Firstly, if you haven’t read my guide on dropshipping, go check it out before reading this article because this will go more in-depth rather than just cover the basics, so you should have a good understanding of how dropshipping works beforehand.
The most common mistake I see people make when starting a dropshipping store is picking an over-saturated niche.
In fact, “No Market Need” is the reason 42% start-ups fail. This is why researching the market before jumping into a new niche is critical to the success of your store.
Picking a good niche is key to succeeding with dropshipping.
I’m going to go through a couple of important factors that you must consider when selecting your store’s niche. I can’t stress how important this part is: there’s no point in going forward if there’s no market need for your product.
Factor 1: Market SizeWithout any demand for your product, you won’t be selling much.
The easiest way to go about learning more about the market for your product is using the Google Keyword Planner. What you want to look for is the amount of monthly searches your primary keyword gets – this gives us an idea of how many people are googling your product monthly.
The number of actual searches for your product will be higher than the number you get because of all the long tail keywords that people also use.
This keyword for example has a good amount of monthly searches. If you try to go for a keyword with thousands of monthly searches, odds are the competition will be nearly impossible to beat and you won’t make any sales.
Another way you can find out more about the market size is by looking at the subreddit for your niche. The subreddit for flashlights has 14000 readers – not bad! This tells us that there’s a community full of people that would be interested in our product.
Evaluating market size of the product you are thinking of promoting is critical. You want a market big enough that there’s actual customers for you to sell to, but small enough that you actually stand a chance against your competitors.
Factor 2: TrendAnother important factor when picking a niche is if the popularity of it is going up or down. You want to invest in a business that is increasing in popularity and not going down.
The best way to go about this is using Google Trends and type in your main niche keyword and look at the trend.
Using the same niche as before as an example, this would be a red flag. The trend is steadily going down and therefore it isn’t a business that you want to get yourself into.
However, this niche would be a better example for what a good trend graph could look like. These trendy weight loss tea products are a blooming business, which is exactly what you’re looking for when looking for a niche. A niche that is constantly flat could also work well if everything else checks out.
Factor 3: CompetitionWhen choosing a niche, people often get scared of competition. Competition isn’t always necessarily a bad thing – if there’s competition, it means that there is money to be made.
A simple google search usually reveals most of your competition, both in the ads and search results. If their ads are up and running, it means that they are making money with the niche which is a good sign. For example, a quick search on google for LED flashlights revealed all these competitors and more.
Once you know your competitors, you can analyze their websites and see what kind of competition you’re up against. Looking at these results, I can tell that there’s many established flashlights stores, and that it would be hard to rank against them. This would be another red flag for the flashlights niche.
Another case would be that you have a lot of competitors, but have websites that look like they haven’t been updated in years with any new products or design. You want to make sure that your site will be able to stand out from competition, or you will need to invest a lot of money to compete with the established websites.
Factor 4: SeasonalityYou must also consider the seasonality of your niche. For example, you wouldn’t want to start a dropshipping business for Halloween costumes during Christmas. Niches can be broken down into 3 different categories of seasonality.
This is the best category for your product to be in when looking for a niche. Something that has a constant demand that doesn’t spike or drop throughout the year.
This includes all the products that do good for about half the year, but drop for the other half. For example, outdoor stuff such as pool equipment or sporting goods peak during the spring and summer but drop during the colder seasons. This isn’t ideal, but can still be considered as you can still make good sales during the peaking seasons.
This includes anything that spikes for a couple of weeks but drops for the rest of the year. For example, any Halloween or Christmas decorations would make a lot of money during the peak, but completely drop afterwards, and therefore isn’t a good business to get into for passive income.
Factor 5: Local AvailabilityYou have to remember that people like you and me are the potential customers. That is why as internet marketers, we have to adopt the point of view of these potential customers. If your product is something that is available at the local convenience store or at Wal-Mart, most people would go to those places before your website.
However, if you’re offering something very niche-specific that wouldn’t really be found anywhere locally, you have more potential customers coming to the internet looking for those products.
For examples, electronics and video games are found everywhere locally, but items related to specific hobbies or niches aren’t which is why more people are ready to buy those products online.
Conclusion:Picking the right niche is critical to the success of your store.
The majority of dropshipping start-ups fail because people jump into niches that are over-saturated or simply have no demand at all.
You want to find a very specific niche that has a well-targeted audience, and a lot of demand online.
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