How to choose a niche for a successful dropshipping business: 9 criteria
06.06.2023 18:40
For successful online sales, dropshipping is a fairly easy-to-implement business model. How to start your own business? The first and most important step is to choose a product niche.
The choice of the category of goods that you intend to sell depends on the profitability of your chosen business. There are hundreds of niches, and it is very easy to get lost in their diversity. Pay attention to the criteria that will help you assess the prospects of a niche.
№1. Assess the level of demand
To measure the demand for your products on the Internet, you can use a keyword planner by entering queries relevant to your business in the search. However, you need to have a Google ads account set up for this. You can find retail trends faster and easier with the answerthepublic service. Here, you can subscribe to trending queries and monitor their dynamics.
Keep in mind that more specific and less frequent long-tail keywords, which generate the most traffic from search engines, will show a more accurate picture.
Another important marker of successful niche selection is when a query has many variations that are interesting to users. This indicates that the niche is multifaceted and reveals different interests of the audience.
However, to get more detailed information about consumer preferences, Google Trends is a good option. This tool shows data that the keyword planner does not have access to:
- Query dynamics. It is better when a niche changes (demand for a certain type of product grows) over a certain period of time. Google trends can tell you this. For example, we analysed the change in demand for vapes over the past three months and found that it was uneven.
- The dynamics of query popularity. This service also allows you to track which of the related queries is gaining popularity and which is already popular.
- Geography of the search query. The tool shows the level of interest in the selected product in different regions of the country. For example, at the time of writing, vapes are most popular in Ternopil, Rivne, and Zhytomyr regions. This criterion is needed to plan advertising campaigns on social media or in search engines more accurately.
- Seasonality of search. In Google Trends, you can set up a search for a particular product by month, season, or even year. While the demand for e-cigarettes and vapes is more or less even throughout the year, demand for other products, such as an air mattress, naturally increases in summer.
A niche must have a key advantage in order to compete with other market players in terms of price, assortment, or customer service.
Auxiliary demand analysis tools
You can also use free or paid services to find the most promising product categories:
✓ Trendhunter - uses artificial intelligence to find popular products,
✓ Sell the Trend is a universal platform for finding trending products that analyses data from AliExpress, Amazon, and many Shopify stores.
✓ SaleHoo provides an optimal selection of profitable trading niches and suppliers of goods for running a dropshipping business.
✓ Asify is a popular Chrome extension that has access to all product information and searches for products according to the parameters you need.
✓ Oberlo is the most intuitive service for running a direct delivery business. However, it has a limitation: it is available only for Shopify CMS users.
№2. Research competitors and forecast marketing metrics
After you have selected niche candidates, study their competitive environment. The easiest way to conduct competitor analysis is to use the organic search results of competing websites in a search engine. This way, you will find out which companies have done a good job of SEO optimisation of their websites, but you will not understand their sales dynamics and the popularity of their products on the market.
You can analyse the level of competition by the coverage of competitors' paid advertising in Keyword Planner, semrush, similarweb, Google Alerts, etc.
In general, looking back at competitors is not an absolute strategy, because competitors are real people and can make mistakes. And adopting someone else's negative experience can lead to unexpected consequences.
To predict sales more accurately, identify marketing indicators that affect website conversion:
- Traffic channels, i.e. where customers will come from (organic traffic from Google or advertising traffic from advertising),
- the probable number of conversions to your website,
- the number of impressions and clicks on your advert or banner,
- the number of customers who will make repeat purchases, and other metrics.
№3. Set adequate prices
The main income of dropshippers is the markup on the goods, i.e. the margin. However, the margin is usually small for expensive goods, so it is advisable to choose niches in the dropshipping business where you can set a margin of 30 to 200% of the purchase price. Use price comparison services. For example, on spocket, you can view retail prices and recommended retail prices, which will give you an idea of the profit margin. However, this does not include shipping and customs costs.
In popular niches, the profit margins are usually lower, as you have to keep your prices low to stay competitive.
№4. Look for niches with a wide range of products
Products that can be used to complement the main product are profitable for running a dropshipping business. These can be clothing accessories, phone accessories, car accessories, pet accessories, and others. They allow you to set a significant margin, while customers will be less sensitive to the cost. The secret is that people spend more time to find an expensive product at a lower price. And when it comes to inexpensive items such as accessories, buyers don't think twice and don't save much money.
№5. Analyse customer preferences
Google trends are great. However, it is worth researching the interests and preferences of different people to find the best niche for dropshipping. By the way, browsing TikTok trends is a great way to do this, in particular by searching for relevant hashtags.
For example, the popular hashtag #tiktoktokmademebuyit collects video reviews of users who have purchased goods on Amazon. You can find a lot of interesting and creative ideas for online trading using this hashtag.
In addition, monitor online resources such as WatchCount.com, where you can assess the level of popularity of certain products, as well as community stores that promote interesting and new consumer products and trends:
✓ Wanelo
✓ The Fancy
✓ Etsy
✓ Pinterest.
For example, on Wanelo, you can find more than 550,000 stores that carry all the well-known big brands and small retailers.
№6. Look for trendy products that are not available in shops near your home
The easiest place to buy gardening tools or household items is in stores that are within walking distance of your home. However, where can you buy, say, anime products, manga popular among young people, anime boxes or magic kits?
Focus on niche products that are difficult to find in local retail outlets. This is mainly the area of leisure, souvenirs and hobbies.
№7. Pay attention to niches with rare product updates
Since dropshippers do not have their own warehouse, they do not need to worry about storing large quantities of products. However, you have to spend time and money on promoting products that can go out of fashion very quickly. It is most profitable to sell products with infrequent line updates that will not lose their relevance for a long time. These can be sales of collector's items, such as toys or souvenirs, rare items, interior items, etc.
№8. Selling disposable items and consumables
Regular sales and loyal customers are the key to the success of any business. You have the best chance of growing customer-friends in niches where they order something periodically and regularly. These can be consumables for the beauty industry - nail, hairdressing, cosmetology; medical products and medical equipment, testers and consumables.
№9. Increase the value of products
To make your product stand out from the competition and charge a higher margin, add value to its presentation. There are many ways to increase the value of a product in the eyes of customers.
The most important of these is the creation of educational content: selling multi-component products that require explanations and the purchase of components, individual consultations on installation or assembly. It also means creating high-quality detailed content for product cards.
In general, to run a successful business, focus on the density of the local market, your own calculations of traffic and profitability, the margin of goods and their stability in consumer preferences, i.e. relevance. Products with less predictable demand and less dependence on seasonality and popularity, even with a low initial price, have a better chance of making it in the dropshipping business than high-frequency popular categories.
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