Level up Your Amazon Product Assortment Optimization With Business Analytics

It’s impossible to downplay the importance of a well-crafted inventory strategy on Amazon. And product assortment optimization, as one of the vital elements, therefore definitely deserves your time and focus. 

Choosing the right mix of products will ensure your long-term success on the platform, mainly due to its direct impact on customer satisfaction, sales performance, and overall business growth. As such an important part of your Amazon inventory strategy, product assortment not only attracts potential buyers but enables you to stand out from the ever-growing mass of competitors. 

Careful curation of your product offerings optimizes your inventory, minimizes risks associated with slow-moving items, and maximizes your chances of capturing more market share on Amazon. In short, product research, inventory strategy and product assortment go hand-in-hand. This article covers everything you need to know about this topic – all in one place. Let’s dive in. 

What Is Product Assortment Optimization?

Product assortment optimization is a valuable strategic process where sellers research and select the right mix of products to sell. This mix of products can be based on a lot of factors, which should, however, always include market demand, profitability, and emerging trends. For sellers specialized on Amazon, this means curating a product portfolio that not only accommodates customer preferences but also has a strong scaling potential in regard to revenue. 

But how can you ensure that your final listing will take off successfully? One way is by making sure that your Amazon assortment strategy is built on data analytics that identify high-demand products with sustainable margins, and minimize unprofitable SKUs. What data analytics do we mean here? While this may depend on your niche, you can never go wrong with historical sales data, assessing competition levels, considering fulfillment costs (FBA vs. FBM), and monitoring seasonal trends. Moreover, keeping an eye on Amazon’s Best Sellers Rank (BSR) and keyword research will help you to pinpoint products with strong demand and lower competition, resulting in a well-balanced, profitable assortment. How to choose the correct Amazon products is tricky business and deserves your time and patience. We have put together this To-Do list as a guide.

Product Selection – To-Do 

Market Research

Evaluate Profitability & Costs

Assess Competition & Differentiation

Check Seasonality & Trends

Ensure Compliance & Sourcing Viability

How Analytics Help Identify Profitable Products

Once you have your product portfolio assembled, the next step is identifying which products to continue selling and which shelfwarmers to discard. Needless to say, this is an ongoing process which – while being simple in itself – becomes more complex the more your product portfolio grows. 

The main goal is to cut loose low-performing products and focus on the high-margin opportunities that are already in your listing – the low hanging fruit. On Amazon, data analytics are your best friend in that regard. 

Pay attention to key metrics like historical sales data, your profit margins, and sales velocity to determine which products are worth keeping and which should be discarded. Seasonal demand fluctuations and competitor activity will also impact your product performance, so regular portfolio reviews are essential. 

For sellers with an overseeable portfolio, monitoring this data manually shouldn’t take up more than half an hour a day. More advanced sellers should consider using a solution that offers all this data at a glance. This reduces the time it takes to identify high-performing products to a few seconds a day (no matter how large the portfolio) and it also reduces the amount of mistakes due to lack of human error. Letting this be handled by a software solution frees up your time and energy to directly use this knowledge to directly optimize your Amazon product assortment, instead of analyzing it first.

Key Metrics to Evaluate Your Amazon Product Assortment

The good news is that the best metrics for Amazon sellers to evaluate their profitability can be assessed quite easily. There are certain key process indicators (KPIs) that are invaluable to any seller. Here’s a list of these KPIs and how to optimize your already existing portfolio using the data you have:

Profit Margins

Revenue alone tells half the story, profitability the other half. Check if you have healthy profit margins by analyzing the cost of goods sold (COGS). This includes manufacturing, shipping, and storage fees. Don’t forget to factor in Amazon FBA fees and check on a regular basis if the fees have changed. Last but not least, see to it that your advertising costs (ACoS) don’t drain more budget than they generate in returns.

Low-Performing SKUs

Storage costs are not getting any lower and not all products are worth keeping. How do you quickly decide which products to cut from your portfolio? Negative review trends, consistently poor ratings, low traction despite high ad spend are all indicators that these products should make way for more profitable items. 

High Performers

Identify your most profitable products on Amazon and pour your energy into scaling these sustainably. When you see something that needs improvement, improve it instantly. This could be product images, descriptions, keywords. If you see a product moving really well, consider expanding this product by introducing new sizes, colors, or bundle options.

Data-Driven Discontinuation 

Did you know that underperforming products can be liquidated faster with Amazon’s discounting programs or seller promotions? Additionally, you can also adjust pricing to test whether lower price points improve sales, or renegotiating supplier costs to increase profitability. 

Analyzing Historical Sales Data

Your historical sales performance is an invaluable source for identifying trends. As an example, units sold over time are great to determine whether demand for this particular product is consistent or seasonal. Revenue trends will help you pinpoint your top-performing products. Keeping an eye on your customer return rates is also important = issues with the quality or misalignment between the product itself and the customer expectations. Another important indicator is sales velocity on Amazon – the rate at which a product sells within a certain time period. Sales velocity shows you if a product is gaining momentum, stagnating, or declining. This will help you make informed decisions about inventory management and possible marketing efforts.

Common Mistakes Sellers Make with Product Selection

On Amazon, the five most crucial mistakes you can make as a seller during product selection are:

1. Ignoring Market Demand

Choosing products based on personal preference never works out. Especially when data-validation can be attained easily and cost-free with Google Trends or the regularly updated ABS-list. For deeper insights, however,  there are also many tools that specialize in product research for Amazon sellers.

2. Overlooking Competition  

On Amazon, another common product research mistake is overlooking competition. Finding a great product is one thing – finding the right market to sell it in is another. Investing time in online research can help you avoid oversaturated markets and protect your margins. Additionally, steering clear of established brands with strong customer loyalty and deep marketing budgets can improve your chances of standing out.

3. Choosing Low-Margin Products

Avoid selecting products with razor-thin profit margins. Some products may seem profitable at first glance, but costs like marketplace fees, shipping, and advertising will make your earnings evaporate. Examples: Phone accessories like chargers, cases, cables (high competition, high ad costs to stand out), basic apparel like T-shirts, socks, hoodies (perceived low value due to no-name brands, high return rates) and generic beauty products (heavily regulated and market-dominated by big brands)

Optimize your Amazon inventory further by keeping close tabs on all expenses. Long-term storage fees, restocking fees, high return rates, removal and disposal fees, regulatory compliance costs – the list goes on. Not having an eye on these fees may hurt your profitability in the long run. Without carefully calculating all costs, sellers risk investing in products that generate high sales but little to no actual profit.

4. Ignoring Product Seasonality

Many sellers overlook the impact of seasonality. Items with extreme demand fluctuations – such as holiday decorations, summer outdoor gear, or winter apparel – can lead to slow sales and excess inventory in off-seasons. 

How to combat this proactively? Ensuring that your product offerings include evergreen items can help maintain steady revenue throughout the year. 

5. Neglecting Supplier Reliability

Unreliable suppliers can lead to stockouts, delays, and quality issues, which in turn will hurt sales and lead to bad reviews. Sourcing from unverified manufacturers increases the risk of receiving defective products or facing sudden supply chain disruptions.

To avoid these pitfalls, vet your suppliers thoroughly, establish strong relationships, and negotiate favorable terms aimed at keeping your prices stable and your products top-notch. 

How to Continuously Optimize Your Amazon Inventory

As with all processes on Amazon, product assortment works best when managed continuously. Amazon is the most dynamic e-commerce platform in the world, and if you want to consistently offer the best-selling Amazon products, ongoing research and optimization of your inventory are equally as important as ad campaigns and pricing strategies.

First, keep a close eye on the market – monitoring shifts in trend, seasonality, competitor movements, and any other factors that directly impact your business and can be leveraged to your advantage. Secondly, closely monitoring your existing inventory is just as vital. Tracking all expenses, quickly identifying underperforming products, and maximizing the potential of high-performing ones is an absolute necessity.

Final Thoughts

If you want to increase your Amazon sales, analyzing business data is always the first step. Whether you should use a solution like SELLERLOGIC Business Analytics depends on the size of your portfolio. While businesses of all sizes can benefit from a solution like Business Analytics, it is essential for advanced sellers with large portfolios and a nice-to-have for those just starting out.

With Business Analytics, you can effortlessly track your business performance with complete transparency. Instantly see which products generate the best margins, allowing you to plan your business roadmap more sustainably. Identify weak products in your portfolio at a glance – precisely, transparently, and effectively. Plus, SELLERLOGIC enables you to seamlessly integrate all expenses, from the cost of goods and VAT to salaries, rent, and more, ensuring a comprehensive and accurate analysis.

Does this sound like something your business could benefit from? Our team is happy to consult you on how Business Analytics can be custom-tailored to you. What’s more, if your business has less than 100 orders per month, you can use Business Analytics for free. 

FAQs

Image credits in order of appearance: © ShinneProject – stock.adobe.com / © Giorgio Fochesato/Westend61 – stock.adobe.com / © Artmozai – stock.adobe.com