eCommerce: Amazon Marketplace
Most Profitable Amazon Categories: Trends, Popularity & Potentials
How to find the best Amazon category for your niche? Learn more about how important Amazon is to third-party sellers and which Amazon categories are the most profitable.Article by Lucia Laurer | January 23, 2024
Most Profitable Amazon Categories: Key Insights
Marketplace Influence: Part of the success of online marketplaces like Amazon comes from its third-party sellers, who will account for a significant 65% of the platform's total gross merchandise volume by 2021.
Profitable Strategies: The profitability of Amazon sellers depends on strategic decisions, particularly niche selection, competition analysis, and pricing strategies. Categories like beauty and personal care as well as home and kitchen emerge as prime examples.
Strategic Niches: The prominence of the home and kitchen category demonstrates the strategic importance of finding the right product to sell. Less competitive categories offer opportunities for sellers, as evidenced by the success of those who explore overlooked markets within the evolving dynamics of Amazon's marketplace.
Today's eCommerce landscape is profoundly shaped by online marketplaces. The share of online marketplaces in the global eCommerce market is growing steadily. At the same time hybrid business models consisting of third-party and own-branded products, as seen with Amazon, are experiencing significant growth.
According to company information, third-party sellers accounted for a whopping 65% of Amazon’s total gross merchandise volume (GMV) in 2021. This represents a 70% increase from 2011. This is not surprising, as online marketplaces provide a valuable low-barrier opportunity for small and medium-sized businesses to get their products in front of customers.
Amazon Product Categories: Analyzing Profit Opportunities
Amazon's marketplaces offer a wide variety of opportunities for sellers, but success in terms of profits seems to depend largely on the choice between the more than 40 product categories found on Amazon. A Jungle Scout analysis shows that there are significant differences between product categories on Amazon in terms of profitability.
Almost one third of sellers in the beauty and personal care category have struck gold, tapping into the widespread desire for self-care and grooming essentials: 30% of Amazon sellers in the category beauty and personal care are highly profitable with a net margin of 21% or more. Notably, beauty and personal care is not only very profitable but also ranks as one of the most popular Amazon categories for sellers. With 26% of Amazon sellers offering products in the beauty and personal care category, it is the second most popular product offering.
Sharing the podium with beauty and personal care, home and kitchen products are a highly profitable Amazon product category, with 30% of sellers in the category generating net margins of 21% or higher. Next to being comparably profitable, home and kitchen is also the most popular product category for Amazon sellers: 35% have products from the home and kitchen category on offer.
The Amazon categories clothing, shoes and jewelry, arts crafts and sewing as well as electronics have profitability shares higher than 20%. Clothing and electronics are again two popular categories that are also comparably profitable. However, popularity and profitability are not necessarily always linked.
Most Popular Amazon Category: Home and Kitchen
The Home and Kitchen category stands out as the preferred choice for many sellers, and this popularity can be attributed to several factors. First, the omnipresent nature of home and kitchen products ensures a large potential customer base, as these items are an integral part of everyone's daily life.
The simplicity of the product requirements adds to the appeal. Unlike categories with strict regulations, home and kitchen products often lack complicated specifications such as food expiration dates or toy certifications. As a result, 30% of home and kitchen sellers choose to develop their own private label products, according to Jungle Scout.
Amazon Categories: Find the Perfect Niche
A highly popular and therefore competitive product category often has a large user base and therefore a large number of sales opportunities as seen with the beauty and personal care category or the home and kitchen category.
On the other hand, less competitive product categories such as electronics - only 16% of Amazon sellers are active in the electronics category - sometimes have a large customer base as 44% of Amazon shoppers buy from the electronics category. This also means high profit potential.
Least Popular Categories on Amazon
Having discussed the most popular categories, we now turn to the opposite: Product categories that are least popular among Amazon sellers. Only 2% of sellers offer musical instruments, which is the lowest of any category. CDs and vinyl, luggage and travel, and video games are each offered by only 4% of sellers.
While certain categories on Amazon may be less popular among sellers, it is important to recognize that profitability is not solely determined by the overall popularity of a category. Key factors affecting profitability include the competitiveness of your product, pricing strategy and cost of goods. In fact, choosing a less competitive category can provide unique opportunities for success.
For sellers conducting product research, exploring these less obvious categories becomes a strategic move. By venturing into areas with fewer competitors, you increase your chances of finding a niche where you can establish your brand and product offerings distinctively.
In the final section, we discuss which are the product categories with the highest growth potential, meaning: They provide the perfect opportunity for sellers to increase their margins in a market that still has room for new competitors to join.
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Amazon Categories with Room to Grow
Fashion and apparel are not only categories that play a large role in global eCommerce, but it also has the most potential when we look at the fastest growing product categories on Amazon, projected from 2022 to 2027.
With a CAGR (compound annual growth rate) of 12.4% over the next years, fashion and apparel shows the most potential for Amazon sellers. Close behind is health and beauty with a projected CAGR of 12.1%. The office category, which has been one of the smallest contributors to sales, is also projected to grow at a CAGR of 11.6%, which is the same amount as the electronics category.
Most Profitable Amazon Categories: Closing Remarks
Amazon offers businesses large and small the opportunity to get their products in front of a wider audience. However, success depends on the product category in which your business wants to specialize. The previous insight discussed key indicators such as popularity and profitability among sellers, but also which product categories are expected to grow the fastest in the coming years. Without a doubt, platform providers are the clear winners in this guessing game, as they profit from every sale on their site and can gauge consumer interest most directly.