Tips For Choosing The Most Profitable and Best eCommerce Niches
Have you ever wondered what the first three rules of finding profitable niches for dropshipping are?
Have you been left scratching your head, thinking that maybe drop shipping isn’t for you?
If so, this post will prepare you to start selling or help you turn your drop shipping business around.
eCommerce Niche Selection Research is Essential
So, you’re ready to start an eCommerce drop-ship business. Congratulations!
The first step is the biggest one of all. That step is not just saying that you “want to start an online business” but actually taking action and moving towards getting your first sale.
One of the largest mistakes that is made when starting an eCommerce drop shipping business is not enough research.
Many times at first glance, a niche can look like a gold mine ready to start bringing in the big bucks.
But, after some diligent research, it can quickly be found to be infiltrated and overrun with competitors. This would mean very little profit and the opposite of your goal.
Tip #1: The Importance of Pricing
There are three tips for selecting a profitable niche that will actually make money.
The first thing is always the price. That means the product’s price, what you’re going to sell this product for.
The average product price should be $200 or more.
This is because your average profit margin (when you are dropshipping and using our method) will be about 25% of the gross revenue.
What does that mean in practice?
Well, if you sold something like a water bottle for $8, you'd profit $2.
So you'd need to sell 100 just to make $200.
The same amount of time will go into processing an order for $20 as it will for processing an order for $200 or $2,000. If you’re going to be doing the work you might as well have a chance of making some real money on each sale.
It is important to note that although I do have websites that sell products for $999 and up, I have noticed customers placing an order that large prefer to call in to place their orders.
If you are comfortable on the phone, then this will not be a problem.
But if you want to run an online store where the majority of orders come in before the customer even contacts you, I would recommend selling items priced between $200 and $700.
Now, on the other hand, if it is something like a cell phone, that’s more than $200. That would pass the price test, but it would not pass the third test that you’ll hear about later.
Tip #2: Your eCommerce Niche Target Market
I have sold products online that appeal to the wealthy, products that appeal to the middle class, and products that appeal to lower-income households.
From all of my experience, I have learned that it is best to appeal to the upper-middle class, meaning online shoppers who have a household income of $100,000 or more.
It’s sad to say but if you sell products that appeal to low-income households you will have a lot more work to do.
Once we make sure our price is above $200, we look towards our target market.
Now, if you are involved with marketing at all (if you ever studied marketing) you’re familiar with demographics. And the truth is you could break up the world into probably a billion different demographics.
When people don’t have enough money or spend their last dollar to buy your products, you better believe they are going to have more questions.
They are going to be inspecting the items more carefully. If anything is wrong or even if they think anything is wrong, you are going to hear about it non-stop.
With the wealthy, it’s the same thing. When they are investing money or buying products, they expect a certain level of customer service that requires really a different type of business owner.
And there is nothing wrong with that.
But, just expect that if you’re going to go that route, you are going to be more of a concierge rather than someone that makes money online.
Again, that is why when we are looking at demographics. Remember, stick with the upper-middle class. I define that as having a combined household income of above $100,000 U.S. dollars.
When people have that kind of money, they are very comfortable with spending online. They are used to buying items that are $200 or more. They are not going to be calling or emailing you as much.
So again, this demographic makes niche selection a lot easier. It makes your business run a lot smoother. It makes it a lot more profitable if you choose niches that fall into that target demographic. If that’s who the products appeal to.
Tip #3: eCommerce Brand Loyalty
The final tip is just as important as the first two regarding your target demographic and pricing.
Now, we will talk about brand loyalty. As was mentioned earlier that while cell phones fall into the price range criteria, they don’t meet one of my other criteria and that is because of the brand loyalty.
When someone is going to buy a cell phone, in general, they are going to buy an iPhone or they are going to buy another Android phone, they pretty much already have a brand in their head of what product they want.
Same thing with people that are going to buy headphones.
There are probably four or five big headphone companies. Right? You have Sony, Bose, Beats, and Sennheiser. These are all big companies and people often have a favorite.
So the third thing that you are going to look for when trying to choose a profitable niche is to pick an industry that has no brand loyalty. It’s going to make a big difference.
That’s because if you try to sell in a niche where people already know what company they want to buy from, it’s going to make it that much harder for you to get dropship suppliers.
It'll be harder for you to actually be able to sell these products, and harder for you to be able to compete in terms of price.
Finding a Profitable Niche Recap:
Remember these three rules for profitable and effective eCommerce niche selection:
- Know the target price
- Know your target demographic
- Avoid niches with brand loyalty
This will get your dropshipping business on its way to profitability. Good luck product-hunting!