Avoid This Mistake When Estimating Amazon Product Revenue

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When researching potential new products to sell on Amazon, accurately estimating the real Amazon Product Revenue opportunity is crucial. However, many new sellers make the mistake of overestimating product revenue due to overlooking seasonal fluctuations in demand.

It’s easy to get excited when you find a product with multiple sellers earning tens of thousands in monthly revenue. But that Amazon Product Revenue is often inflated due to temporary spikes in sales volume during peak seasons or holidays. Basing your product criteria and expectations solely on these seasonal highs can lead to pursuing products that will underperform for most of the year.

This causes new sellers to waste time and money on products that seem more promising than they really are. To avoid this common but costly mistake, you need a data-driven approach to factor in seasonal changes in demand when estimating Amazon product revenue.

In this guide, we’ll cover key strategies to accurately account for high and low seasons so you can make wise product decisions based on the true year-round revenue potential. Following these steps can help you find winning products and set your Amazon business up for long-term success.

Analyze Sales Volume Trends to Identify Seasonal Fluctuations

When estimating potential Amazon product revenue, the first key step is to analyze the sales volume trends over time to identify any significant seasonal fluctuations. Far too often, new sellers simply look at the current monthly revenue numbers without considering the context of seasonal demand cycles.

To avoid this mistake, you need to take a data-driven approach by examining the product’s search volume history in tools like Jungle Scout‘s Product Tracker. Look for patterns showing a baseline search volume during low seasons versus major spikes during peak seasons like Q4 holidays or summer.

For example, a patio furniture set may have a baseline search volume of 500 per month during spring and winter. But then it spikes to 5000 searches per month during peak summer demand, and again in Q4 holiday shopping season. Christmas lights follow a similar pattern with huge seasonal swings around November-December versus low sales in summer.

The specific seasonal effects vary widely by product type and niche. But the key is identifying the baseline low season demand versus temporary spikes. This allows you to grasp the true year-round revenue potential.

Analyzing granular search volume data over time provides the visibility into seasonal fluctuations you need. Without understanding these demand cycles, any Amazon product revenue you make will be distorted and unreliable. So take the time to examine and chart out monthly or weekly sales volume trends before moving forward.

Adjust Amazon Product Revenue Downwards Based on Low Season Declines

Once you’ve analyzed the sales volume patterns and identified seasonal fluctuations, the next step is to adjust your revenue estimates downwards based on the percentage decline during low seasons.

This is where many sellers make crucial mistakes. They see the high revenue figures during peak seasons and assume that level of sales will continue year-round. But when seasonal spikes fade, that revenue can drop dramatically.

To illustrate, let’s say you find a pumpkin carving kit with $50,000 in monthly revenue in October. But when you examine trends, you see October search volume is 5X higher than the baseline in summer months.

This means the real baseline revenue is likely closer to $10,000/month for most of the year outside of fall peak season. So you need to adjust any initial revenue estimates downwards based on the percentage decline in low seasons.

The best way to make data-driven adjustments is to download full revenue reports from a tool like Helium10. Look at the low season months and calculate the percentage decline compared to peak seasons.

For example, if revenue drops by 60% from November to March, you would adjust estimates downwards by 60%. So that $50,000 peak revenue would really be $20,000 for most of the year.

Making informed adjustments is vital to avoiding overestimation and having an accurate sense of real revenue potential. Don’t rely solely on the inflated peak season numbers. Crunch the numbers to account for low season declines.

Use Adjusted Estimates to Assess If Product Criteria Are Met Year-Round

The third key step to avoiding overestimated revenues is to use your adjusted low season estimates to assess if the product truly meets your criteria year-round.

Many sellers determine criteria like:

• Minimum revenue threshold (e.g. $10,000/month)
• Number of sellers earning over certain revenue level (e.g. 5 sellers over $5,000/month)
• Total market size based on competitors’ sales

It’s crucial to apply these thresholds based on the adjusted low season revenue estimates, not peak season. This ensures the product can consistently meet your needs, not just for a temporary sales spike.

For example, say you require $15,000/month in revenue and find a Christmas wreath with 10 sellers making over $20,000/month during winter peaks. But when you adjust for 60% winter to summer decline, the real low season revenue is around $8,000 – below your threshold.

So despite meeting criteria based on peak holiday sales, this product wouldn’t be a fit based on the adjusted off-season estimates. The key is verifying the product clears your revenue bars during the lows, not just temporary highs.

Some flexibility is reasonable if revenue dips slightly below thresholds for 1-2 low months. But in general, ensure your criteria are met by the adjusted numbers, not inflated seasonal figures. This prevents pursuing products only viable for a fraction of the year.

Apply a Revenue Adjustment Formula to Factor in Low Seasons

Once you’ve analyzed seasonal trends and identified percentage declines, the final step is to apply a simple revenue adjustment formula to factor in low seasons:

• Start with the current peak season Amazon product revenue estimate you want to adjust
• Calculate the percentage decline during low seasons (e.g. 60% decline)
• Plug the percentage into the formula:

Adjusted Revenue = Peak Revenue x (1 – % Low Season Decline)

• For example, if peak revenue is $50,000 and low season decline is 60%:

Adjusted Revenue = $50,000 x (1 – 0.60) = $50,000 x 0.40 = $20,000

This formula allows you to easily calculate adjusted yearly revenue at a glance based on the seasonal decline percentage.

Some key tips for using the formula accurately:

• Use monthly data to calculate average % decline across full low season.
• Factor in variations by product type and niche – some may vary more than others.
• Recheck adjusted figures against full revenue reports.
• Update estimates if you notice changes in seasonal patterns over time.

Having a streamlined formula to quantify the impact of seasonal swings on Amazon product revenue is invaluable. It enables data-driven revenue projections in minutes versus manual month-by-month calculations.

Just remember – garbage in equals garbage out. The quality of the adjusted estimate depends on accurately identifying the real low season demand decline. Invest the time upfront in seasonal trend analysis, and the formula will take care of the number crunching.

Wrapping Up

Accurately estimating real Amazon product revenue potential is crucial to finding winning products and succeeding long-term on Amazon. By avoiding the common mistake of overestimating due to seasonal spikes, you set yourself up for smarter product decisions.

The key is taking a data-driven approach:

• Analyze sales volume patterns over time to reveal seasonal fluctuations. This provides the visibility you need into demand cycles.
• Adjust revenue downwards based on percentage declines during low seasons. Don’t rely solely on temporary highs.
• Verify products meet your minimum criteria based on adjusted low season estimates. Don’t be fooled by peaks.
• Use the revenue adjustment formula to easily factor in seasonal effects. Let the data do the heavy lifting.

While it requires upfront work, properly accounting for seasons gives you a true picture of consistency and year-round potential. This helps avoid wasted effort on products that underdeliver over the long-run.

By following the strategies outlined, you can accurately estimate Amazon product revenue, select winning products, and build an Amazon business poised for lasting success. The key is having the data-savvy discipline to look past the seasonal hype.