Now that you know where to look to do the research that precedes selecting a niche for dropshipping, the next question arises- what the research is that you should be doing? What are the factors to check when you choose a niche, but most importantly, why are they so important?
Research might sound like an unnecessary step in the race to start an online store and count your dollars, but all successful entrepreneurs study first and then take action.
Imagine you decide to sell a beautiful Indian textile: by all means, it is a unique product; but your target audience resides in the Netherlands. While the product is lovely and inexpensive, the material is suited to tropical temperatures, and Dutch weather is anything but that. Now even though the product is excellent, sales might be downright terrible, and you have nothing to blame except the lack of research.
We have all heard that ‘a great marketer can sell anything’, but why sell something that does not add value to the customers’ lives?
The answer to ‘What product should I sell’ is a combination of multiple factors that need to be considered before the decision is made. From cost analysis to demand, there are multiple variables to selling a product online, but don’t worry--they can all be covered in a day or two’s work!
Additionally, your product needn’t score a 10 in every single of the below factors, but knowing where your product stands will help your ecommerce business.
Before we delve into the details, here’s an overview to what you need to keep in mind when selecting a niche:
1. What is the wholesale price of the item, and what profit margin is available to you?
2. What is the size of the market?
3. What does the target market look like?
4. What sort of competition can you expect to face?
5. Is the dropshipping niche steady or just a fad?
6. Is the product available locally?
7. What would the shipping time for the product be?
8. Can you find reliable suppliers for the niche?
9. Is the product perishable/disposable/renewable or seasonal?
Let’s dive right in and explore the above points!
1. What is the wholesale price of the item, and what profit margin is available to you?
Once you have a few product ideas on your hand for your dropshipping business, the first step is to check the general retail price of the products in the market and compare it with the wholesale prices you will be able to purchase the product for.
On Spocket, the listing prices and the suggested retail prices can give you an idea of the profit margin.
However, that is the price of the product excluding the shipping costs and possibly customs. If your profit margin can still be sustained after the extra charges are added to the wholesale price, then the niche is good to go.
If the product is incredibly unique, a slightly higher retail price would not be a deterrent for purchases, provided that there is demand for the product, but with products that can be sourced from a competitor at a lower price but the same quality, you would want to think twice.
For example, wooden home decor signs show an average of $35-45 in terms of retail price, and these products have a $10 wholesale price on Spocket.
Add to that a $3.95 domestic shipping cost, and you have a profit of about $32 dollars, which is a great chunk.
However, shipping abroad would cost you $22, which would mean just a $13 profit margin.
Also check for processing fees which are 2.75% of your sale, as well as custom duties, if applicable. Lastly, you might also want to consider the cost per acquisition: how much money you are spending in advertising to get a sale.
This will give you a fair idea on what to expect from the niche, and how to maximise your profits.
2. What is the size of the market?
Narrow niche ideas are picking up: this online store sells only scissors of different types, but with much gusto:
While this may seem like a small niche, the market size is quite huge, considering everyone uses scissors at some point: and their speciality is the one product that they sell.
You might want to check Google trends for the amount of traffic keywords related to your niche generate: for example, a great number of people search for shoes on search engines such as Google, but perhaps not as many will be looking for red shoes sized 8.
A fairly broad niche with enough demand for your store to sustain and grow your ecommerce store seems like a great solution: but general stores, which seem to have the widest possible audience range may not be exactly the best.
We have found that niche based stores can focus on a select bunch of people, and gain higher conversions. This is because general stores are often unable to establish a relationship with their customers in terms of interest or passion.
All good products either solve a problem or cater to a passion, and your goal with your product is to make the potential customer realize the problem that you are solving or show them how their passion leads to this product. With general stores, it is difficult to hit these specific goals with your ads.
And obviously, most people would rather buy sportswear from Nike than the sport section of Walmart.
How much you can sell is definitely going to depend on the size of the market, so this step is crucial: use Google Keywords planner, look up similar products on sites such as Amazon and make the most out of social media for research.
3. What does the target market look like?
With regards to online shopping, different sections of customers prefer not just different products, but also have different reasons for purchasing a product. You will need a basic idea of what your target customer will look like to decide which products in the particular niches will fit best with your store and how exactly you will sell them.
For example, if you sell to the UK, while you are a resident in the US, you might want to make sure customer support is available to them without too much of a delay or if you target college students, payment methods such as PayPal are available.
For example, the company Old Time Candy sells..you guessed it: candies from the 50s, 60s, 70s, 80s and 90s.
A lot of their audience comprises of Baby Boomers. With this audience, it is essential to create a personal connection: phone support would work better than chat based support, referral programs might work significantly better than online reviews in obtaining conversions, and loyalty programs might be a great bonus. You would also want to ensure that the journey from the shopping cart to the purchase is easy!
Check into this before your finalize a niche!
4. What sort of competition can you expect to face?
Is the market saturated with thousands of stores selling the very same product as you? What are the popular products in your selected niches, and who are the companies selling them?
If there are no competitors for your product, is it a product that no one would purchase? You must find out if your product is an innovation or simply unnecessary by delving into market research. Alternatively, if there are a few competitors, but are all performing poorly, that may be a cue that the product does not sell well. If they are making great sales, then you can rest assured that the niche is a good one.
If there are a number of competitors, you might want to think on a way to differentiate your product and brand from your competitors.
Marc Chapon, who built his business in the pet niche, says that no market is saturated: he simply made sure that every visitor received a free e-book with recipes for dogs, photos, tips and stories on pet care.
He updated blog posts regularly to help customers with more than just products. He provided the best customer experience possible to his customers, and made $178,490 in just three months.
%201.svg)
.svg)
