Amazon is able to snoop on all the sales data without any risk.
Their response is usually “I’m making enough money now, why worry about later?” or “our product category is too niche for Amazon to enter.” It seems like that kind of reasoning makes sense for traditional retailers like Costco/Walmart/Macy’s etc., but not Amazon where Amazon virtually has no risk in listing a product.
Highest gross profit (volume * margin).
And how would you ever know either of these two (volume, margin) if you were an arbitrary 3rd party?
Amazon doesn't need to branch out into every single long tail product to cause severe disruption to a retail sector that is often predicated on low single digit margins.
Amazon know volume, Amazon goes to suppliers on alibaba and gives them the quantity they require and then Amazon figures out what margin they'll be making if they sell it at the same or lower price than the original seller.
Start with volume as a suggestion of which products to investigate for purchase price with sellers. If you can get the "right" price with the "appropriate" volume, start selling the product direct.
Also, at Amazon scale, you can estimate margin by looking at price variation over time and throwing in some well tested assumptions.
You really can't. You have to do research and modeling to figure out margins. There are probably half a dozen factors that determine a product's margin.
It gets into things where not much is needed.
For example, USB cables, laptop sleeves, kettle bells, dumbell, weight plates, led light and this kind of category is simply too big and it will put whoever ever discovered a new niche which doesn't require anything more than the physical product get outcompeted by Amazon.