Product Life Cycles

My favorite sourcing strategy revealed, an in-depth look at product life cycles, and lots of interesting ASINs.

Much like the stock market, every toy investment you make should come with a loose idea of an exit strategy. Of course — things change, strategies evolve, and you can’t always predict the future, but it’s nice to have a general idea of how you’re going to approach selling off your inventory.

When deciding on an exit strategy, you typically need to understand the life cycle of the product you’re selling. It’s extremely useful to know where in the product life cycle your investment is, so you can determine if it’s a good time to sell, buy, or cry and wish you bought something else.

Today, we’re going to cover what I consider the different “phases” of a product’s life cycle and how I approach them.

By the end of this article you should have a better idea of how to determine where in the life cycle a product is, so you can properly determine when you want to exit.

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“First to Market” / “Phase 1”

“First to market” has a bit of a loose definition to me. When I say “first to market”, I’m not talking literally. We will rarely ever be the literal first person to be selling a product online. I like to define it as being among some of the first people to sell a product on a particular platform. Maybe you’re one of the first third party sellers carrying it on Amazon. Maybe you’re one of the first to list it on eBay. But VERY rarely will you actually be the literal first person selling a brand new toy online.

The exciting thing about being “first to market” is that it usually means you will be able to command a much higher sale price than MSRP.

“First to market” is the most difficult position to plan an exit strategy for, because you have no control over it. It just kind of falls into your lap. What I mean by that is, you are not the one who determines if you are “first to market” or not. Even if you were the first person in the entire world to place a pre-order for a product, there is no guarantee you will be the first one to receive it — that is entirely up to the manufacturer or distributor and how they allocate their toys.

Some manufacturers *cough* Mattel *cough* favor certain retailers . Other manufacturers try to play ‘fair’ and rotate who of their customers gets what. Distributors are usually on a ‘who ordered first’ basis (very important to pre-order early!).

Sometimes being “first to market” can even be affected by a logistics issue. For example, maybe the truck driving the shipment of a toy to Amazon got run off the road and won’t arrive in time for the release date. Maybe Target’s warehouse is backed up and they haven’t finished unloading their trucks.

Whatever it may be, all of these things go into play when determining who the first lucky people are to list a toy — all things which you do not control.

However, despite all this, there will be times where you will be able to take advantage of being one of the lucky ones who is “first to market”.

For example, let’s say Amazon, was technically first to market on a hot new action figure. They put the toy up for pre-order, and within a few days it pre-sold out. Since Amazon sold out of their pre-orders, they needed to place a second purchase order to get more stock. But the manufacturer is still working on fulfilling the first purchase orders from their other clients like Walmart, Target, and Gamestop. Now, Walmart, Target and Gamestop will be receiving their stock while Amazon is in line behind them, twiddling their thumbs waiting for their second purchase order to fulfill. This is opportunity for us, because we can hunt these products down from other retailers, and be the first third party seller to market on Amazon.

There are a lot more intricacies to it than that, but it’s an example of how these things sometimes pan out.

So, why does being first to market matter anyway?

It’s simple. Demand is usually highest when a toy is first released. Always exceptions to this of course, but if you look at 99% of collectibles on Amazon, you’ll see that the best rank a toy receives is usually pretty close to its release date (and Christmas the first year its released).

It might not make sense, because people can simply be patient and usually get the toy for MSRP, but there are hordes of people who scramble to be one of the first to get a new collectible, even if they have to pay 2-3x MSRP.

There are a number of reasons for this. Some people are content creators and literally will pay almost anything to be the first one to review a toy on their channel, helping them grow their business. Some people want to give a gift to someone, knowing it’s the first release of their favorite character. Others are simply hardcore collectors, and being one of the first to pose the action figure and send photos to their friends is important to them.

All that really matters is that being one of the first to market can be very profitable.

Personally, when I recognize that I have the opportunity to be “first to market” on a toy, I go straight to eBay — not Amazon.

I usually don’t want to wait for the item to check in at Amazon doing FBA — that completely puts the whole strategy of being first to market at risk because it could take weeks.

For some, FBM is a viable option, but there is one single reason I prefer eBay to FBM in this instance — returns.

The reality is, you will have a higher return rate on these products on Amazon when being “first to market”. Unfortunately, people take advantage of Amazon’s return policy and will pay over MSRP just to have it first, then simply find it for MSRP a few weeks later and return it used or damaged to get the difference in money back.

On eBay, I have a 0% return rate over my YEARS of selling. No one has ‘ordered by mistake’, ‘changed their mind’ or any other ridiculous reason Amazon allows.

Yes, you may suffer from slightly less sales than if you were to list on both platforms, but I promise you; being one of the “first to market” for an in demand collectible on eBay is similar to selling toys on Amazon during Christmas — they fly.

With that being said, sometimes you order a LOT of an item, and it does make sense to sell on eBay while also sending units into FBA to try and capture some sales there. Let’s take a look at an example:

Marvel Legends Doc Ock (ASIN: B0BLT95FL7)

This is a great example of a toy where being first to market was insanely profitable. For whatever reason, Amazon did not get their full, steady supply checked in until early March. But people like myself were receiving this in JANUARY. Yes, two months of sales that felt like Christmas on this SKU.

The real early birds were able to get sales around $75-$90, but most sales ended up being around $60 until Amazon came in stock. Sales were also rockin’ on eBay anywhere from $55-$65, even more profit than Amazon because of lower fees. Not bad for a $32 buy cost — about $12 profit per sale that was selling at lightning speed, and you could have pre-ordered hundreds if not over a thousand. Oh, and since you were first to market, there was no hold time.

This is what I mean when you hear me mention that you should make your investments with the expectation that they won’t sell until the next Q4, but you aren’t afraid to let them go early if an opportunity like this arises.

Hence, why it is important to be able to determine where in the product life cycle a toy is. If I paid no attention to where in the life cycle this Doc Ock figure was, I may have just shipped them them all into FBA instead of snagging thousands in sales on eBay.

If you find a product and it looks like the beginning of the Keepa chart above, you should immediately check eBay comps as well and see if there is a faster opportunity to flip it there.

But unfortunately, all good things come to an end (temporarily)…

The Middle / “Phase 2”

This is usually the point in a products life cycle that you want to avoid selling because the sell price is close to or at its lowest. Let’s use a new example:

Sonic the Hedgehog 4" Rouge The Bat Action Figure (ASIN: B07KXGLSSZ)

First of all, yes there is a bat with big boobs in Sonic the Hedgehog. Get over it.

Secondly, you may notice a giant orange circle on the Keepa graph there. That’s “the middle” or “Phase 2”. If you were one of the “first to market” on this toy, you were snagging sales in the $40s on about an $8-$10 buy cost. Fantastic.

But like I said, all good things come to an end (temporarily). The supply chain catches up, retailers receive their stock, and all of our competitors start finding this toy in stores and listing it alongside us.

As you can expect, the listing floods with sellers, and the price starts to drop down to a point where people are literally selling for break-even.

“Phase 2” is when supply is exceeding demand, and it is not usually worth it for us to sell the product. When supply exceeds demand, the price goes down or remains steady and has no reason to rise.

Most commonly, this is when Amazon or another big competitor comes in stock and holds the price down to a point that isn’t profitable for us.

[NOTE: Sometimes during “Phase 2” there may be ‘blips’ where Amazon briefly goes out of stock and the Buy Box shifts to a higher price third party seller. It’s hard to strategize around this because it is not guaranteed or consistent unless it’s caused by a predictable catalyst like a movie release.]

Frustrating, but a completely normal part of the circle of life for a toy like Rouge.

Going back to Doc Ock for a second, we are currently still experiencing “Phase 2” (as of 10/28/24). It’s a period of time where Amazon is comfortably in stock, other retailers are in stock, and supply is meeting or exceeding demand. Again, it’s a completely normal part of the process.

But “Phase 2” is where things start to get interesting.

During this dark time of decreased prices, while others are panicking and selling, this is where we start to experience things like clearance or discontinuations.

As “Phase 2” rages on, manufacturers realize they have supplied enough for the market and are ready to cut production. Retailers have had it on the shelves for months and are ready to make room for newer product.

While “Phase 2” is usually unfavorable for us to sell, it can be favorable for us to buy. Sometimes at this point in the product’s life cycle, distributors may be willing to cut deals to get this older product out of their warehouses. On top of that, we start to get more and more confirmations on if something is discontinued or not.

This leads us to arguably my favorite sourcing strategy: