Hi, it's Daniel here. In this video. I'm going to talk about Amazon FBA private label product research and selection. And I'm going to talk about it from a different perspective than, uh, usual. And I'm not going to show you like over my shoulder, as I work through some process, like use on software or use on spreadsheet to do research, I'm actually going to explain, uh, some of the principles and thinking behind product selection that I've learned over the last 10 years. That really matter when it comes to some collecting products to sell, uh, private label products and specifically on Amazon. So this video is going to be a lot different, but in my view, and in my experience, these are the things that actually make by far the biggest difference in terms of your results with this. And the truth is that about 80% of your results, uh, with products on Amazon private label come from, what is the product like?
What did you choose to sell? It comes from this product selection. It doesn't come from marketing because when you have a great product, great offer, then the rest becomes easy. So let's start I'm in. So the first thing here is input versus process. I'm gonna explain these sort of, um, compared to the, the norm compared to the usual thinking. So, um, this topic comes up a lot when I speak with, uh, sellers on the phone. And, um, based on that, I think this is gonna be very helpful for you. So first thing is input versus process. Now this is gonna tie into the last point here as well. Um, so it'll make even more sense at the end, but I'll start with this here. So what do I mean? So input is basically like what's going into a process because what you have is like input.
Then you take that input, put it through a process and you get output. And in nature and business, like the process is obviously designed to take the input and process the input into the, did you want, or a better output, you know, that's how things work, get results, right? So, um, most sellers that I see, um, but most is mostly being talked about is like the process when it comes to product research. So the product research process, so that's usually like maybe a spreadsheet or a software or something like that. But in my experience, this is not the most important thing. Uh, the product research process is far less important than the input that comes into this process. And so what I mean is like, what are the ideas that are coming through the process? Cause you can have a good process and it's important to have a process, but if the input is crap, the output is also gonna be crap, even with a good process.
The process doesn't change that. Um, it helps you like sort the output and have good output, like clear output where you can make good decisions. But again, if input is crap, the output is gonna be crap as well. So the input is much more important than the process. And if you've got really high quality input, um, it's gonna give you good output even with a pretty weak process in this case. So all it takes really is like one good input, like one idea that's great and the output will be good. Like the idea is good, you know, and obviously the process is how you check that. So that's how is much more important than the process. So let's talk about a little bit more, like what makes good input, like how can you get good input into the process? So, um, like you can get bad input by doing basically what most, uh, people do, which is like sort on Amazon for ideas, or maybe use some product research software.
Chances are the input. Isn't gonna be really good. It's gonna be maybe things that are already really hot and selling a lot. And it's kind of too late for you to get in there, for example, or let's say you look at, um, a product like two keywords, describe this product. And then you look at that as a whole, like all the products that come up and these could be hundreds of products. And based on that, you determine if the process, the output, but within the two search terms like to, to, or the search term to search for the pro audit, uh, there's actually loads and loads of sub opportunities, which if you looked at those and that was the input, the process might lead to completely different output, which would be like good. So input more important. Um, some other examples of like how to get good input would be talking to manufacturers, asking them for new items that they have, or what's popular, what they're selling.
A lot of things like this. Um, and I know this from experience because the best products that I've sold had not come from forcing it it's more come from like organic ly speaking to people or going to visit a friend or a factory and seeing something and then putting it through the process to check it on Amazon and voila. The output is great. It's a good it and a good opportunity cuz the input was good in the first place. So hopefully I'm getting that across to you. One more thing I'll mention is that, um, I tried to create a great process, uh, a long time ago and really tried, you know, with the team team to delegate like to a VA and have them, uh, run the process. Output tends to be pretty crap. Uh, because again, it's not inspired. The input is forced. Uh, it's not good enough.
So that's the first thing. Second thing is value versus money. So let's start with the usual. So when it comes to product research and selection, the usual thing is the focus on the money. Like what will make me a lot of money and there's nothing wrong with that. Of course, as an entrepreneur, uh, you want to get rewarded for your time. You want to make money, but your job really as an entrepreneur is to create value and is to add value and focusing on the money here in the research phase too much is really back the front because what creates money for you as an entrepreneur? Like what makes you successful? What makes a business profitable ultimately it's how much value do you add? So if you're always focused on the money and not the value that you're delivering with your products as an entrepreneur, you got it back to fraud and you're always gonna struggle to make money.
That's the irony of it. But if you focus on value and you actually are able to deliver great value and add value to the marketplace, your reward will be money. So you should think far more about the value of the products when you're looking for something to sell. Like, can I actually add value versus can I make money at this stage? Because if you can add value, chances are very high that you can also make money. Of course you need to verify and make sure there's a commercially viable, um, product here and things like that. But this is the first question by far, the more important thing to figure out is can I add value? So this can be a lot of different ways, of course, that there's not many products on Amazon like this and they're not being done properly. Like even with the marketing, you can add value sometimes through that, but usually it's something more to do with the product and creating something better or different or more appealing or new.
This is really it to the next point here, which is offer, uh, versus product. So again, what most sellers do is they focus on the product. So, uh, what is like the actual product? Um, can I private label this? Is it something I can easily do? Can I sell the same thing? Maybe just slightly better. And they focus really on the product itself too much because in reality, what makes something sell is not really the product. It's the offer. It's more like the psychology behind it and making a good offer to people. So, um, you should really think about that more than the product you should be looking at. Can I make a great offer? This is very much connected to the value. You know, if you've got value, uh, you creating value, you're offering lots of value. Then that usually translates into a good offer.
If you know how to communicate it properly, it's important as well. So people understand the value, but that's really, uh, value. And then from that, you can create a great offer, uh, or that's a, do you want to do? And then it will convert really well. And again, the rest will be easy. Like the advertising. There's a few more things, obviously that are important. We need to make sure also check out, but that's a key driver of results. Usually sellers look at the money and then the product and they forget about value in the offer, which is far more important. Uh, fourth thing here is barrier versus open. So what I mean is like envision a gate, you know, is there a barrier that you need to like open, um, or climb over or is the gate already open? And you can just walk right in.
So what I mean here, when it comes to product research and selection is usually sellers want something that's easy, that's open. Like I can just go on Alibaba. I can source this product easily or I can just source it domestically. Um, I mean, things like this can be good for sure, but this is really not the right thing to be focused on really in research. I explain why here, because if something is very open also this, um, applies to things like the product, this small it's lightweight. Um, there's no like no difficulty finding this product, let's say in Alibaba or, uh, accessing this product, selling this product, like I don't need to fill any paperwork. I don't need to get UN gate on Amazon, et cetera, et cetera. Um, these might seem like good things. And in a sense they are right. Makes things easier.
But the downside to it is because us, it makes it a lot easier. There's going to be a lot more competition. There's gonna be a lot more sellers. And ultimately, if you look at adding a new product, the whole point is that you create an asset that works for you for maybe a decade or more, right. At least 5, 6, 7 years, uh, produces profit success, results value for a long, long time. Uh, so if you want that, this is actually not good. The barrier is better. So barrier me means you need to do some work to make this work. Uh, it's something that isn't so open. This usually means there's less competition and there's going to be less competition. There's more of a moat around it. Like, you know, like what you have around a castle, it's harder to access. It's harder to come into business and compete with you.
This is a good thing. So barriers, what, what can these barriers be? It could be like finding a manufacturer for the product. Let's say you can't source it in China or you can't source it domestically somewhere else. Um, it could be things like regulat rules, again, gated categories on Amazon. Um, the product is big and clunky, heavy, uh, takes more of an investment to start like very expensive, these sort of things. Right? So these things actually, again, usually create better opportunities when you can crack the code. And again, that's also a part of your job as entrepreneur, is this problem solving, figuring things out, figuring things out that most people can't or won't do. And then that's how you open opportunities for yourself, for your business opportunities to add value where none has been added or not enough. Right? So these are the first four things next we have, uh, bit scenario versus price. So what is this? So most sellers focus mostly on the price, right? So that's an important consideration is important viable for sure. Like what's the price, retail price of this product? Is it, um, is it high or low?
And that is a factor that is important, but what's actually much more important. Like the reason why price matters really is the bid scenario. So on Amazon, the bid, this means the average cost per click for advertising divided by your gross margin. So if you're paying $2 for one click on ads and you make $5 gross margin, that's not good because you need to literally have like a 50% conversion rate to make a profit, right? So if one outta two people buy the product, you got a $4 expense and you make like gross margin is five. So you make one. So this is obviously almost impossible to achieve. So that's more important than the price, because with a good bit scenario, you can make it work. So if your average cost per click were like a cent and you made a dollar per sale, you only need one word one in 10 to break even.
And that is not too difficult to do, especially if you check some of these boxes here as well, like value offer, et cetera. So this is what matters, obviously what tends to be true is that higher priced products have a better bit scenario because if you make 20 bucks per sale, the average cost per click is two. Again, you can, uh, you just have to convert one in 10 to break even so that's easy or relatively easy again, uh, depends. But generally speaking that wouldn't be too difficult. Obviously if you made a hundred dollars per sale, gross margin and the cost per click is $2. Now that's only, uh, one in 50, right? So that's very easy.
Um, six thing here is dollar margin versus percentage margin. So most sellers focus on the percentages margin. So what's the percent it's margin, you know, 30%, uh, 20%, like what is the percent it's margin and this while important, like it's important for things like cash flow. You can kind of reverse engineer that, that back to, uh, obviously things like ACO and a C Ts is an important number to be sure an important metric to understand, to be aware of and work with. But what's much more important is actually the dollar margin. You know, this is important for cash flow, et cetera, but this is really more tied to the bit scenario. So, you know, if you make, let's say 50 bucks gross margin for one sale and your percentage margin is 10% harder on cash, but it can be very profitable. Like it's a good amount of money and to make like a hundred dollars profit in a day, not too difficult, you need to sell two, three items.
So in my experience, dollar margin is actually more important to consider, um, when you're doing product research and product selection. Now this can obviously, again, create a high barrier to entry because if you've got a lower percentage margin, which is often the case, when you have a very high gross margin, which might sound come to intuitive, but this has to do with the dynamics of price and things like that. Like if you've got something that's very expensive, uh, the percentage margin on the item might be lower, but the dollar margin might be really high. So this again, cuz it's harder on cash flow, et cetera, uh, lower ROI maybe on the product. This tends to create a higher barrier entry and less competition. But that's another thing to consider, which is different than what most people or sellers are think. Right. Um, seventh thing here is, um, is the, um, potential versus goal.
So when most sellers are doing research product research, they focus mostly on the potential of the product. So you're looking through different ideas and you see one item that has the potential based on what the com petition, who new and everything to make like a hundred thousand a month. For example, now that's a lot of potential, but that's not necessarily going to be your reality, right? So you can look at that all day long and choose the products with the biggest potential. But if you're never going to realize the as potential, then what's the point. So instead you should really be more, um, more aware often considering your goal with this product. So the goal will be different for everyone depending on the situation they're in. So a very large business, uh, when they launch a new product, their goal might be very ambitious. You know, they might want a lot of potential.
They got the resources, they got the know how they got the skillset, the patience, et cetera, to go and make it happen, make it a reality. They can invest, they can lose money for some time to realize this grant potential. So, but if you're just starting out, you have to ask yourself what's my goal. And if your goal is to generate 10,000 a month in revenue and make like two grand profit, uh, that's your first goal, you'd be happy with that. You shouldn't be trying to re uh, trying to sell the products with the highest potential, like choosing a product with the potential of doing like a hundred thousand a month is not in your favor in that case, because that is going to be way, way, way more challenging to achieve than a product that's say sells 10,000 a month and generates 2000 in profit.
So that's why you want to consider your goal, not the potential so much because if your goal is that, then you want to find a product that will make that as easy as possible to achieve. And when you focus on that, you're not so concerned with the potential, you're just focused on finding some, the maths is your goal. It become is much easier to reverse engineer that result. And actually we'll go for something realistic and something that will make that easy as possible to achieve. Now the final thing here is, um, research versus tests, so, or task versus research. So what most sellers do when it comes to selecting products to sell is they put a ton of emphasis on the research.
So like how to, um, like do great research upfront. So it's kind of like the process here. So spending a lot of time and energy on the research and analyzing it again, the process, but they don't put any or enough emphasis on testing. So the, the reality is that it's important to do research because you can stack the alts in your favor and you wanna know exactly what you're doing. You wanna know the numbers, exactly. Everything that matters, right worth, certainly putting in time and energy. But at the end of the day, you will never know for a hundred percent sure if something will work or if it will work as expected without testing it. So you can research your, you know, from months on end and then you think you've got it, you source it and you test it with your first order, doesn't work or not as expected.
Now you've just wasted all this time researching for no good reason. So you will never know the truth until you are in the real world with something you're selling it. You're getting real data. That's called a test, an experiment. That's when you know whether you've got it or not. And even if the best research, like maybe the chances of success aren't 90% or that is gonna be roughly as expected, but not more than that, certainly even with the best possible research. So there comes a time or there comes a line where you've done enough research and now you just wanna test as quickly and as efficiently as possible. So research is good to a certain degree, but then you wanna switch over to the test. And if you're starting from scratch, for example, the way to put the alts in your favor, like where you're almost guaranteed to find something that works is to test more than one thing, like two or three products.
Because now if the Chan S are like 90% with each product that it works, the S of one of these products working is almost a hundred percent. And what do I mean with tests? So testing really means, again, actually ordering something, actually putting it on Amazon, actually turning on the advertising and tracking it correctly and measuring it and understanding what's happening. And is it working as expected is going in the right direction or is it way off something needs to change for it to work, or this is not gonna work at all. You are wrong with our research possible does happen. I've done this for 10 years and I don't know, anyway, to be a hundred percent certain, something will work up front.
You've gotta test it. Good news is you can test things, uh, with a low risk, like with low investment, you can significantly reduce the time it takes to source and sell something. If you don't go all the way into things like private label or customizing products with your test. So that's a top big for another day, but I hope this video has been helpful and these things make sense. So I encourage you to apply these principles to your thinking when you're doing your product research and selection and putting these things, you know, higher on the prior list, the, in the actual process, but then obviously utilizing a process to make sure everything checks out. But if you follow these principles, the chances that you actually find a product that works for you again, uh, delivers you delivers the result. The goal that you're looking for are significantly higher.
Also the chances of finding some that's a real home run, and that's amazing, and you can build a very successful stable long-term business on and a brand. So again, that's it hope this has been helpful. Uh, if you would like more advice from me, uh, and especially other things like sourcing supply chain, advertising, marketing on Amazon and, um, systems and operations, like how to build a team, how to run your business efficiently in a data driven, scientific way like professionally. Um, I'm gonna place a link below this video and you can opt in to receive a free case study, uh, from me in my company where, uh, I walk you through some of these things and help, you know, break some more myths and, and clarify your thinking around Amazon private label and really how to be successful with it and build a proper successful brand and a business for the long term with this great business model. So that's it. You can again, check it out below this video if you, if you want, but that's it. I hope you really enjoy this video, come value and, uh, feel free to also like comment and subs, subscribe to my channel again, if you liked it. And I would love to hear from you in the comment section, if you have something you want to say, so that's it everyone, bye for all.