How to Choose an Ecommerce Niche
In the training that follows we will go into every detail of exactly what we do to build highly successful niche web stores, just like the ones selling for 5 and 6 (and sometimes even 7) figures in our Websites For Sale Marketplace!
Let's just say we have the "blueprint" for building successful niche stores, and every bit of it is right here in our training program! If you're serious about building your own successful web store, this is the program for you!
In the training that follows you will learn precisely how to...
- choose what product to sell based on demand & competition
- source dropship products at true wholesale prices
- launch your online store & optimize it for conversions
- get visitors & maximize your store's profits
There's no time like the present, so let's get started!
Just a few quick notes to help you get the most out of this training:
- Each step contains a 'Learn' section (indicated by the icon) that teaches you why the step is necessary, then an 'Execute' section (indicated by the icon) that indicates how to actually complete the step!
- The 'Learn' sections will sometimes be text, sometimes be video, and sometimes they'll be a combo of both. If you feel like you already have a good understanding of the topic being discussed you can jump straight to that section's 'Execute' step, but never skip an 'Execute' step or you'll break the process!
- You will often see links to guides throughout the training and these are standalone tutorials that supplement and support our core training. They can be vital in helping you understand a concept, but if you already have a good understanding of the topic in hand you can bypass that particular external guide.
1.1 The "Big 4" Factors Overview
Choosing a great product niche is one of the most (if not the very most) critical step of our process. If you don't choose a winning product niche up front, the chances of a smashing success store are significantly smaller!
In this section I'll introduce you to the "Big 4 Factors" but we won't actually brainstorm niches ideas or deeply analyze our ideas until later on. So at this point, just try to get a basic understanding of each of these 4 factors and why we have them.
Factor #1. Poor Selection with Mega Retailers
It's absolutely critical that we avoid direct competition with the major retailers of the web like Amazon. The "Mega-Retailers" of the world have billion dollar annual advertising budgets, and we don't, so it's truly vital that we find a product line that's being generally overlooked by these major retailers. The most frequent question I get from newbies to niche eCommerce is "how can I compete with Amazon?" and the answer is "you can't & you shouldn't try to!". Later on in this chapter I'll go into how to determine whether or not the Mega-Retailers are overlooking a product niche, but for now just know that this will be a major focus in choosing our niche!
Factor #2. High Price Point
With this type of niche eCommerce store you're not going to be making dozens and dozens of sales every day. (Sorry to burst your bubble, but you're probably not going to become the next eBay or Amazon or a household name.) You're not going to be able to rely on a crazy high sales volume to make up for a low amount of profit per order. So unless you're in this for the education and experience (instead of the money – doubtful!), you'll typically want to sell higher-priced products where you'll likely net a good $50+ per order. Typically, this means selling products that retail for at least $200 or more (given the fact that most products are going to have around a 20-40% profit margin when everything's said & done). Keep that in mind as we move into the brainstorming stage below!
Factor #3. Shopper Demand
Having a product niche that's "under the radar" is ideal, but at the same time it's critical to ensure that people are actually looking for the items you want to sell. If you're selling something that's too absurd and unusual, there won't be enough demand to drive the traffic needed to make regular and consistent sales. Later on I'll show you how to verify that shoppers are searching for your niche idea, but for now just be aware that verifying search volume is vital to choosing a winning niche!
Factor #4. Seasonality
Virtually every niche out there is "seasonal" to a certain extent. Most product lines get a “bump” around Christmas and also sell particularly well a specific season of the year. So you're not looking for a niche that has perfectly even demand throughout the entire year. You just need to avoid product lines that only sell well for a short period of time each year (3 months or less!), particularly for your first store or two. The most obvious examples of highly seasonal niches are Halloween costumes and Christmas trees (those that coincide with a specific holiday). But you also want to avoid product lines that have a sharp decline in demand for long stretches of the year. We'll discuss this more when we analyze our niche ideas, but try to keep this in mind as you brainstorm niche ideas in the next section.
Again, you don't need to know how to actually analyze niche ideas yet - we will do that after the brainstorming step - but I just wanted to introduce you to the "Big 4 Factors" that make for a winning niche idea and get you familiar with them. It's important that you start considering these factors and try to wrap your mind around why they are important.
No action required.
1.2 Brainstorm Niche Ideas
Before we jump into the how of niche brainstorming, let me make sure you understand exactly what I mean when I say "niche product line". That phrase is simply referring to a product type that shoppers would buy. It's a phrase that represents a "line" of products you would see grouped together in a department store. For example, all forms of cages to house birds would be defined as 'bird cages' and all forms of homes for of homes for dogs would be referred to as 'dog houses'. So don't overcomplicate this, a "niche" is simply the words used to describe a grouping of similar products.
Niche ideas can really come from anywhere, but I recommend using Amazon.com to brainstorm. Why? Well because Amazon has MILLIONS of products! And even though we intend to find a niche product line that Amazon is overlooking - so we don't have to COMPETE with them - it's a great place for sparking ideas (aka brainstorming!).
HINT: the higher the price point of your niche ideas the better, but for newer online retailers without much experience I recommend staying under the $1,000 price point.
As I said before, you can come up with niche ideas however you want to! All that matters is that before we move onto the next step we have at least a handful (4-5) of niche ideas written down. Ideally the niche ideas you write down will be product lines that aren't too seasonal - not tied to a holiday or specific annual season - and ones where the average order will be $200+ (as that should ensure we net $50+ per processed order, you'll understand why that's so important later on when we start advertising our products!).
You can really cruise any major shopping site (or even walk through any of your local retails stores) to get those creative juices flowing, but here are my favorites:
- BizRate's Sitemap - BizRate is an advertising site where merchants list their products, but it's also my absolute favorite place to brainstorm niche ideas! as you'll see when you get there, down the left side is a list of 18 categories. Each one of those 18 pages has hundreds of product types to go through and consider!
- Shopify Exchange - The Exchange is a marketplace (that Shopify maintains) where website owners (like you) can sell their website. For the most part it's a website junkyard, simply because people typically only list here as an alternative to close their store, but you can still find some great niche ideas here. And remember, it doesn't matter where your niche ideas come from, so just looking at online stores can spark ideas (it doesn't need to be the same product lines you're looking at!).
- Flippa - This is another website marketplace where website owners can attempt to sell online businesses. Much like the Shopify Exchange, we don't recommend necessarily buying any websites here, but just cruising through the listings can spark niche ideas!
Again, it doesn't matter how you come up with the niche ideas, but make sure you have at least 4-5 written down before moving to the next section!
1.3 Analyze Your Niche Ideas
Alright, now it's time to determine whether any of your niche ideas are solid enough to move forward with! At this point we need to truly analyze each of the "Big 4 Factors" for each one of our niche ideas. Let me list each of the 4 factors and explain how to determine whether any given niche idea passes or not:
Factor #1. Poor Selection with Mega Retailers
This might be the trickiest factor to judge, simply because it comes down to a judgement call on your part! As we know, Amazon is by far the biggest retailer online, and we cannot compete directly with them. So in this step we need to determine whether or not Amazon is "overlooking" the product niche in question (simply indicated by a 'PASS' or 'FAIL'). Since this is the #1 factor, you can eliminate the niche idea completely if it doesn't pass this.
The first step is to see how many brands of this product type (aka niche idea) Amazon offers, if there aren't many available you can assume it's being overlooked. And if there are many offered that span multiple brands, you still need to see if Amazon's prices are competitive. If they aren't, you can still consider the niche product line as being overlooked by Amazon! Here's how to check each and determine whether your niche gets a 'PASS' or 'FAIL' for this factor:
How many brands are offered on Amazon?
Start off by searching Google for the niche phrase you want to check (i.e. Google search for 'bird cages'). Ignore the 'Ad' results up top, but go into the top couple of high ranking websites and write down the brands they carry on a piece of paper (brands are usually listed in the sidebar or within the navigation menu).
Now that you have an idea of what brands the top couple of ranking websites carry, go search for the same niche phrase (i.e. 'bird cages') on Amazon.com and note the brands they offer (also noted in Amazon's sidebar). If they only carry a couple (or less than half) of the ones you wrote down from the top ranking websites in Google, this means Amazon is overlooking the niche and you can consider this a 'PASS'. If Amazon does carry most or all of the brands you wrote down, that's a bad sign, but they still may be overlooking the niche if they aren't priced competitively.
HINT: Unknown to most, the majority of products being sold on Amazon are not products that Amazon themselves carry. Most products on Amazon are being sold by individuals (and other 3rd parties) who are not affiliated with them (other than the fact that they sell products through them!). These individuals and 3rd parties sell as "Marketplace sellers" and are charged fees upwards of 15% by Amazon in order to use the platform for selling. And in order to cover those hefty fees, they will often "jack up" their prices and that makes Amazon's listings quite uncompetitive with other online retailers!
How to determine whether Amazon's prices are competitive or not
Simply open Google Shopping in one tab, and Amazon in another. Randomly select a couple specific product models from within each brand name you wrote down and compare the price on Amazon with the prices that other retailers are listed at on Google Shopping.
If Amazon is the same or lower than most retailers on at least half of the products you look up, I would consider this niche a 'FAIL' and move on. Otherwise, give your niche a 'PASS' for this specific factor and move on!
Factor #2. High Price Point
Technically you should've only be writing down niche ideas where you expect the average order total to be at least $200, so every niche idea should get an automatic 'PASS' for this factor. However, you may want to check Google Shopping for a few product models from the brands you wrote down earlier to make sure that's the case!
HINT: many niche product lines will include products that are sold in quantities greater than '1' and/or sold with almost "must-have" accessories or upgrades. You won't know exactly what the average order will look like, but right now just use some common sense and give it your best guess.
Factor #3. Shopper Demand
This step is simple, and it's basically just to verify that the niche product line you're considering actually gets searched for by shoppers! Unlike the other 3 factors, this one won't be a 'PASS' or 'FAIL', it will be the number of searches that are done for that specific niche phrase monthly (i.e. 3,050).
To get this number go to any free keyword tool (like this one) that pulls Google's monthly search volume and enter the 'root phrase' that best represents your niche in singular form (i.e. 'bird cage') and plural form (i.e. 'bird cages') and simply note the higher of the two.
HINT: you do not need crazy search volume in order to build a successful store around a niche phrase. We've built very successful niche stores that make thousands a month around phrases that show only 3,000 monthly searches, so don't get too caught up with this number!
Factor #4. Seasonality
Much like factor #2 'Price Point', the niche idea probably shouldn't have made your list if the product line seemed too seasonal. Just ask yourself if the niche product line seems likely to really only sell for a short period of time each year, and if the answer is 'no' you can indicate a 'PASS' for this factor.
HINT: if you want to get more advanced here and make sure your product line has pretty solid demand throughout the year, you can enter your search phrase into the Google Trends tool and verify that very easily!
Add a column next to each niche idea for each of the "Big 4 Factors" and assign scores (as explained above) for each. As indicated above, factors 1 & 4 will be simple 'PASS' or 'FAIL' scores and factors 2 & 3 will be numbers (avg price point & monthly searches, respectively).
Here's an example of what your niche ideas sheet should look like before you move on to the next step:
IMPORTANT NOTE: These are not accurate scores for the niches shown, I simply created this as an example so you have a clear understanding of what you should have before moving on. Since we've gotten so much public press for our success in the 'bird cages' and 'pitching machines' markets, I can just about guarantee you those markets are oversaturated at this point and not good ones to go into!
1.4 Select a Winner
So at this point we have a list that shows ratings for each of the four big factors that make for a winning niche idea. In order to choose the niche idea to build your next store around, I would start off by eliminating any niche ideas that aren't clear winners. You can do so by simply crossing off any that show a 'FAIL' in columns 1 or 4.
That should leave you with nothing but niche ideas with 'PASS' in columns 1 & 4, and positive numbers in columns 2 & 3 (aka all potential winners!). At this point you can simply choose the niche with the highest number combo between columns 2 & 3.
Select the niche phrase you will build your first (or next) online store around and move on to chapter 2 of the training! This should be a niche with 'PASS' in columns 1 & 4 and high numbers in columns 2 & 3 (preferably $300+ in column 2 & 3,000+ in column 3).
HINT: Don't overthink this! To be 100% frank & honest with you, there are many factors you just won't (and cannot) know at this point, so don't get paralysis from over-analysis! Just choose the niche you feel the best about and move forward without looking back! If I'm truly torn between a couple niches, I simply choose the one with the expected higher profit margin!