One of the most exciting things about starting an online drop shipping business is that you can sell practically anything you want. If you have a supplier, good profits and a cost-effective way to ship things, there are unlimited dropshipping business opportunities that still exist for eCommerce stores.
Just because you theoretically CAN sell things online, it doesn't necessarily mean that you SHOULD; there are a whole lot of things that make no sense at all to sell online. That said, there are so many things that you CAN sell online - things that definitely will lead to nice profits - we've never come close to being able to build an online store for every excellent eCommerce niche that we have found!
Here, I'll show you how we go about choosing a product niche for our web stores - what to look for and what to avoid.
"The Big 4" Keys to Choosing a Niche for Your Drop Shipping Business
There are 4 things that all successful eCommerce drop shipping websites have in common. Without these 4 things, your chances of making money online are not good.
1. Poor Selection with Mega Retailers
We list this first because it is the most important factor of them all. If someone can drive down the road and pick up pretty much everything you sell at the local Walmart, Best Buy, Target, Home Depot, etc., there is little chance that they are going to purchase your products. The reason is simple ... when people decide they want something, they want it now! Besides, they may even have an opportunity to see and try the product at a local store before purchasing it.
In this day and age, a ton of people buy online, so it's not just the local availability of products that you need to concern yourself with. If online "Mega-Retailers" like Amazon have every product that you sell at competitive prices, you stand little chance of competing against their billion dollar advertising budgets.
As big as Amazon is, they really do not carry everything. There are plenty of product niches where Amazon only carries a few brands or a handful of products when those niches actually have far more brands and products available.
Also, a large number of the products on Amazon are not actually being sold by Amazon. They are being sold by companies listing as third parties on the Amazon Marketplace. Because Amazon takes a HUGE cut as their commission, those companies often have to raise their prices, so they aren't always the most competitively priced products.
If you can come up with a product niche that is being under-served both locally and online (meaning that either the selection is poor or the prices are), you potentially have a winning product niche!
2. High Price Point
Unfortunately, the days of being able to toss up a website and rank quickly are long gone for most product niches. There is far too much online competition and Google's algorithm is now skewed to favor well known, established websites. That doesn't mean that you can't eventually overtake those websites in the search engine listings, but most people who get into eCommerce do so because they want to start making money NOW - not 2-3-4-5 years from now!
In order to start making solid money immediately, there are no two ways around it, you are gong to need to advertise right out of the gate. Although it is less expensive to advertise online than it is to pay for TV or radio airtime, it can still be a major expense, so you need to make sure that you are selling products that earn you enough profit to pay for that advertising - with a decent amount left over to put into your pocket.
What do you think you earn more profit on ... something that sells for $39.95 or something that sells for $399.95? (Please tell me, you picked the higher priced product!)
Although there are always exceptions to every rule, you can count on advertising to cost anywhere from $20 to $60 for each order that you receive from that advertising (for most stores that we've built, it is somewhere between $30 and $40 per conversion). That means that no matter how great your profit margin is on that $39.95 product, you might very well be losing money every time you make a sale - especially after you pay to ship it to your customer. (You certainly aren't going to make enough to write home about!)
In order to immediately start earning money online, you are going to need to sell higher-priced products. Something that sells for nearly $400 will typically have a profit of at least $80. You can definitely afford to cough up $30-$40 every time someone hands you $80 in return, right? Imagine how much happier you will be to hand over $30-$40 make when your average product costs $600, $800, $1,000 or more!
Really, this should be a no-brainer. Even if you do manage to eke out a measly $5 of profit on a $39.95 sale, would you rather put in the work of processing 20 orders to earn $100 or 1-2 orders for that same profit?
3. Shopper Demand
You may have found a great product that is not sold anywhere and it may have an incredible price point and profit, but if nobody's looking to buy it, you might as well be selling used baby diapers.
There are tons of online tools that will tell you how many people are searching for any given product type - tools that will tell you all of the different search phrases that people use to find those products, as well. The most common one that people use is the Google Keyword Planner, mostly because it is free.
Our general rule of thumb is that if there are at least 2,000 searches per month for your general product type, it is a niche worth exploring. Anything much less than that simply takes too much time and effort to build an online store around.
BONUS TIP: Take particular note of the search phrases being used. If you see a decent amount of searches being made with words like "sale", "buy", "discount", etc., specific product names or models, or even things like colors or materials, it shows very high buying intent and those people practically have credit cards in their hands as they are searching.
4. No Seasonality
It takes a considerable amount of time and effort to build a really good online store and, although it doesn't cost a ton, there are ongoing monthly costs to keeping a website online - costs that could range from $30-$100 (or more) per month, depending on the type of store and the plugins you may decide to use with it.
If you are selling things at a profit every month, it's easy to absorb the monthly fixed website expenses. If, however, you are only making money for 1-3 months because your website sells very seasonal products, it may not be worth your time, effort and those monthly carrying costs.
The most obvious example of a very seasonal store is one that only sells Halloween costumes or Christmas tree ornaments. There are others that you may not think of, however, like stores that only sell things for swimming pools, heaters for the home, ice fishing gear, etc.
Although all stores - both brick and mortar and online - have natural peaks and valleys throughout the year, you want to make sure that even during the worst months, there is still enough demand for your products and that the demand is fairly consistent throughout the year (perhaps with a "super-demand" surge near the Christmas holidays). You can use Google Trends to see the monthly searches for any phrase you type in, which is about as close as you are going to get to judging the seasonal demand for something online.
What Are Good Drop Shipping Business Ideas?
Ah, the million dollar question ...
We have set up more than 150 of our own successful online drop shipping businesses so we definitely know about some amazing, winning niches. We have a special folder with dozens upon dozens of ideas for future websites, too!
Sorry, but we're not going to make it that easy for you by just telling you what all of the great niches are. Part of your ongoing success depends on your ability to use your own powers of observation as well as a little bit of your brain to figure it out on your own.
That said, we can certainly give you a few ways that we use to come up with winning product niche ideas (we list far more in our Academy).
- Whether you are driving, watching TV or attending an event, keep your eyes and mind open to all the things that you see. Constantly look for things people are using or things in the background that you don't see at stores every day. If you have to ask yourself, "where do you buy that?" you may have a winning product niche!
- Thumb through the myriad of magazines that are available at a good magazine stand - especially concentrating on the things that are being advertised. I guarantee you will find a ton of products that you never knew existed!
- Think of all the many jobs people do and the things they need to do those jobs. Then, think of all the different things people like to do when they are not at work and all of the things they might need to buy to do those things.
OK, I Found My Winning Drop Shipping Niche, Now What?
Although there is nothing more important than building your website around a product line that you actually have a solid chance of making money with, it is also one of the easiest things to do. The hardest thing of all comes next - finding a supplier who is willing to give you wholesale prices..
Now, if you have a TON of money, pretty much any manufacturer will sell to you at wholesale prices if you agree to buy a whole lot of their merchandise. Unfortunately, most of us do not have tens of thousands, hundreds of thousands or millions of dollars lying around to invest in a massive bulk order, nor do we have the warehouse space and systems in place to process orders and get them to our customers.
This is why we recommend the drop ship business model - something we cover extensively in our online course here. With drop shipping, you don't have to pre-purchase any products and your supplier ships them directly to your customer for you. Talk about convenient, you save time and a ton of money!
In The Store Coach Academy we lay out the same drop shipping business plan that we have used for all of our successful eCommerce websites. We help you every step of the way, from choosing a product niche to finding drop ship suppliers, from optimizing your store for search engines to marketing it, from showing you how to increase your conversion rates to managing your time effectively. Heck, we even show you how to sell your online store for a huge lump-sum payoff if you want! It's sort of a drop shipping for dummies program (but you're no dummy or you wouldn't even be pursuing this!).
That said, even people who have gone through the course and heard our advice on how to get drop ship suppliers still seem to have trouble with that most crucial step. Some people are shy, some are very nervous about talking to people they don't know and, sorry to say it, but some people are just not very motivated (the nicest way I could put it). And, of course, some people are just super busy at their "real job" and don't have the time necessary to deal with finding suppliers, building a website, setting up marketing, etc.
If you'd rather just buy an already successful eCommerce business, we even have numerous drop shipping businesses for sale in our Website Marketplace!