Choosing a Product and a Supplier: A Beginner's Sequence

Most new sellers pick a product by browsing, fall for an idea and only then meet the number that ends it: a margin that is too thin, a category that needs approval or a supplier whose sample looks nothing like the photos. A better order lets cheap checks come first and expensive commitments come last. This article gives a sequence in which each step removes a risk before you spend more: demand, margin, restrictions, supplier, samples and barcodes, with the red flags that should make you stop.

Why the order matters

Checking demand takes an hour. Pricing a product takes an afternoon. Getting a sample takes a few weeks and some money. Placing an order takes thousands. If you do these in the opposite order, you spend the most before you know the least. The sequence below puts each filter ahead of the one that costs more, so that most ideas fail early and cheaply.

Check demand from several angles

Demand means shoppers already searching and buying, not a product you happen to like. Check it from several angles, because no single tool is exact:

• Search interest: Amazon's own search suggestions show what shoppers type, Brand Analytics shows search data if you are brand registered, and a public trend tool shows whether interest holds across a year or is a spike.
• Many sellers, not one: look at the first page of results. If several different sellers show steady sales rank, demand is broad. If a single listing takes nearly everything, you are competing with a monopoly.
• Room for a newcomer: if some listings on page one have modest review counts, a newer product can break in.
• A healthy price range: a wide spread suggests room to position yourself, while everything piled at the lowest price suggests a commodity.
• Seasonality: a twelve-month view stops you buying for a peak that is already over.

Third-party sales estimates are modeled guesses. Use them to compare one product with another, not as a forecast of what you will sell.

Run the margin screen before you get attached

Price the product on paper before you contact anyone. Start with a believable selling price taken from the middle of the first page, then subtract every cost that belongs to a sold unit: landed cost (the unit price plus freight, duties and prep), Amazon's referral and fulfillment fees, an allowance for returns and storage, and an allowance for advertising.

Here is a hypothetical product. It sells for $30. Landed cost is $9. The referral fee is assumed at 15%, which is $4.50, and the fulfillment fee is assumed at $5, so Amazon's fees total $9.50. A returns and storage allowance of $1.50 and an ad allowance of $4.50, which is 15% of the price, add up to $6. That leaves $5.50 per unit, about 18% of the price.

Then stress the result. Suppose the price you can really charge is 10% lower, at $27, and your landed cost is 10% higher, at $9.90. The referral fee falls to $4.05 and the ad allowance to $4.05, while the other costs stay the same. Profit drops from $5.50 to $2.50 per unit. A product that loses more than half its profit from two modest slips has no margin for error.

Also work out the cash at risk. A first order of 500 units at a $9 landed cost ties up $4,500 before you pay for a single ad, and the money only returns as units sell.

Clear the restrictions before you request quotes

A product that you cannot sell, or cannot sell without paperwork, should be dropped before you speak to a supplier. Check these in Seller Central and in the regulations that cover your product:

• Category and brand approval: some categories, and some brands, need approval before you can list. Read the requirements for the category.
• Restricted products: some items cannot be sold at all, or only with documentation. Search Amazon's restricted products help pages.
• Safety and compliance: products for children, products with batteries, electrical products and anything used on skin or taken by mouth come with testing and labeling obligations. Ask what documents will be needed before you choose the product.
• Shipping class: size, weight and dangerous goods status, such as batteries, liquids or aerosols, can raise fees and limit storage.
• Intellectual property: search for patents and trademarks that could cover the design, the name or the look. A listing can be removed after a rights owner complains, so be careful with products that resemble a known brand.

Treat a supplier's yes, that is easy to sell as unverified. A supplier does not decide Amazon's rules, and an answer that suits their sale is not an answer that protects yours.

Choose a supplier and test before you commit

Send the same written request to three to five suppliers, so that you can compare like with like: unit price at several quantities, minimum order, lead time, packaging, customization options, payment terms and the documents they can supply. Then work through these steps:

• Verify the business. Ask for the legal name, address and business license, and request a video call that shows the facility. Find out whether you are dealing with a factory or a trading company, and ask for references.
• Order samples from at least two suppliers and pay for them. Test each one against the best competitor for build quality, dimensions, packaging and durability. Photograph the sample and keep it as the reference for production.
• Negotiate terms in writing. Prefer staged payment to full prepayment, define what happens to defective units and attach an agreed specification to the purchase order.
• Inspect before shipping. Have an independent inspector check the production run against your approved sample.

Settle the barcode plan before production. For a product sold under your own brand, the GTIN should come from the official issuer, GS1, so that it is registered to your company. Check Amazon's current guidance on GTIN requirements and exemptions. If your units need Amazon's own labels, send the supplier the label files, ask them to apply the labels at the factory and inspect a sample first.

Red flags that should stop you

One red flag does not always mean a bad supplier, but an unresolved one means you do not yet have enough information. Ask the question directly, wait for a clear written answer and walk away if you do not get one. Losing a quote costs nothing. Losing a deposit does.

The short version

• Verify demand from several sources and favor products where many sellers show steady sales.
• Run the margin with landed cost, all Amazon fees and an ad allowance, then stress price and cost by 10%.
• Clear category, safety, shipping class and intellectual property questions before requesting quotes.
• Send the same request to several suppliers, verify each business and pay for samples.
• Settle barcodes, labels and inspection in the purchase order.
• Walk away at the first red flag that stays unresolved.