Most Profitable Product Categories for Amazon FBA Sellers
- Market trends
- Most Profitable Product Categories for Amazon FBA Sellers
- The trends
While you are reading this, Amazon has just recorded $4,722 in sales, which is over $17 million in revenue in an hour.
Starting its success story from selling books, Amazon is now the world’s leading online retailer, having over 50% of the US e-commerce market share and accounting for 13% of the global e-commerce market. The growth of the company is expanding annually from revenues of $0.511 billion in 1995 to $280.52 billion in 2019.
And at the core of such an exceptional success of the online retailer are its loyal customers and everyday expanding audience, which value the company for its almost endless options of over 350 million individual products, affordable pricing, and most importantly, fast and convenient shipping. Being one of the most popular online shops and the main starting point for product search, statistics show that 52% of customers start browsing Amazon when they want to get inspiration for purchases. The online retailer that prioritizes its customers and their great experience also enjoys the trust of its shoppers, which gives Amazon a competitive advantage in the market. As the recent survey suggests, the vast majority (89%) of customers in the US are more likely to purchase products from Amazon than from any other e-commerce website.
Alongside being a popular choice among customers, Amazon is also presenting a profitable opportunity for sellers. As mentioned by JungleScout, 86% of Amazon sellers are profitable, with the new sellers generating from $26,000 to $810,000 in profits in a year. While there are different methods for selling on Amazon, Fulfillment by Amazon (FBA) is among the most preferred fulfillment methods by sellers currently, getting even more popularity year by year.
The option of directly sending the products to Amazon warehouses and entrusting the storage and shipping to Amazon was shown to be an efficient way of boosting sales and conversion rates for SKUs. Sellers enrolled in FBA have recorded a 30%-50% increase in sales due to the fast and efficient shipping provided by Amazon and the great customer experience connected with it. Furthermore, thanks to the trust towards the company, customers are more likely to purchase products that are shipped by Amazon rather than items sold and shipped by other merchants. This together with other factors ensure the success and profitability of FBA sellers in Amazon.
With over 2.5 mln active sellers and a wide range of diverse products available, Amazon is also challenging for sellers, particularly, the newcomers, who had to beat the fierce competition in the market. That’s why it is worth looking through the best-selling Amazon product categories and considering the key features of products, which make them profitable.
So, here are the top 6 most profitable product categories listed on Amazon.
With the continuously developing tech sector and growing popularity for the Internet of Things, Voice Recognition, and Artificial Intelligence, it is not surprising that Electronics are among the best selling categories on Amazon. As reported by Amazon, Echo Dot and Fire TV sticks are the most purchased items among prime members in 2019 and it seems they will not be giving in their positions of "best sellers" yet.
The numbers also speak up about the profitability of the product category. According to the 2020 report, sellers in the Electronics category on average make a 20% profit margin, which is considerably high compared to other categories. Apart from the high demand, this can also be linked to lower commission fees for Electronics charged by Amazon. In comparison with other types of products, referral fees are 8% for most electronic products, being the lowest in the list.
As a part of the Electronics category, cameras, photo equipment, and related accessories are the other best sellers of Amazon. While it might seem that the demand for cameras is declining in recent years, wireless security cameras for homes, instant films, and baby monitors have been listed among the most purchased items in this category.
Starting as an online bookstore, Amazon still enjoys high sales for books. Being comprised of over 35 sub-categories, the Books category is the biggest one, including over 44.2 million products ranging from art to exam preparation books. Interestingly, printed books still enjoy popularity among customers, not giving in their positions to ebooks, with the most demanded genres like epic adventure novels, political and children's books, as well as books for home. Currently, printed books are the leaders in the Amazon bestseller list with The Rage and The Home Edit Life being the most popular ones.
Clothing, Shoes & Jewelry
The Clothing, Shoes & Jewelry category is another driving component of Amazon's sales, which is one of the largest apparel sellers in the US. As the research shows, the main buyers of clothing on Amazon are Millennials and customers with Amazon Prime. Despite the fact that the e-commerce giant is not offering high fashion and luxury brands, the category still enjoys high sales, as the affordability, quick delivery, and the convenient shopping experience are the main priorities among the customers when purchasing apparel on Amazon. Hence, the best sellers in the category are mainly basics. According to the survey data presented in the research, customers, in general, browse Amazon for casual tops (68%), casual bottoms (38%), shoes (48%) sportswear (34%), accessories (26%), dresses (23%), and underwear (24%).
Toys & Games
Another category ensuring high profits for FBA sellers is Toys & Games. With the continuous releases of new cartoons every year, more and more movie-themed toys are becoming popular in the market and enjoying high demands among customers. Furthermore, toys and games are considered to be among the most preferred gift options for customers, which directly has a positive impact on the sales of the products and hence justifying the high profitability of the category.
The category of handmade products is another big source of profits for Amazon sellers. In general, having lower costs of production and considering the added value to them, handmade products generate, on average, a 26% profit margin for FBA sellers, which is considerably high in comparison with other products available on Amazon.
Currently, the best-selling items in the category are scented candles, and not surprisingly, handmade patterned face masks.
While the musical instruments can not be frequently found on Amazon's list of best-selling products, data shows that sellers in this category record profit margins of 22% on average. Offering both used and brand new instruments and ranging from Guitars and Mandolins to Instrument accessories, the category seems a promising option for FBA sellers. When looking at the most popular products purchased by customers, accessories for musical instruments, like a music stand, folding frame for guitar, and wireless karaoke microphone are leading the category.
Meanwhile… The trends in customer behavior seem to be changing
The effect of COVID-19 was inevitable for the world of business, significantly changing customers’ buying patterns, spending behavior, and product preferences. Making online purchases has become even more widespread nowadays, and the majority of customers surveyed claim that they started appreciating Amazon even more during the pandemic, which creates opportunities for the online retailer to further develop the loyalty of its customers. As mentioned in the report, 69% of customers think they will keep using online shops even after the physical shops reopen, suggesting that these changes in customers’ shopping behavior might stay for longer.
The preferences for the product categories were also impacted. While customers have limited their purchases of discretionaries, such as electronics, sales for essential products are experiencing an upward shift, with groceries and cleaning products currently being among the most demanded and purchased products on Amazon. Interestingly, the customers also increased their purchases of products, like cookware, puzzles, and home exercise equipment, as they started to work from home and spend more time with their families.