An important step when launching a dropshipping business choosing the niche that you want to sell products.
This can be daunting as the choice is obviously huge. Essentially, dropshipping opportunities are so wide these days, you could attempt to start an eCommerce business in any product category and you will find a supplier to facilitate your needs.
This means that a process of narrowing-down has to take place to prevent choice overload.
In this article, we will look at some steps you should take when choosing a product niche. These will help ensure that your dropshipping business gets off to the best start for you.
So if you are ready? Let’s jump to it…
Popular Product Categories
Certain categories lend themselves to eCommerce sales. When Jeff Bezos first started Amazon, he used the logic of selling well online and opted for books.
The customer doesn’t need to look at a book or try it on to make a purchase, there are millions of books available and package and shipping could be standardized.
The internet and consumer online buying habits have changed a lot since the mid-90s and the start of Amazon, however, there are still categories that perform better online.
Let’s take a look.
Within these are clearly is a ton of product opportunities. It is important to understand that these are also top-level categories.
These can be broken down into subcategories that could be the niche that you choose, (Yoga in health for example, or sewing in hobbies).
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Sell what you know
Beyond seeing what’s popular, choosing a niche in a subject that you know or are passionate about so that you are willing to learn, is highly recommended.
We discussed here, how being an expert in your niche is a way of differentiating yourself from the competition and will help you offer superior customer service.
Knowing the product will also enable you to empathize with your target audience and think as they do.
Take hiking for example. If you have used the various products you are selling in real-life situations, you will bring that knowledge to your product descriptions and recommendations.
If you decide to write a blog for your eCommerce store, it will be a lot easier to create content if you know your niche.
Finally, putting in the work to succeed with a dropshipping store is a lot more fun if you are interested in the product niche.
So, simply write down all your hobbies and interests and see if this list presents any potential opportunities for dropshipping.
Do you understand the target audience?
This is connected to the above point about knowing your niche. Do you understand the needs of your target audience?
An example of a bad niche choice would be someone choosing the sewing niche because they like the profit margins on sewing machines, yet they have never touched so much as a needle and thread.
How can you hope to understand your target audience in this situation? Do you know firsthand what considerations they may have before making a purchase?
Understanding your target audience is a factor that impacts everything from your choice of logo design, the platform for your marketing efforts, and the way you sell the products in your store.
This means that it is imperative you choose a niche where you have a hope of getting inside the head of your audience. Fail at this and you are starting your business at a huge disadvantage.
Furthermore, you will need to be abreast with the latest innovations related to your niche. Your customers will expect this and if you drop the ball here, they will go elsewhere.
If you have followed the above points, you will have reached a stage where 2 or 3 product niches may be in contention.
Now, you can do a more in-depth analysis to zero down on the one that will become your dropship niche.
Essentially, you will want to know that there is a ready buying market for your product choices and that you will be able to sell them at a profit.
Let’s see how you can analyze this
Competition is a double-edged sword. On the one hand, seeing lots of players in a marketplace means there is demand for the product and it is selling well.
On the other hand, the increased competition means it can be difficult to “break-in” and compete.
It will take a larger marketing budget and profit margins may be squeezed if you are forced to lower your prices in line with the competition.
Unless you have a big differentiating factor (top-level expertise or a product that is notably superior to that being sold by the competition), you should avoid saturated product niches.
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Product Price Point
The product price point is one factor that may help you choose one product area over another.
The dropshipping business model generally relies on percentages. You may add 10% on a product price over the supplier’s cost, which will be your profit.
Therefore, the sale price of the product directly affects the income you might earn.
For example, 10% of a $50 product is $5. Swap this and sell a $500 product and your profit is $50 per sale.
There are important caveats here of course. A buyer is more cautious when looking to purchase a $500 product as more money is at stake.
That being said, plenty of high ticket items enjoy large sales online (laptops and phones for instance). Identify these and you could be on to a winner.
Size of the product
We talked here about the psychological impact of free shipping and how this offer encourages the buyer to make a purchase.
This means that light, easy to package products have an advantage. (This goes back to Bezos and his books with the launch of Amazon).
Cosmetics, personal electronics, etc would fall into this category too. White goods certainly wouldn’t.
The point being, when choosing a niche, consider how large the average items are and whether you can compete on shipping with other retailers.
Avoiding bulky products is recommended.
Smaller ones will allow you to offer free shipping, which is a great way of increasing sales.
And there you have it, some great tips when choosing a niche for your dropshipping business.
Follow these and your enterprise should get off to a great start in a niche that will provide consistent sales and good profits.