1. is there a demand for the product?
2. can you source it cheap enough?
3. is there a healthy profit margin?
While points 2 and 3 can and will probably change over time, point 1 has to be true every single time.
I sat my best buddy at my screen in front of Alibaba and watched him go wild like a kid in a sweet shop. I asked him to choose a few products that he thought would sell well, and I noticed something that gave me a great insight into brand-new sellers and the way they approach product research:
He looked for products that he liked.
I've given this a lot of thought, and I believe it's the natural thing to do. We all want to sell products that we love. But this a huge mistake that can cost you dearly.
The reality is that the market doesn't care about what we love. It cares only about what the market loves. For example, I'm not particularly excited about toilet paper, but that is a product that is always in high demand.
My buddy went home and called me later that night to tell me he'd spent all evening browsing products on Alibaba. He wanted to get into drop shipping, and he felt like he'd discovered Aladin's cave.
Unfortunately, my buddy had broken the first rule, which is the ensure there is demand for a product. And that means doing product research.
By the way, I explained to my buddy the error of his ways, but I had a hard time convincing him. That brings to mind a rule I try not to break: never fall in love with your products. This is easier said than done, and many will argue that it's good to love your products. I think it is too, but unconditional love can cause you to spend serious money on a dead-end product and make it extremely difficult to pull the plug on a product when it's time to let it go.
Now, as I mentioned, when it comes to points 2 and 3, things will probably change over time.
For example, point 2 is: can you source the product cheap enough? This is important because your product margin depends on how much you pay for the products in the first place.
But that doesn't mean that a small profit is bad if the product has real potential.
Here's what I mean:
When I placed my first order on Alibaba, it was for 100 units. I paid the price the manufacturer wanted per unit, which didn't leave me with a lot of profit.
The manufacturer had no reason to lower his price, because I was a first-time buyer who may never return, and because I was only placing a relatively small order.
By the time I placed my fourth order, I was on much better terms with my supplier. We had started to build our relationship via email, and I was placing bigger orders - and promising to order more as soon as I was able to. These bigger orders enabled me to benefit from the manufacturer's tiered discounts.
Many suppliers use tiered discounts to encourage bigger orders and reward buyers who spend more. An example of a tiered price structure may be:
* 1 to 100 units: $1 per unit
* 100 to 500 units: $0.85 per unit
* 500 to q00 units: $0.75 per unit
Ok, so far we've covered how to buy items from Alibaba and the all-important criteria that I stick to when searching for products. Those are 2 key things out of 3 to make product sourcing work for you.
But without the final piece in place, this whole thing becomes a hit-and-miss game. If you don't know what to actually buy, then you're likely to spend (or waste) time on Alibaba searching for products in the hope that one will jump out at you, like my buddy.
So let me share with you my entire process for finding the best products to sell on Amazon. The key here is to identify the products that are going to work for you, before you head on over to Alibaba. Otherwise, it's like going into a supermarket without a clear idea of what you want.
The good news is that the hordes of untrained FBA sellers out there are probably doing just that: diving into Alibaba and searching aimlessly.
So let's fix that:
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