People often make up their minds to start a drop shipping business long before they consider the specific drop shipping niche or product they will focus on. Choosing the right drop shipping niche is one of the biggest challenges you will face in setting up your drop shipping business. Some people pick products based on their passion, others on what they think will sell well. While this may be a good starting point, the journey to a profitable business begins with more than simply selling products you like or know. Below are some steps you can follow to help you choose a good drop ship niche.
Step #1: Evaluating the Demand
It is surprising to think that many people start a drop shipping business without first evaluating if there is sufficient demand for the products they are going to sell. There is an abundance of online tools you can use to try and gauge the demand for various products, but the ones below will give you a good head start.
• Amazon / eBay: Amazon and eBay are good places to get inspiration and see what other people are selling, what is popular, and what is not. There are hundreds of different product categories on these sites, and browsing through may even give you some new ideas.
•Google Trends: Google Trends provides information about search volumes, demographics, seasonality and search trends for a variety of products.
•Google Adwords: The Keyword Planner tool within the adwords platform can be used to check out how popular certain search terms are. You can use it to see how many times a product (or product variant) is searched for each month.
•Pinterest: You can use Pinterest to search for products of interest and see how popular they are via the number of shares and comments attached to each.
Step #2: Analysing the Competition
Analysing the competition is an important next step, but one that can prove quite tricky. On the one hand, a lot of competition means there is most likely a healthy demand for the product. But this means you will have to spend much more time and effort on SEO and advertising to build decent traffic to your site. On the other hand, little competition could mean there is little demand for the product, which will make it easier to get traffic to your site, but may not produce the volume of sales you require.
A great way to analyse your competition, is to search for websites on Google that are ranking highly for specific keywords. These sites are the ones you will have to compete against to get a high rank. When analysing the competition, you should consider the domains that link to the site, and the website authority. Quality inbound links from other sites to your competitors are a factor in ranking higher on Google, and will give you a good idea of what it takes to compete against them. Website authority (referred to as Page Rank by Google) also adds weight to the ranking. Any site with a Page Rank of 5 or more is considered to be a high-authority site, so if your potential competitors have a very high Page Rank, then you will face some really tough competition.
An easy way to check inbound links and website authority is to use the SearchStatus Firefox, a browser extension specifically for the Firefox browser.
Step # 3: Analyse the Niche
Your final step should be to objectively analyse the niche (or products) you have chosen. There are a couple of things you need to consider during this analysis:
• Selling Price: Most experts have a differing opinion on the best product price range to focus on, but on average it is in the $60 to $80 range.
• Profit Margin: Works in tandem with the selling price. A profit margin of 80% sounds brilliant, but doesn’t amount to much on $2 items.
• Market Size: The more established the market, the less you need to advertise to, or educate, people on the product.
• Product Rarity: Try and focus on products that can’t easily be found in shopping centres and stores. Products that lack rarity mean you are simply competing on price, which, depending on the product, can put you at a disadvantage.
• Product Longevity: Consider whether the products will become superseded regularly. Whilst you don’t need stock in a drop shipping business, you will need to keep your site up-to-date.
So, the bottom line is, the secret to finding a good product to drop ship is research and more research (but not too much!) Many people who try drop shipping fail because they blindly pick a product, or products, and hope to make some sales. Take some time to evaluate a niche and you will already be ahead of the pack.