Chapter 1: Choose Your Niche

Chapter 1: Choose Your Market

Hi, Dave Hermansen the "Store Coach" here! 🙂

Dave HermansenQuick bio on me... I am 39 years old and live in Meridian, Idaho (a suburb of Boise) with my wife Jen, my daughter Madi, my son Ethan, a Yorkie named Owen & a Morkie named Cooper. I got into eCommerce in 2003 while simultaneously juggling a full-time job at an electrical engineering firm and working on a computer science degree at Boise State University. Needless to say, my plate was pretty full. The going was a little rough at first... eCommerce was a newer concept and the training and info was extremely limited, so I had to learn things mainly through trial and error. Once successful, I was able to recruit my two younger brothers, Kevin and Mike... and the rest is history.

That's all well and good, but you're probably wondering why you should listen to me when I talk about eCommerce, right? Well, this is where you force me to brag a little bit about myself and my brothers. In the past decade, we have...

  • built around 100 (we've kind of lost track now!) highly successful niche stores
  • built several stores that have netted 6 figures of annual net profit
  • sold several websites for well over $100,000
  • been interviewed live (via satellite) on Fox Business News
  • been featured in the business section of The New York Times

(See my full eCommerce résumé here.)

eCommerce websites built using our system are being sold regularly for 5 & 6 figures in our Website Marketplace, so clearly our techniques are still working quite well. 😉

We've primarily focused on dropship-based eCommerce, where the supplier ships direct to your customers so you don't have to stock inventory, deal with shipping or invest a bunch of money up-front. However, our training course (which you are already into here) covers all 3 types of websites: 1) dropship eCommerce, 2) stock-and-ship eCommerce and 3) affiliate product stores. (Don't worry about choosing a store model right now... we'll get into that in Chapter 2.)

Alright, let's dive into the first lesson...

eCommerce Supply & Demand

Supply and DemandIt's a bit ironic, but the very first decision you need to make is also the most critical one. If you start off by choosing a bad niche, you are setting yourself up for failure and choosing to fight an unnecessary uphill battle!

Remember Economics 101? Hopefully you didn't sleep through every economics class during high school and college! 😉 While I agree the topic is a bit dull, it's important that you understand the basics of supply and demand in order to understand why choosing the right niche market is so important. The concepts of supply and demand are a bit different on the web than out in the “real world”. Luckily for you, it's far easier to analyze online supply and demand than "real-world" supply and demand.

Let's Start with Demand

Demand is the easy part. You can determine the demand of a niche (aka a product type) by simply seeing how many people are searching online each day for the keyword phrases that represent that niche. For example, if I want to see how much demand there is for the bird cages product line, I can use a tool (which we'll provide you with, of course) to see how many times phrases like 'bird cage' and 'bird cages' and 'parrot cage' are being searched for each day on Google.

“Okay, simple enough... but what qualifies as enough demand?”
Great question, thanks for asking that! 😉 We like to target keyword phrases where the singular and plural versions of the main keyword phrase (that represents our chosen niche) combine for at least 70 searches per day. We've found that this is plenty of demand and allows us to get enough traffic and sales to make it all worth it!

Next Up: Supply

Supply is a bit trickier to not only understand, but also to measure. In the "real world," supply would be represented by the number of competitors in the geographic area you intend to sell to. But in the online world, we don't look at it that way at all. Instead, we look at how "strong" the websites are that rank on the 1st page of Google's search results.

"Why only worry about the websites ranking on Page 1 of Google?"
Wow, another great question. You're on a roll today! 😉 The answer is: That's where WE want to be, and we know we'll be making a TON of money once we make that happen. Google is typically our #1 source of free traffic for our web stores, so that is the primary focus of our marketing efforts.

So to us, supply is nothing more than the “strength” of the competitors appearing in the first 10 spots on Google.com for our targeted keyword phrase. The total number of competitors in that market (aka "real world" supply) is not at all important.

So the challenge here lies in doing the actual analysis of the top 10 ranking websites. Unless you are an advanced search engine marketer with all sorts of cool tools, you are sunk! Simply visiting each of the top 10 ranking sites and seeing how "good" they look isn't enough (that can actually be quite misleading); you need to actually dig into the “key stats” that are making each of those sites rank so well. We'll get back to this shortly, but first I want to introduce you to the “Big 4” factors for choosing a winning niche.

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The “Big 4” Factors for a Winning Niche

We've actually already touched on two of the “Big 4” factors in our discussion about online supply and demand, so we're already halfway there. But let's define them a little more clearly now, and let's also discuss the other two factors that make up the “Big 4.”

Factor #1. Daily Search Volume

Daily Search VolumeLike we just discussed, this is the online demand for the niche (aka product line). The more people searching for a particular product type each day, the higher the potential for visitors and sales. Again, we like to target niches where the singular & plural versions of the primary keyword phrase for the niche add up to at least 70 searches per day. The higher the daily search volume, the better... but 70 searches/day is plenty to turn a nice profit.

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Factor #2. Seasonality

SeasonalityVirtually every niche out there is "seasonal" to a certain extent. Most every product line gets a “bump” around Christmas and also sells particularly well a couple/few months 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 1-2 months of the year, 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.

Factor #3. Profit Per Order

Profit Per OrderWith a 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 $25+ per order. Typically, this means selling products that retail for $100 or more (given the fact that most products are going to have around a 15-30% profit margin).

Factor #4. Can I Rank?

Can I Rank?This is the "reality check" factor that addresses the supply issue. Is there a realistic chance of getting ranked on Page 1 on Google in this niche? If the top 10 ranking websites are all powerhouses you'll never out-rank, it doesn't really matter how attractive the niche looks for the other 3 factors! Unless you're planning on relying exclusively on paid advertising and/or other forms of direct traffic, it's absolutely critical that you choose a niche where at least 2-3 of the top 10 ranking sites are weak enough for you to realistically overtake. Bottom line: If you want lots of free traffic from Google, you've got to choose a niche where you can rank on Page 1 of Google.

Let's Put it All Together

So, what's the definition of a winning niche? Answer: A niche where all four of the “Big 4” factors look good...

  1. Passes all Big 4 FactorsDaily Search Volume - At least 70 searches per day
  2. Seasonality - Relatively steady demand throughout the year
  3. Profit Per Order - Likely to net $25+ per order
  4. Can I Rank? - At least 2-3 of the sites on Page 1 of Google are relatively “weak” and can realistically be overtaken

A keyword phrase that passes all four of these “Big 4” factors is almost certainly a big-time winner, and you should get a store built around it immediately!

But here's the tricky part... How are you going to quickly analyze hundreds and hundreds of potential keyword phrases in order to find these golden opportunity niches?

Keep reading...

Find Winning Niche Ideas

Back in the day, we used the Google AdWords keyword tool (now called Keyword Planner) to get the daily search numbers (factor #1) and to get a basic feel for seasonality (factor #2). For profit per order (factor #3), we'd kind of just “guesstimate” that we'd have a ~20% profit margin so we'd look for products with a price tag of $100-150+ and assume we'd be able to make $25+ per order. All that was easy enough (though not very automated), but then there was factor #4... analyzing the “strength” of the top competitors to determine how feasible it would be to get ranked on Page 1 of Google. And this was a freaking nightmare!

Boring and MonotonousI'll spare you the details of how we'd go about analyzing the competition (I don't want to put you to sleep)! Suffice it to say that for each keyword phrase we wanted to analyze, we'd create a unique spreadsheet, manually copy and paste the URLs of the top 10 results from Google, go out and gather key “stats” for the top-ranking pages from all kinds of different tools and sources on the web (a couple of which aren't available anymore without paying a hefty monthly fee), drop all that info into the spreadsheet, and then manually analyze all of it. The process was extremely cumbersome... it took over an hour to analyze a single keyword phrase). I'm not exaggerating when I say that it would literally take us weeks and weeks to find a killer keyword phrase to build a store around!

Flash Forward  to the Present

A few years back, we just plain got fed up with the process. Not only was it the type of miserable work we'd have to "draw straws" for to see who got stuck with it, but it was just plain too time-consuming. We wanted each new store launched and making sales in the amount of time it was taking to just find each good niche!

We set out looking for a niche-finding tool that would aide the process. We scoured the web and checked out every keyword tool that seemed like a possibility, willing to pay pretty much whatever. After weeks of research, we came up empty... there was nothing that did what we needed it to do.

So, we just decided to build the tool ourselves! It was a monstrous undertaking, and it took nearly a year and tens of thousands of dollars, but in the end it was all worth it. No other keyword tool on the planet can do what our proprietary keyword tool is capable of... period!

Our keyword tool - which is called Niche Finder Pro - takes a "root" keyword (i.e. 'dog' or 'machine' or 'light' or whatever) and generates a list of hundreds of keyword phrase ideas containing that word. Then, for each keyword phrase, it tells us...

  1. the average daily search volume in Google.com (factor #1)
  2. the seasonal immunity score (factor #2), ranging from 1 (extremely seasonal) to 5 (not seasonal at all)
  3. the value per visitor score (factor #3), ranging from 1 (low profit per order) to 5 (high profit per order)
  4. the Can I Rank? score (factor #4), ranging from 0 (no chance of getting ranked) to 100 (high likelihood of ranking on Page 1)

Now, let's be honest... the first 2 pieces of info aren't all that revolutionary. But the 3rd one is pretty dang sweet, and the 4th one is absolutely mind-blowing! No other keyword tool on planet Earth does all this, and we are extremely proud of that!

But more important than our "pride" is the massive amount of time we have saved along the way! Rather than doing hours and hours of mind-numbing research to determine how tough it would be to rank for each keyword phrase, we can click a single button and almost instantly get a score that tells us the organic Google.com competitiveness for a keyword phrase. This is game-changing technology, and only we have it! Watch this short video to see it in action...

Using this tool, we've turned the hundreds and hundreds of hours of saved time into lots and lots of cash! Instead of doing 2-3 weeks of research to find each winning keyword phrase, we can now find "winners" inside of an hour and have the store built & making sales inside of the same calendar month! Seriously, how insane is that?!

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Niche Finder Pro: Your New Best Friend

As you know, Store Coach isn't just about providing you with the training and information you need to build your own online store. We also provide all the tools and resources you'll need, which obviously includes Niche Finder Pro. Create a free account now to give Niche Finder Pro a test drive and see it in action!

Alright, enough talk. You've gotta be sick of reading by now! It's time to take Niche Finder Pro for a spin (which you can do right here on this page... just keep scrolling down) and see just how easy it is to find a few winning keyword phrases you could potentially build a store around. Just do exactly what you saw me do in the video above, and save any and all attractive keyword phrases to your Favorites list. Once you have a decent list of candidates, continue to the final section of Chapter 1 where I'll teach you how to compare them side by side and choose the best one to build your next store around.

You can do this, I promise you. If I can do it, anyone can (and I'm not just saying that)! With just 20-30 minutes with Niche Finder Pro, I can just about guarantee you that you'll have at least 3-5 keyword phrases that you can build "cash cow" stores around. (Scroll down just a little further to access Niche Finder Pro right here on this page, or click here to use it in a stand-alone window.)

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Use Niche Finder Pro  Right Here, Right Now!

OR go to the Niche Finder Pro page to use the tool on a separate page (instead of using it within this box)

Once you've found a few potential winners, continue the training below for advice on choosing your favorite.


Time to Pick a Winner

Alright, if you've spent any time at all playing around in Niche Finder Pro, you should have a "short list" of attractive niche ideas. Now it's time for us to compare them side-by-side and choose our winner.

If you haven't compiled a list of candidates yet, it's time to put on your big-boy (or girl) pants and get it done! 😀 Seriously, though, Niche Finder Pro makes it a piece of cake to come up with 3+ killer niche ideas in just a few minutes, so you have no one to blame but yourself if this is where your dreams of working for yourself die!

R.I.P.

R.I.P. Dreams of Working from Home in Pajamas

Still with me? Good! Let's choose your niche and keep rolling...

Q&A from a Question Recently Asked by a
Pro Member Via the Pro Ask-A-Coach  Box  

Question from Pro Member: Am I Looking for a Niche (i.e. a Product Line) OR  for a Keyword Phrase?

You must be a Pro Member to view Coach's answer.

Choose Your Favorite Niche Idea

With Niche Finder Pro at your side, it's crazy-easy to find awesome niches you can dominate in. You have a very high chance of succeeding with any of the niches where all 4 scores are bold and green. The higher the numbers, the better... but anything with straight bold and green numbers is fair game.

"Which of the 'Big 4' matters most, though? Which one trumps?"
Man, why do you ask such difficult questions?! 😉 This is like trying to choose my favorite kid... I love them all the same! (Really, I do.)

The Daily Search Volume is obviously important because, without visitors, you can't possibly make sales! The higher the daily searches, the higher the demand and the more potential visitors you can get. BUT... a high search volume means nothing if you're not ranked well, which is why you can't even think about the 'Daily Search Volume' without its "handcuff" - the Can I Rank? score. It doesn't matter if a keyword phrase gets 10 searches a day or 10,000 searches a day... if you're not ranked on Page 1 of Google, you won't see any organic traffic either way! So you really have to look at the Daily Search Volume and the Can I Rank? scores together. You can't separate the two (hence the reason I used the term "handcuff"). If one number is low and the other is high, it has limited potential. What you want is the highest combination of both.

Which of the two matters more? Well, it largely depends on your experience level. If this is the first website you've ever built and tried to get ranked in Google, I'd pay A LOT of attention to the Can I Rank? score. I'd be inclined to go after a lower-volume keyword phrase with a crazy-high Can I Rank? score, just because I have so much better chances of getting ranked. On the flip side, if you've run a few sites in the past and have a certain level of confidence and experience with getting a site ranked, I'd be more aggressive with going after higher-volume phrases that maybe don't have quite as high of a Can I Rank? score. In either case, though, both of the numbers should at least be green and bold.

Of all the "Big 4" factors, I'd say that Seasonality probably matters the least. I mean, it's still important (important enough that we included it as one of the "Big 4")... but it's just not as critical as the other 3 factors. I'd avoid going into a niche with a 'Seasonal Immunity' score of just 1 or 2 (unless you have other stores and/or sources of income and you're fine with this store only doing well a couple months out of the year), but I wouldn't worry much about going into a niche with a score of 3 or 4 (which are both green and bold). You certainly shouldn't be picky about insisting that it has a score of 5.

Last but certainly not least is the Profit Per Order. The point of this whole endeavor is to make money! You need to be realistic in recognizing that you're NOT going to be making dozens and dozens of sales every day. With most of our stores (including the crazy-successful ones), outside of Christmas shopping season, we typically only get a 3-8 of orders a day. Remember, you're building a niche eCommerce store. You ain't Walmart! 🙂 You can't have the mentality, "Well, I may only make $1.50 per item but I'm selling 100,000 items a day!" You need to be realistic. Since you'll only be making 3-8 sales a day, you need to make a decent chunk of change on each one. That's why we always target niches where we know we'll make $25+ per order (and really, we usually try to make $50-100 per order, if possible). Look at it this way... Would you rather receive and process 10 orders to make $1,000 or process 100 orders to make $1,000? The answer is pretty obvious!

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Honestly, my #1 piece of advice is to go with the product type you feel the best about. Trust your "gut feeling"... it's usually right!

One final thought: Consider which product line you can "get into" and be passionate about. You certainly don't have to care (at all!) about the product you're selling to make good money with it. My first $100K-annual-profit store sold parrot cages, and I had never even owned a parrot. In fact, the only thing I really knew for sure about birds before opening that store was that some of them taste really good! 🙂

That being said, you are going to be more excited and passionate about your own store if you are actually somewhat interested in the product line. That excitement and passion can translate into the dedication you will need to see the project through. Keep that in mind, and give a slight edge to the product types you have a bit of interest in.

Excerpt from a Recent Pro Live Learning Workshop  

Topic: Other Important Factors to Consider as "Tie-Breakers"

You must be a Pro Member to view this excerpt from the live learning workshop.

And the Winner is...

Winning NicheIt's time to choose your favorite niche and move on. And let's not get "analysis paralysis" here! Chances are all of your niche ideas would make great stores... that's why Niche Finder Pro rocks! So don't get stuck here. If all else fails, flip a coin or roll a die. 🙂

Pick a winner and move on to Chapter 2, where we'll discuss the different store models and help you decide which type of site to build. Keep plowing ahead... your financial independence is depending on it! 😉