Which business path to choose? One or multiple products? One or multiple brands? One or multiple niches?
Building a business on Amazon is both an art and a science. There's neither a right way or wrong way, especially with multiple business approaches possible.
Sellers may wish to choose to focus on one product, or simply expand to a range of products. Others choose to branch out towards multiple brands across several niches.
Today we'll be evaluating each Amazon business approach, the pros and cons, and our recommended pick.
Table of Contents
- Initial considerations – fundamentals to consider
- Focusing upon a single SKU
- Scaling towards a product range
- Choosing to operating multiple brands
- Creating a general store
- Our recommended Amazon approach
- Making the right decision
- Protecting your assets
We'll be writing this from the viewpoint of the person who already sells one product, yet is deciding between focusing down or growing wide.
Initial considerations – fundamentals to consider
Each individual selling on Amazon is different. It's not just the capital but the willingness and determination of the seller. Long term goals should be considered first and foremost.
When you ask yourself what next product I should sell on Amazon, the natural way to approach this is to think about what sells well in my home county, in my home region.
Choosing the right approach towards your business model is based upon some considerations:
- The capital you have available to expand and grow
- Current time availability towards your Amazon business
- Interest, motivation and commitment towards success
In fact, with our own clients, we've seen a vast range of businesses and their approaches towards products. Some sell just a single SKU, others choose a smaller business of 5 to 10 products, whilst we do have a few that trust Bindwise with 1,000+ SKUs. When your business has scaled so wide, with so many listings, then security is paramount.
Focusing upon a single SKU
For the newer sellers on Amazon, this is the ideal pathway, especially when capital is likely limited. Choosing this business approach has a sense of amateurism in the Amazon seller communities, yet in our opinion, is also an aspirational endeavor.
A single SKU in your business allows complete focus upon product improvement, world-class packaging and better inventory management. It's easier to dominate a product type through complete focus on that one SKU. Some variations (color / size) should be considered if an expected rise in sales volume is likely.
On the contrary, a small Amazon business where the owner chooses a single SKU could leave them up to risk. For example, should an inventory order have excessive defects and require a removal order, then monthly cashflow is likely to suffer a large decline. That is, until the faults can be rectified. Business valuation may also be impacted negativity, since risk hasn't been spread across a range of products.
There are solid examples of Amazon sellers successfully selling just a single SKU. It certainly has its place, and growth prospects may not need to be considered, especially if a high sales volume is present.
Scaling towards a product range
This is the most common Amazon business approach. We would recommend 5 to 10 products, though we've seen quite commonly that sellers choose to scale beyond this.
In this eCommerce approach, every item is related to that niche, which might be larger or narrower.
How do you choose the eCommerce niche that’s right for you?
That’s a tough question for me to answer because I’m not you. My experiences, goals, and knowledge base aren’t the same as yours.
Everyone has to choose the eCommerce niche that’s right for them. If you don’t, you’ll likely fail.
Scaling towards a product range is considered for the following reasons:
- Existing customers may suggest launching more products in the same niche
- A product range provides a cashflow safety-net if a shipment defect occurs
- Likelihood of different product purchases from a brand in the same transaction
- Provides enhanced trust and risk reduction for the future business purchaser
Yet, at the same time, both strong cashflow and available capital is required to launch towards a relatable product range. It should not be the goal to launch multiple products, until the first product has established sales, has reviews and is unlikely to run out of stock.
A product range also shows an enhanced brand perception by customers. That is, you're seen as not just a beginner selling a single SKU, but instead has numerous complimentary products. Plus, customers will sometimes view a brand page on Amazon if they like their initial offering.
Knowing what is trending and popular in a particular niche, you get a brilliant opportunity to only fill your inventory with demanded items that will be bought often.
Plus, as a fan of your own niche, you know what exact product features are valuable to your target audience, which is why you can create unique product descriptions that are both appealing to your potential buyers and winning in terms of SEO.
The only drawback which we can come up for this approach is that you need to conduct a strong product research to enter the market.
So focusing on a niche, you really need to understand what you’re selling and whom you’re targeting.
Choosing to operating multiple brands
Building multiple brands on Amazon is the lofty goal that many people, especially the younger generation, envision towards when starting their Amazon journey.
Yet, building towards this 'Amazon empire' takes time, work, effort, energy...and a lot of capital! If this is your goal, consider reinvesting every single dollar from your first Amazon business.
Just like building out towards a product range, owning multiple brands provides reduced cashflow risk. Further still, season variations can be easily managed.
The sale of one Amazon business allows the seller to take a large payday, whilst at the same time, continue to enjoy the cashflow from their other existing business(es). If becoming an 8-figure Amazon seller is your goal, then multiple brands is one to aspire towards.
At the same time, operations at this scale aren't without the downsides. There is a strong element of inventory and brand management, paired with dealing with multiple suppliers. Cashflow management is paramount, and business owners at this scale are likely to have outsourced (through full time staff or contractors) many elements of their Amazon businesses.
Creating a general store
With this general store approach you can add absolutely anything to your product offering. If you sell lots of various products you can expect different customer persona to come to your listings and make purchase from you.
General store benefits
- No research is strictly necessary
- The product choice is vast
- The circle of potential buyers is really wide
But don't fool yourself. Running such a store in an efficient way is really challenging.
- Product related tasks (like listing editing) are overwhelming
- Competition is way too intense
- It's nearly impossible to rank high for the chosen keywords
- You don't have a focus
Our recommended Amazon approach
The most popular approach we see, and we're sure you agree, is building out to multiple products.
List broadly across multiple products rather than deeply in one or two products.
Because a broader selection of products means higher customer search exposure to your listings overall. The broader selection can help you quickly gain the knowledge what products might be successful.
You can start small. A small Amazon business consisting of 5 to 10 products is going to have at its disposal to largest range of qualified business buyers.
This allows greater cashflow management, increased brand equity with increased customer order volumes. At the same time, it allows easier management of inventory, especially compared to brick and mortar stores.
This common approach to scaling on Amazon also allows an easier exit. A potential buyer looks at ease of operation, but at the same time, wants to minimize their downsides.
Also, a business that sells exclusively on Amazon is higher risk, as it's simply relying on a single stream of income. Regardless of whether you choose go to stretch wide or go deep, we highly recommend expanding more international marketplaces. Ebay is one good example, and many Amazon sellers also run Shopify stores using Amazon's own fulfillment network.
Making the right decision
We've presented some fundamentally strong options. They all work, and each has pros and cons. Aspiring Amazon business builders are will find success based on their personal and business goals.
Note: It's wise not to compare yourself to that of another Amazon seller, at any stage of the journey. It's your business approach, not theirs.
Most sellers surprisingly haven't set goals, and here at Bindwise, we would recommend goals set for at least the next 5 years. Consider using the SMART analogy to set your goals, and then consider the right Amazon business approach.
Protecting your assets
Regardless of your chosen business approach to selling on Amazon, we would recommend all private sellers to consider solid protection.
This comes in various aspects:
- Strong brand trademarks and patents
- Supply chain monitoring and control
- Strong relationships with key suppliers
- Enrollment into Amazon's EBC Program
- Strong passwords for all brand assets
- Brand packaging to prove authenticity
- Direct connection with Amazon corporate
In addition, our simple solution is currently protecting thousands of Amazon sellers, both large and small. We provide real-time and crucial alerts that Amazon themselves does not provide to sellers. This can improve your listing ranking and buy box percentage, leading to improved seller account metrics.
Selling on Amazon has a multitude of business approaches, and each has its own pros and cons as we've outlined. Indeed, sellers will find their own personality caters for a specific type of approach, and thus, there's no right or wrong way.
The ideal way is one that suits your long term and realistic goals as an Amazon seller. Consider, before simply joining the masses, what type of business you're intending to build, and whether this is for a long term hold, or simply a future exit.