eCommerce: Amazon Marketplace Insights

Most Profitable Amazon Categories: Key Insights

• Marketplace Influence: A major factor in the success of online platforms like Amazon is the contribution of third-party sellers, who are projected to generate 65% of Amazon's total gross merchandise volume by 2021.

• Profitable Strategies: The success of Amazon sellers hinges on strategic choices, including niche selection, competitive analysis, and pricing tactics. Notably, categories such as beauty and personal care, along with home and kitchen, are highly profitable.

• Strategic Niches: The prominence of categories like home and kitchen underscores the importance of choosing the right products to sell. Sellers can find opportunities in less competitive categories, as shown by the success of those who target underexplored areas within Amazon's dynamic 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.

Company data reveals that third-party sellers made up an impressive 65% of Amazon's total gross merchandise volume (GMV) in 2021, marking a 70% rise since 2011. This growth is expected, given that online marketplaces offer small and medium-sized businesses a valuable opportunity with low entry barriers to showcase their products to a wide audience.

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.