Good post by fudjj and I'm going to add to that since he got into some marketing lingo with the SWOT analysis.
As far as selecting what product to sell, I recommend to all newbies grasping a solid understanding of another term called the "PRODUCT LIFE CYCLE."
I'm going to do my best on explaining this and , fudjj or any other Salehoo staff please add to this.
The Product Life Cycle (PLC) consists of four stages: 1) Introduction of product, 2) Growth of product, 3) Maturation Stage, and 4) the Decline stage of the product.
I suggest anyone not familiar with this to Google it and read more!
Figuring out where your prospective product is on the PLC will help you determine if it's worth taking on.
In this business it's very easy to get ahold of products that are in the fourth stage (decline) at a very low price. For example, the other day I was browsing Via Trade sourcing for products and came across a lot of like 100 Nike arm-band Ipod holders. You could get them for something like 70 cents per unit, which I think is very alluring for newbies. However, I'd label that as a product at the end of the PLC....you can get it cheap, but you're going to have to sell it cheap, and you might have a hard time selling them in a reasonable amount of time.
Now I don't have a lot of room to stock inventory therefore I must turn my products over somewhat quickly. This is why I mainly sell store returned items. Most of them are in the "growth" or "maturity" stage of the PLC, meaning that they're still being advertised, still being sold in stores, and still wanted by the consumer.
I'm not knocking products that are at the end of the PLC, there's lots of thrift stores that specialize in that kind of stuff. If I had more room, I'd probably get products at the end of the PLC.
Now take a look at the flip side of the PLC, the introduction stage. If you can get your hands on those kinds of items you need to be aware that people generally may not be aware yet of the new item launching. However, it's pretty hard to get those kind of items at low cost. Take for example the Apple Ipad, a product I view as coming out of the introduction (because everyone knows about it) and going full-blown into the growth stage. If you get your hands on a pallet of those, you'd probably be lucky to turn a very small profit.
That's all for now. I hope that shines some light on things here. I'll be interested what some real pros like fudjj has to say in regards to the PLC and product selection.