Buying products to sell on Amazon isn't easy. If you aren't careful, you can end up wasting money by purchasing products that end up tanking or buying products that end up getting your account suspended.
Amazon is not a "get rich quick," opportunity and it can easily lead you to lose money fast if you don't learn what distinguishes a good buy from a bad one.
But fear not because in this article, I'm going to show you every step you need to take to make sure you buy only great products that sell and don't get you in trouble.
If you get into the habit of following each of these steps before you buy anything to sell on the Amazon platform, you will absolutely...
- Make more money
- Waste less time
- Keep your account safe from suspension
Simply put, consistently implementing the steps I outline in this post will help you create a thriving Amazon business that is more profitable and less stressful than those of the vast majority of your peers.
This post is not just for beginners (although it is probably the best post I've ever written for a beginner) it is for anyone who wants to make sure they handle their Amazon product sourcing the right way.
Of course, I don't expect you to read this post (which is pretty long) every time you buy a product. Once you've read this post and done the process several times it will be like riding a bike.
I do recommend sharing this post with your existing and future employees and downloading the free printable checklist below. Reference it regularly until you are asking the checklist questions in your head without needing to read them.
I've broken the process down into 4 components and each component has sub questions you will have to consider when making a buying decision.
So, let's get into it, here are all of the important points for consideration when purchasing anything to sell on Amazon.
Step #1 Physical Product Inspection
Before we worry about whether a product makes money or not, we need to be sure that it would be ok to list on the Amazon platform.
If a product doesn't meet the minimum quality standards I don't want you to even bother seeing how much money it could make if you sold it.
Why? Because if you see how much an item could make, you'll be tempted to bend the rules and loosen your standards (which we will outline shortly).
Remember, a good Amazon business is not just profitable but it is also sustainable and lasting.
If you bend the rules and sell products without properly inspecting them, it won't matter how profitable you were because you're heading for an account suspension.
"Remember, a good Amazon business is not just profitable but it is also sustainable and lasting."
Note on the Products You Can't Sell on Amazon
If you find a product that you can't sell no Amazon, don't forget that you can possibly sell it on other channels like eBay, Craigslist or the Facebook marketplace. This isn't extremely scalable but you can add a lot of sales to your bottom line each year by flipping some of the "too risky for Amazon," products. If you're a beginner, this is even more viable. It should go without saying though that you should only list products exactly as they are and never sell items that are inauthentic or hazardous to the end user.
As a rule of thumb, be very skeptical of every product you check.
It's best to assume that if you find a product that makes money that there is something wrong with it or that you are looking at the wrong item.
The difference here is that you'll always follow up on these negative assumptions and attempt to debunk them.
Yes, this will slow you down a bit but remember, you want a strong, secure business not just a profitable one. A suspended Amazon account will REALLY slow you down so getting into the habit of critically inspecting your products and your ability to list them will pay dividends in the long run.
Trust me, you'll sleep much better knowing that the products you send in to Amazon are legit.
What is the condition of the product?
It is critical that you pay attention to the product condition. It shouldn't be an afterthought.
This is especially true if you are doing retail arbitrage and dealing with clearance items or items without seals.
One thing that many new sellers are surprised by is how stringent Amazon's product grading guidelines really are.
I'd venture to guess (and I'm totally pulling this out of my butt) that only about 75% of the "new" products sold on Amazon would technically meet the definition of new as Amazon defines it.
Yes, you'll get away with sending in products as "new" when they should be "like new" or even "used-good" but this just doesn't work at scale.
Eventually, over-stating the condition of your products will catch up to you and just a couple of complaints can send you into a month long suspension or full blown lifetime account ban.
So please remember that if you continually list items incorrectly, you might find yourself creating removal orders for all of your inventory when Amazon closes you permanently!
So, it's very important that you and your team review the definitions for each product grade completely and that you commit to following them.
Instead of regurgitating all of that information here, I'm going to suggest that you visit Amazon's product condition guidelines on seller central.
This page is also updated when changes are made so I recommend you bookmark it and check it at least quarterly.
Things we look for when "grading a product," include:
1. Product seals
- If the product has seals, are they intact?
- Have seals been replaced with new seals that weren't from the manufacturer?
- Is there tamper resistant tape missing?
- Is there store specific anti-theft sealing that can't be removed? Amazon (and their customers) don't like when they can tell you bought a package from a big name retailer.
- Does it appear that the product was opened? If so, we need to completely open it and review all the contents for completeness. If you were to follow the Amazon product condition guidelines, you wouldn't list a product like this as "new."
2. General product condition
Even brand new products will experience some minor packaging dings and dents but if a package is slightly worn or damaged, has the actual product been affected?
- Are the edges dented?
- Does the package appear to have experienced any crushing or dropping? Again, some mild indentations are to be expected occasionally.
- Are there any openings, tears or holes in the product?
- Is there dust or dirt on the product (beyond what can be wiped off)?
- Are stickers that should be included with the product when it reaches the consumer torn?
- Are there loose components within the package?
Also, unless your authorized to sell refurbished items and are listing a product as refurbished, you have to avoid refurbished products like the plague.
They might check all the product quality checkpoints but you just cannot sell a refurbished product as anything except "Refurbished."
Product Grading Rules of Thumb
1. When in doubt, underestimate the product condition.
2. Ask yourself, "if I received this product in the condition I listed it in, would I be upset when it arrived?" If the answer is yes, you know what you need to do.
Is the product far enough away from expiration?
Remember, if you list a perishable product via FBA it must have a minimum of 105 days of shelf life from the date of receipt to the warehouse.
If a product is sent in with just 105 days shelf life left, you only have 55 days to get rid of them because no inventory that is within 50 days of expiration can stay at FBA warehouses.
Some products would need to be received earlier than 105 days.
For example, a daily supplement that had 180 daily servings, the remaining shelf life would need to be 285 days (180 + 105) or greater, however the same supplement with only 120 daily servings would only need a remaining shelf life of 205 days (120 + 105) or greater.
Keep in mind, all topical and consumable products are subject to Amazon's expiration policies even if there is no expiration date printed on the item.
If there is no expiration date, Amazon does consider "best by" or "sell by" labels as the equivalent of an expiration date.
If the product you're reviewing is perishable but doesn't have any labels indicating when it expires, don't sell the product.
Here is what you need to know about perishable products in Amazon's own words...
Again, I want you to read the perishable guidelines in Amazon's own words so I've linked to them below.
Are you positive your product is authentic?
If you have any doubt of a product's authenticity, don't buy it. Simple.
Although we can never rule out the fact that some customers may "cry wolf" and claim that products are inauthentic when they are really not, we need to control what we sell as much as possible. Selling inauthentic products is the easiest way to get your account suspended.
Some products are at heightened risk for inauthentic claims and they aren't all as obvious as these "Calvim Klain's."
Another rule of thumb to follow is to remember that if the brand has their own store in your local mall, they are at a heightened risk.
Brands that are well enough established to have physical locations benefit from brand equity. This means that they charge even more for the product than they pay to produce it relative to their competitors.
This brand equity is something that counterfeiters try to take advantage of often. They create the knock off and capitalize on the company's brand name to charge more and sell more units.
My point here isn't that you should avoid these branded products but that you will want to pay extra close attention to them when buying and listing since they are at a heightened risk of being inauthentic.
Also, consumers put these products under a microscope and are much more likely to notice subtle differences and file inauthentic claims.
Think brands like Fossil, Nike, Burberry, Michael Kors, etc. These companies have great margins thanks to their branding and are ripe for counterfeit.
If you can picture a shady character trying to sell you them in an alley, be careful.
Authenticity Rules of Thumb
1. If you find a source for a popular brand name product and the margins seem too good to be true, be skeptical.
2. Be extra careful with brands that have a lot of "name value," but likely have low production costs (high end clothing, perfume, etc). These are the perfect products for counterfeiting or knocking off.
3. Alibaba is not a good source for brand name products. Countless newbie sellers get scammed on Alibaba daily by purchasing bulk amounts of "name brand" products that are just knock offs.
Are you positive the product hasn't been recalled?
Frankly, there isn't a whole lot you can do when it comes to product recalls. Unfortunately, ignorance is not always good enough for Amazon. Amazon does a decent job of alerting you to product recalls, but you aren't free and clear if a product you sell becomes recalled and you leave it up.
The best thing you can do is to monitor your notifications and messages very frequently and immediately act on anything that may hint to a safety issue or recall. There aren't many recalls, but you can track them here.
If you're doing retail or online arbitrage from a well known company like Walmart or Target, it is far less likely that they will let you purchase recalled products. However, many stores might slip in recalls with liquidation or clearance items.
Step #2 Verify the Listing
Once you've verified the condition of the product and confirmed that it would be acceptable to list on Amazon, you need to verify the listing itself.
We can't calculate the potential profitability of a product until we know for sure what it is!
So, using your Amazon app and any other scouting tools, diligently confirm the following.
Are you positive the product matches the listing exactly?
When it comes to Amazon, even the most subtle differences can mean huge problems. It is very easy to jump on a product and miss something.
Here are a few differences to note.
Mistaking product count is a very common way to lose money. Products may look profitable but the count may be for multiple units (multi-packs) or some sort of unique bundle.
Are you sure that this is not a duplicate listing?
Sellers often make multiple listings of the same product. Be sure that you are basing your decision on the listing that is going to NOT be removed by seller support (all duplicates are eventually removed). This is usually easy to tell.
Here is what Amazon says about duplicate listings:
You can find more about the duplicate listing policy on Amazon's prohibited seller activities page below.
Avoid the temptation to say "I'll assume the correct listing is this one because it has higher priced sellers," or "this person is charging too little, I'll create a new listing and own the buy box."
Step #3 Verify You Can Sell or List the Item
Now that you've identified the product and it's condition, you need to verify if you're able to sell the product yourself.
Sellers have different restrictions on their accounts and what you can sell might vary from what others can sell.
Can you sell in the category that the product is listed in?
Like the brand restrictions, category restrictions can change quickly as well. Fortunately, category restrictions don't change often and once you're ungated once, you're typically good for life.
For a thorough understanding of this, check out Amazon's explanation of all categories and requirements.
How do you tell if you're eligible to sell a product on Amazon?
There are 3 easy ways (2 are free and one is paid).
1. [FREE] The Amazon seller app. Enter or scan the product with the free seller app and it will show you if you are restricted from listing an item.
2. [FREE] Try to list the item in seller central. From within your seller central account, hover over inventory at the top of the screen, and click “add a product.” Then, enter the UPC of the product and Amazon will show you if you can or can't list the item.
Note: There are a number of 3rd party selling apps and not all of them show you whether or not you can sell a product. Be careful and don't assume your 3rd party selling app is accurate like the methods above.
When it comes to brand restrictions, it can be very frustrating because Amazon allows these to happen very abruptly.
Remember that the brand restrictions are in constant flux and require you to be vigilant. There are multiple articles that can help you stay on top of the restricted brands as well.
Step #4 Review Estimated Profits and Velocity
Once you've identified the product, its condition and confirmed that you can sell it on your account, you can (finally) check to see if it actually makes money!
Does the product fit your buying criteria?
Every seller will have different buying criteria.
I wish I could give you a perfect answer like "everyone should aim for products that sell 1x/day, with a net profit of $5 and a minimum ROI of 40%."
That may be ok for one seller but for another, it might not maximize their profits. The goal is to maximize profits while not working more or less than you'd like.
Editor's Note: In the past I've said, "the goal is to maximize profits, period." I was wrong. I added that last part (the time element) because profits aren't actually everything. Selling on Amazon should be a lifestyle business, not your entire life.
There is nothing worse than buying something that doesn't fit your model just so you can feel like you bought something. There is a reason you should have a firm grasp on what level of risk you are willing to handle, how much you're willing to spend and how much you need to make to make it worth it.
You need to be sure that you have properly calculated profit and ROI after fees. These fees should be visible within your scanning tool (or web program) but there are some you will need to track yourself like sales tax, shipping and handling and your own prep costs (suppliers).
The criteria you should be aware of should include:
- Minimum net profit
- Minimum ROI
- Sales velocity (we estimate this with sales rank and Keepa graphs)
- Number of competitors near buy box
- Maximum purchase price
So, how do you make sure that you're earning as much as possible within the amount of time you're willing and able to work?
We find these parameters by finding the balance between two factors. Time available to work on your business (counting your time and employees) and capital available to spend on inventory.
To optimize profits, you need to spend as much of your capital as possible on the products with the highest margins possible that "turn" at the highest velocities possible (sell as quickly as possible) without going over or under the time available to work .
So, you need to ask, "What parameters will help me optimize my time and capital?"
Here are some basic scenarios:
- If you have more time than capital, you'll want to find higher ROI items, with higher net profits that move more quickly.
- If you have more capital than time, you'll be able to accept lower ROI items, with lower net profits that can move more slowly.
A 7 figure seller for instance may need to accept that to spend as much of his capital as possible, he needs to take lower margins.
Why?Because higher profit items are harder to find and require more time (something he doesn't have, relative to how much he wants to spend).
Sellers with less to spend can be more choosy. They can wait to find products that have great margins and move very quickly. They have the time to hunt for these items and they need to get the most "bang for their (limited) bucks."
If they spend their money on lower margin, slower turning products, they will be stuck without capital to reinvest!
Finding your parameters takes a lot of trial and error so be patient with it.
- Can't spend your budget each week? Lower your parameter minimums (ROI, sales velocity, etc).
- Running out of money each week? Increase your parameters minimums (ROI, sales velocity, etc).
Get the idea?
Let's move on...
Is the sales rank an accurate representation of future sales?
I highly recommend that you avoid purchasing based solely on current sales rank. It is much more important that you understand the realistic sales potential of the product.
- Watch for price drops that may have led to a spike in sales (and surge in sales rank).
- Note if there was some event (like a Holiday) that just passed.
- Is this a seasonal item?
Ensure that you understand what you are looking at. A "great rank" may be deceptive and actually based on a smaller sub-category. This is why it is better to look at Keepa or CamelCamelCamel for projected sales than just basing your decision on sales rank alone.
Also, you should understand if there are is a new model or update that could make the product less desirable.
When buying in bulk you need to buy for the near and not so near future.
We lack a lot of information that would come in handy when it comes to new releases, but for the most part, we can know when to expect the new alternative to land.
EXAMPLE: If you are sourcing a product that currently sells 1 per day but you know a newer model is coming out in 6 months, you would need to assume that your average sales velocity will be dropping. In 6 months, you will most likely not sell 1 per day since there is now a better option. So, you shouldn't purchase a year worth (365 units) if your goal is to turn all of the units before the end of the year.
The visibility of a deal will play a role in price and sales velocity.
How did you find the deal?
Was it very public or relatively private. Was it regional? Was it a result of savings stacking?
All of these things impact the risk of a "race to the bottom." The race to the bottom refers to the process of Amazon sellers fighting for the buy box and continually under cutting other sellers on the listings. The company willing to take the lowest margins will "win" these battles until they run out of stock.
Before you take part in a race to the bottom (unfortunately it is sometimes necessary) I recommend using a tool like the How Many app to see how many units a competitor has left in stock. If they don't have many left, you can wait until they sell out. If they have a lot, you may be forced to enter the race.
More visibility = More risk
Deals with less visibility are often a result of regional opportunities in the form of...
- Human error. Your local rookie store manager maybe ordered 3x more of a product than they needed.
- Lack of need in region. A good example would be how people in Michigan don't use toothpaste...go Bucks! 🙂
- Regional store closings. Some companies don't balance store closings and hit some regions harder than others.
Other deals with less visibility might include things like...
- Exclusive deals you've negotiated with suppliers brands or wholesalers. This is part of why growing your business beyond basic arbitrage is so ideal when you're ready to scale.
- Profitable opportunities you've created through gift card and cash back arbitrage. Many products don't appear profitable on the surface but savvy sellers can turn many products into serious profits thanks to using discounted gift cards, store bonuses, cash back cards or rebates.
These private opportunities are ideal and far less risky. You typically won't experience intense "races to the bottom," or buy box battles.
Deals that are a bit more public and more likely to lead to a race to the bottom include....
- Products that are on sale or clearance storewide and across all regions.
- Products that are sold online and visible to anyone in the world. Online arbitrage is perfectly viable but we need to pay attention to things like stock levels and durations of sales. If a product is sold at a low price for a very long time, we can expect a bit of a race to the bottom.
- Products from suppliers, wholesalers or brands with few "barriers to entry." If a company allows anyone with a pulse to source from their products, expect a lot of competition.
Understand the visibility of each product and you can better prepare yourself for price drops.
Is Amazon a seller?
Amazon is brutal on the buy box. Knowing where they are on an item is important in deciding if you can profit or not.
Tools like Tactical Arbitrage (which can be used for wholesale, online and retail arbitrage) will allow you to filter out products if Amazon is on the listing.
Is the product being sold over MSRP?
Items that are purchased at MSRP and sold above MSRP often have heightened risk for tanking prices. Also, selling above MSRP will lead to possible "suppressed buy box" listings.
A suppressed buy box is less appealing to customers but isn't a "death sentence" for a listing by any means. Just keep in mind that if previous listings had a buy box (priced more "reasonably" in Amazon's eyes) the sales velocity will be impacted negatively.
Is your break even price lower than the all time low sales price?
Not everyone has the same tolerance for risk, but making purchases of products that you don't intend to dip below your break even point is a standard decision.
Is the current buy box owner going out of stock?
You can view stock levels with the How Many mobile app.
Step #5 Additional Consideration (Optional)
If you're on the fence about a product, you can add the following to your decision making process.
Does the product have recent reviews?
Some products may not have a sales rank, but show a lot of recent reviews. This may be a good sign. You may have a product with a suppressed sales rank.
Does the product have less than a 3 star average review?
There is nothing saying you have to sell only the products people love, but if an item has shown terrible reviews, avoid it if you can. This is more difficult for retail and online arbitrage sellers I know, but it will pay off for you in the long run in terms of fewer returns and fewer dissatisfied customers.
Is the brand known for making IP complaints?
Unfortunately, Amazon allows brands to make sweeping intellectual property complaints against anyone selling their products.
Amazon adopts a "let the kids fight it out," approach. Basically, you're guilty until proven innocent and in many cases, the brand will never withdrawal their claims (legitimate or not).
Here are the brands that we know so far have filed IP complaints.
I wrote an article that includes the brands that we know are currently making the most IP complaints. Click here to check it out.
Don't forget to grab a printable summary of this blog post below! It includes all of the important things you just read and a few extra resources you'll enjoy!