Basics for Selling on Amazon: Demand, Competition, and Profitability

What “Product Research” Means (and What It Doesn’t)

Product research is the process of finding product ideas that have enough buyer demand, manageable competition, and a realistic path to profit after all costs. It is not a guarantee of sales, and it is not about finding a “secret” product. Your goal as a beginner is to identify beginner-friendly opportunities: simple products, stable demand, and competition you can realistically match or improve.

This chapter gives you a repeatable workflow you can run on any idea, using Amazon storefront signals plus a simple spreadsheet model. You will end each evaluation with a decision: Proceed, Test cautiously, or Reject.

The Repeatable Workflow (Overview)

• Step 1: Start with a product “seed” list (10–30 ideas).
• Step 2: Validate demand signals using Amazon search and category context.
• Step 3: Measure competition using reviews, brand dominance, and listing quality.
• Step 4: Run profitability math with a spreadsheet (fees, shipping, packaging, returns, ads).
• Step 5: Apply decision rules to reject risky products early.

Step 1: Build a Beginner-Friendly Seed List

Beginner-friendly filters (use these before you do any math)

• Simple and durable: fewer parts, fewer sizes/variations, less breakage.
• Low compliance risk: avoid items that commonly require approvals, lab testing, or strict claims (for example: ingestibles, medical claims, children’s products with safety standards, batteries, cosmetics). If you’re unsure, treat it as higher risk and plan extra time/cost.
• Easy to ship: smaller, lighter, not fragile, not liquid, not sharp.
• Not dominated by a single famous brand: you want room for a new seller.

Where to get seed ideas (without overcomplicating)

• Amazon category browsing: look at subcategories and “Best Sellers” pages for everyday items.
• Amazon search autocomplete: type a broad term and note the suggested phrases.
• Customer pain points: read reviews for “I wish it had…” or “broke because…” to find improvement angles.

Create a list of 10–30 product ideas. Don’t fall in love with any single one yet.

Step 2: Demand Signals (How to Tell if People Want It)

Demand is about whether customers are actively shopping for the product. As a beginner, you’re looking for consistent demand, not hype spikes.

Demand signal A: Search volume proxies (without needing exact numbers)

Even if you don’t have paid tools, you can still use practical proxies:

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• Autocomplete depth: If a seed keyword produces many relevant autocomplete suggestions (e.g., “silicone spatula set”, “silicone spatula heat resistant”), it suggests active searches.
• Search results relevance: If searching the keyword shows mostly relevant products (not random items), Amazon likely understands the query and there is established demand.
• Multiple keyword angles: A good sign is when the same product can be found through several common phrases (synonyms, use-cases, sizes).

Demand signal B: Category popularity and “shelf space”

Check whether the subcategory has many active listings and frequent movement in best seller lists. A category with steady purchasing typically shows:

• Many products with recent reviews (dates within the last weeks/months).
• Best seller pages that are not static (items rotate over time).
• Multiple price points (not only ultra-cheap items).

Demand signal C: Sales rank context (BSR) without overinterpreting it

Best Sellers Rank (BSR) is a relative indicator within a category. Lower BSR generally means higher sales velocity, but it varies by category. Use BSR as a comparison tool:

• Compare the top 10–20 listings for your keyword: do several have “good” (lower) BSRs rather than just one outlier?
• Look for a cluster of listings that appear to sell consistently, not just one bestseller and many slow sellers.

Practical check: If you see multiple listings with strong BSRs and recent review activity, demand is likely real. If only one listing looks active and the rest look stale, demand may be thin.

Step 3: Competition Indicators (Can You Realistically Compete?)

Competition is not just “how many sellers exist.” It’s whether customers already strongly prefer established brands and whether the current listings are hard to beat.

Competition indicator A: Review counts and rating patterns

Reviews are a proxy for sales history and social proof. Use them to gauge the difficulty of entering the market.

• Beginner-friendly pattern: Several top listings have modest review counts (for example, many under a few hundred), and ratings are not perfect (room to improve).
• Harder pattern: Most top listings have thousands of reviews and 4.7–4.9 ratings, suggesting entrenched winners.

Also check whether reviews are spread across many sellers (fragmented market) or concentrated on a few listings (winner-takes-most).

Competition indicator B: Brand dominance

Scan the first page of results and note brand repetition:

• Fragmented: Many different brands appear in the top results. This can be easier for a new entrant.
• Dominated: One or two brands occupy many top spots, often with strong branding, storefronts, and off-Amazon presence. This is riskier.

Competition indicator C: Listing quality (your “improvement opportunity”)

Beginner-friendly opportunities often exist where listings are weak. Evaluate the top listings for:

• Images: Are they clear, consistent, and informative? Do they show scale, use-case, and key features?
• Title and bullets: Are they readable and benefit-focused, or keyword-stuffed and confusing?
• A+ content: Is it present and high quality?
• Variation structure: Are there confusing size/color variations that frustrate buyers?
• Common complaints: Are there repeated issues you can solve (durability, missing parts, unclear instructions, packaging damage)?

If the top listings are already excellent and complaints are minimal, you may need a stronger differentiator (which can increase cost and complexity).

Step 4: Profitability Math with a Simple Spreadsheet Model

Many beginners underestimate total costs. Your spreadsheet should force you to account for all-in landed cost and realistic selling expenses.

Spreadsheet columns (copy this structure)

Key formulas (use in your sheet)

Landed Unit Cost = COGS + Inbound Freight + Packaging/Labeling  Total Cost per Unit = Landed Unit Cost + Referral Fee + Fulfillment Fee + Storage/Other + Returns Allowance + Ad Budget  Net Profit per Unit = Selling Price - Total Cost per Unit  Net Margin = Net Profit per Unit / Selling Price

How to estimate the “hard” inputs

• Amazon fees: Use the category referral fee percentage and fulfillment fee for the product’s size/weight tier. If unsure, estimate slightly high to be safe.
• Returns allowance: Start with a conservative assumption (for example, 3–8% return rate depending on product type). Convert to per-unit cost: Returns Allowance = Return Rate × (Refund impact + extra shipping/processing). If you don’t know the impact, use a simple placeholder like Return Rate × Selling Price × 0.2 as a conservative buffer and refine later.
• Ad budget per unit: Estimate using TACoS (total ad cost of sales) rather than only ACoS. For a new listing, you might plan a higher TACoS early. Example: Ad Budget = Selling Price × 10% or × 15% depending on competitiveness.
• Packaging: Include anything required to prevent damage and meet fulfillment prep needs. Under-packaging often increases returns and negative reviews.

Break-Even Calculations (Know Your Minimum Viable Price and Max Cost)

Break-even selling price (given your costs)

If you want to know the minimum price you can charge without losing money, separate costs into:

• Variable costs tied to price: referral fee (percentage).
• Fixed per-unit costs: landed cost, fulfillment fee, storage, returns allowance, ad budget (if set as a dollar amount).

Break-even price formula (simplified):

Break-even Price = Fixed Costs / (1 - Referral Fee %)  where Fixed Costs = Landed Unit Cost + Fulfillment Fee + Storage/Other + Returns Allowance + Ad Budget

Example: Fixed Costs = $15.35, Referral Fee % = 15% → Break-even Price = 15.35 / (1 - 0.15) = $18.06. If the market price is $16.99, reject or redesign the offer (reduce costs or increase value to justify higher price).

Maximum allowable landed cost (given market price and target margin)

Work backwards from the market price to see if your supplier cost target is realistic.

Max Total Cost = Selling Price × (1 - Target Margin)  Max Landed Unit Cost = Max Total Cost - (Referral Fee + Fulfillment Fee + Storage/Other + Returns Allowance + Ad Budget)

If your supplier cannot meet the implied COGS after freight and packaging, the product is not viable at that price point.

Decision Rules: When to Reject a Product (Beginner Risk Filters)

Use clear rules so you don’t rationalize bad ideas. Mark each product idea as Green, Yellow, or Red.

Demand rejection rules (Red flags)

• Search results are inconsistent or irrelevant for the main keyword (weak query intent).
• Only one listing appears to sell well; the rest look inactive (thin demand).
• Demand seems trend-driven with unclear longevity (unless you are intentionally doing short-cycle testing).

Competition rejection rules (Red flags)

• First page is dominated by one or two major brands occupying many top slots.
• Top listings have extremely high review counts across the board and very high ratings with few complaints (hard to differentiate).
• Listings are already high quality (images, copy, A+), leaving little room for a beginner-level improvement.

Profitability rejection rules (Red flags)

• Net margin too thin after ads: if your model cannot support a realistic ad budget and still hit your minimum margin, reject.
• Break-even price above market: if break-even is higher than the typical selling price range you observe, reject.
• High return risk: products with fit/compatibility issues, many variations, or frequent “didn’t work” complaints (returns can erase profit).
• Cost sensitivity: if small changes in freight or fees wipe out profit (see sensitivity test below), reject or treat as Yellow.

Run a Simple Sensitivity Test (Stress-Test Your Numbers)

Before you approve an idea, test how fragile the profit is. In your spreadsheet, create three scenarios:

• Base case: your best estimate.
• Conservative case: COGS +10%, inbound freight +20%, ad budget +30%, return allowance doubled.
• Optimistic case: small improvements (COGS -5%, ad budget -20%).

Decision rule: if the conservative case goes negative or near-zero profit, the product is risky unless you have a clear plan to control those variables (better packaging, negotiated freight, stronger differentiation to reduce ad dependence).

Putting It Together: A Practical Walkthrough (Example Evaluation)

Example product idea: “Stainless steel sink caddy” (illustrative only)

Demand check: Autocomplete shows multiple relevant phrases (sink caddy, sponge holder, kitchen organizer). Search results are highly relevant. Several listings show steady activity indicators (recent reviews).

Competition check: First page includes many brands, not just one. Some top listings have high reviews, but there are also mid-tier listings with moderate reviews. Common complaints mention rusting, poor drainage, and weak adhesive—potential improvement angles.

Profitability model: You estimate selling price based on current market range, then plug in conservative costs (including packaging to prevent scratches and a return allowance). If the model supports your minimum margin with a realistic ad budget, it stays Green; if it only works with near-zero ads, it becomes Yellow or Red depending on competition intensity.

Template: Your One-Page Product Research Scorecard

Add a final section in your spreadsheet with a simple scorecard so you can compare ideas quickly.

Decision rule: If any category is Red, reject or redesign the offer. If two or more are Yellow, treat it as a cautious test (smaller initial order, stronger differentiation plan, tighter cost control).