Part 1: Finding Your Niche
This is an important first step. It is actually on of the first major business decisions that you will have to make.
How to properly choose your niche:
1. Measuring demand:
There must be an active population of people interested and willing to buy the products you want to sell.
Luckily, there are free online tools that can help you properly measure demand.
First, there is the Google keyword tool. When using this tool, make sure that you are searching in the correct locations (countries), and that you investigate what specific keywords draw traffic. [tip: look for niches that use diverse, long, words in their search-this typically leads to generations of more targeted traffic].
Google Trends offers similar data. Important Note: [spy on competing drop shippers by googling your product and seeing how many sites pop up. Make sure there are not too many, or too little competing drop shippers in your niche. Too little means there is not a large enough market for that product. Too many means you will have a hard time carving out market space for yourself.]
Google ranks sites based off of how many “unique linking domains” are connected to that site. This basically means Google ranks sites on how many other, stand alone sites, offer links back to the original site. A good way to measure this is with SEOMoz. Google’s other linking criteria is based off of LRD or “linking root domains." 0-50 LRD is a little too low for a market. 50-300 is a good market size. 300 and up is too large. There will be too much competition and too many big players.
Another thing to consider is your page rank. If you fall in the 3rd-5th place then you are in a proper market. If you are higher than this, it is too easy. There is almost no competition and almost no market. If you are beyond this point, then you are in a market that has grown too large.
2. Measure online compatibility:
There must be a need for people to buy your product online.
What we mean by this is, people should be turning to the internet when seeking out your product. For example, let's say you are considering selling gasoline online. People will most likely prefer to buy their gasoline at brick-and-mortar gas stations. Therefore, your product does not have good compatibility and will most likely suffer with traffic.
An example of an internet-compatible product would be screen protectors for smartphones. In fact, on August 20th, 41,443 units were sold just on eBay.
This last example brings up two points:
First, screen protectors are sold at Best Buy, Verizon, AT&T, T-Mobile, you name it. Obviously, this product is not found exclusively online. Your product does not have to be found exclusively online. However, it must have a solid base of customers looking for the convenience of buying online. A good way of measuring this is by utilizing the Google tools described above.
Second, 41,443 units were sold on eBay. This is not particularly a good thing. If you plan on becoming a drop shipper through platforms like eBay and Amazon, then have at it. However, if you want to operate your own free-standing store, this is a red flag. You must make sure that there is market space for your product/niche.
Do not choose a product that people typically buy on Amazon or eBay. In this case, the customer will never go to your site. 99% of the time they will prefer to go through the trusted, verified, mega-giant that eBay and Amazon are.
3. Targeting The Golden Demographics:
There are certain demographics that breed reliable, dedicated, and frequent buyers. These are some general categories that these people lie in:
- Hobbyists: Hobbies fill people's leisure time. People look forward to their hobby all week. It is the reason why golf courses, Dick's Sporting Goods, Cabela's, and many others do so well. Hobbyists are willing to pay a lot for their equipment. To many, their hobby is their passion.
- Businesses: Businesses have needs to fill. It could anything from poster boards, pens, staplers, chairs, etc. Businesses typically make consistent, large orders.
- Governments: Governments agencies have needs, usually quite similar to the needs of a business. Governments make consistent, large orders. Government agencies are more willing to spend because it is not their money they are spending. They are spending money out of a budget, meaning they will commonly buy consistently from one easy source to keep things easy.
- Needs: Find something that disquises itself as a need. There are some things that people cannot seem to go without. An example of this is vitamins. Vitacost makes a killing from drop shipping health supplements, mulit-vitamins, protein shake mix, etc. People invested into their health will consistently buy these products. Another example are left-handed products. Lefties need the same tools we right-handers use, however, they are typically hard to find. Drop shippers can capitalize on this market by providing specialized left-handed products to their customers.
4. Other things to keep in mind
There are some more things to keep in mind when deciding your niche:
- Repeat Buyers: Aim to find a niche that breeds repeat customers. Find products that need to be replaced often. You will see the same customers coming back to your site to buy time and time again. An example of this is vape juice. Vape juice runs out, and when it does your customers will be ordering from you again and again.
- Accessories: Selling accessories is a great way to make additional money on any order. Accessories come with low margins because they are just add-on costs. You can sell them for a higher price because they add a lot of additional value. For example, let's say you are selling electric guitars. A customer can buy just the guitar, but he will gain a lot more value from it if he has strings, chords, and an amplifier to go with it. In the customer's mind, if he/she has already bought the guitar, then they might as well buy some more smaller things to make it that much better.
- Price point: You have to make sure you sell products at a good price. Expensive products mean you do not have to sell many units to make a lot of money. However, the higher the price, the more apprehensive the buyer will be towards making a purchase. This means more time spent on customer-service: talking on the phone with customers, answering in-depth questions, dealing with returns, etc.
Smaller items are easier buys for customers. Not many people are gonna sweat a $40 purchase.
Therefore, our recommended retail price for products is in the $40-$200 range. This price point promotes the most profit while limiting the need for increased customer service and customer fright.
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