[2018 Update] Profitable Niche Selection Guide: Do Less While Earning More
Note: this post has been updated February 2018 to reflect the newest information about drop shipping and profitable niches.
Every year we update our guide to selecting profitable niches. If you’re familiar with digital and eCommerce trends, you know how fast things change. This is still good news for you though!
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That’s because it’s only getting easier to research the profitability of a niche product before you start building your drop shipping store. This will give you a clear picture of market trends, releases, and ways to be profitable within a broad, over-saturated niche, hint: sub-niches!
Don’t Rush the Niche Selection Process
One of the first steps in eCommerce is choosing a niche… it’s also the biggest point where we see people get hung up. While you shouldn’t make niche selection harder than it is, it’s more important to not rush the process.
Niche selection is a common topic of discussion in our DSL Labs community. As you can tell from the conversations below, there’s plenty of help and advice shared as well!
To give you a little background, my very first eCommerce store started making money within 24 hours of going live. I made a sale for $485 the FIRST night that my store was able to accept orders.
I’m not telling you this to show off. I’m telling you because I want you to know the secret to my drop shipping method. The same secret I used to make over $3,000 of sales in just over three weeks.
People are often shocked when they hear this because it sounds like I just threw together an online shop and starting making money through luck. But the truth is I spent A LOT of time prior to launching. In fact, it’s all about the preparation.
Before my store launch, I did a ton of market research in order to have the best chance of success once I was ready to launch. There was one reason that I made $485 within hours of launching. It was because I found a profitable niche that fit a certain criteria.
Keep reading to learn all the details, plus step-by-steps of my favorite methods to research the current profitability of any eCommerce niche.
4 Guaranteed Methods to Finding Profitable Niches in 2018
This guide will cover the first and arguably, one of the most important steps in building your own profitable eCommerce business: selecting profitable niches.
Selecting a niche can make or break your drop shipping business making it one part of the drop shipping process you don’t want to rush.
Breaking it down, there are two types of niches the bad (non-profitable niches) and the good (profitable niches):
It’s not hard but there are quite a few methods that you need to know in order to select a profitable drop shipping product. When searching for a profitable niche that’s good for the drop shipping model in 2018 you’ll want to use these methods:
Method #1: Focused Brainstorming
Before you can test different niches for profitability you need to think of niches to test. This doesn’t mean you think about it on the ride to a friends house, you need to block off time and focus on brainstorming.
TIP: When first brainstorming profitable niches, make a list of at least 50 good niches that fit the criteria above.
To brainstorm new ideas, I often think of things that I’ve recently bought online. As well as asking family and friends what they’ve recently purchased. Also, think about what you’ve bought in the past.
Think about all your family and friends and what they have in their houses.
Write everything down, even if it seems questionable at the time. I then take this list and begin running them through my “tests”. Tons of niches are profitable, but that doesn’t mean you should rush into them.
Once you have your first list of niches, view them through these five lenses:
- Competition – Scout out other drop shipping stores and see what products are over-saturated. You don’t want to sell those.
- Loyalty – Don’t go for a niche or product that is dominated by a national brand(s).
- Pricing – It’s easy: the higher the price of the products, the greater your profit margin will be!
- Weight – Shipping is expensive but a winning combo is a high-priced product that has low shipping weights.
- Returns – Don’t pick a product with sizing and style preferences, they will have an astronomical return rate.
Method #2: Research and Evaluate Current Drop Shipping Trends
eBay is still a good place to check if items sell online but don’t base your prices off of eBay’s. They’re far too low. Even though it’s not as relevant these days, it’s still a good place to brainstorm profitable niches.
Once you’re on eBay, you want to identify products in different niches that are expensive (to me, that’s $500 or more, but it’s up to you). Then go through different categories on eBay and change your search results to show “completed listings”.
If the completed listing is in red it means the item did not sell. If it’s in green it means the item sold.
Look closer into the products that are shown in green and search for completed listing only for that specific product. I used to do this over and over until I identified about 20 products within one niche that almost ALWAYS sold (10+ units per day).
TIP: Tons of niches are profitable, but that doesn’t mean you should rush into them.
When I started I wasn’t drop shipping. I was importing from China, so I contacted a few suppliers that I had found on Alibiba.com and requested price lists for these exact products. I then contacted a customs broker and got shipping quotes for a container of the products.
Next, I factored in all of my other expenses and learned I could sell these on eBay at the same price as many competitors and make a 50%+ profit on each sale! But that was back in 2006…
Method #3: Use Amazon’s Help to Select Very Specific Niches
Amazon is the world’s biggest retailer and they sell pretty much everything under the sun. That’s what makes it one of the best places to find profitable niches and the products that are “red hot”.
Here’s the step by step process to finding profitable niches using Amazon:
- Click on the ‘All’ tab at the left of the main search bar it will show a list of categories or ‘niches’.
- Click on a specific category, that interests you (or at random).
- Then leave the search box blank and hit ‘Go’.
- A new page will display and on the left-hand side a whole list of subcategories or ‘sub-niches’ will pop up.
- Click a subcategory and it’ll take you further down into the niche into a more specific sub-niche.
- You now have drilled down into specific niches and can even go further still.
Amazon is especially great to help you find a super specific niche and the products that sell best. Even better is you can choose ‘best sellers’ from the navigation bar at the top of the page just under the search box and see what’s currently selling best.
There’s no way you can’t find a profitable niche on Amazon, or at least have a good brainstorming session browsing the site. Amazon’s “Best Sellers” page is updated hourly making it a solid resource for profitable niche selection!
Method #4: Think Like A Marketer
Now, I know that I’m not selling on eBay anymore and I don’t think you should either. But, a lot of this advice is still useful in the world of drop shipping today. The first (and most important) tip I will share on finding a profitable niche when drop shipping is SELL EXPENSIVE ITEMS!!
Based on my experience, the average net profit when drop shipping is about 20% of your total sales. Basically, you’ll make 20% profit on a $1,000 item and a $10 item so you could either make $200 or $2 per sale. If you want to make money, you need to sell expensive items.
There’s nothing else to it. Not that complicated, right?
Once you’ve identified these items you need to find some potential “future competition”. Online retailers who are already selling these items. Unfortunately, there’s no way to find out how much money they make on each sale at this point. BUT you can find out if this niche is profitable by seeing if the suppliers enforce MAP policies.
If your results show different prices, that are all over the place, then this supplier does NOT enforce MAP. If the results say something like “$999 from 3 stores” and there are no other prices listed for the same exact item then you’ve likely found a supplier that enforces MAP! You can now move onto the next step.
You can call these potential suppliers to see if they enforce MAP policies. But the easiest way to check if MAP policies are in place, is to go to Google Shopping and search for some random products in your niche:
Two More Tips for Niche Selection from Our Expert DSL Coaches:
Our elite group of Certified DSL Coaches, work hard with DSL members to ensure they never feel alone, frustrated, or confused in their drop shipping journey. We’ve got an incredibly smart group of coaches who love to help new members find drop shipping success. Here’s two tips they want you to know when researching profitable niches:
Tip #1: Think Just Outside the Box
Michael Coghlan has been a coach with us since we started the program and he’s the perfect example of a great coach. While Michael helps members grow all aspects of their drop shipping businesses, niche selection is one his specialties.
His biggest tip for selecting a highly-profitable niche? You gotta think barely outside the box. Michael explains:
“When people pick their niche they often fall into one of two categories. Either people choose a very common niche idea or one that is too ‘out there’. The common niches are often over-saturated. Leaving you in a highly competitive marketplace that you’ll struggle to thrive in.
“The other mistake is choosing an outlandish niche. Something that is very specialized, making it very difficult to make consistent sales without a ton of extra work. Again, if you research properly you’ll see that niches like this feel more like a boutique than an automated business (the kind that will give you freedom).
“The real way to excel at drop shipping is to pick a product idea that is just outside the box. For instance, my best selling product ever was a portable ice maker. If you think about it, it was just barely outside the box. Not as common as a refrigerator, but not as UNCOMMON as say a walk in deep freezer for a restaurant. Finding that nice balance early on makes niche selection a much easier process.”
Tip #2: Get Out and Open Your MindGet out and open your mind. It's amazing how many potential winning niches you can find. Click To Tweet
Brent William is one of our drop shipping coaches and is an expert at niche selection. His biggest tips for new members to the community is to not get overwhelmed with niche selection:
“Everyone struggles with this, but what you need to do is open your mind. Get out among the shops and big stores for a day, pay attention to what’s around you as you walk around. It’s amazing how many potential winning niches you can find.
“Also, when using Google Shopping you can search broad words like outdoors or furniture. Then on the left hand side, reduce the search down to items over $500 or $1,000 (Perfect Priced Items). You’ll get a ton of interesting ideas by scrolling through all the pages. By using broad keyword search terms can uncover things you never thought of.”
Getting Started and Finding Your Winning Niche
Finding a profitable niche is the most important factor that goes into building a successful drop shipping store. To help get you started brainstorming drop shipping products, here’s my list for the most profitable niches in 2018:
- Racing Bicycle Wheels (New Tires = Repeat Sales)
- Skeet Shooting Launcher (New Skeets = Repeat Sales)
- Grills / Smokers (Wood Chips = Repeat Sales)
- Video & Photography Lights (New Bulbs = Repeat Sales)
- Pottery & Ceramics (New Material = Repeat Sales)
- Automatic Pet Feeders (Pet Food = Repeat Sales)
- Mobile Bars (Restocking = Repeat Sales)
- Commercial Restaurant Equipment (Restocking = Repeat Sales)
- 3D Printing (New Material = Repeat Sales)
- Bow Hunting (New Arrows = Repeat Sales)
You’ll notice that these top 10 niches provide plenty of opportunities to create repeat (and loyal) customers. Repeat customers are the type of customers that continue to buy from your drop shipping store for years to come.
This means you’ll have a much higher customer lifetime value and a higher ROAS (return on ad spend). Keeping long-term strategies like this in mind when you’re researching profitable niches will not only help bring in a consistent cash flow, but will also increase the value of your drop shipping store over time!
Any questions? We’d love to hear from you. Leave a comment and we’ll keep the conversation going!
If you’re looking more ideas for a profitable drop shipping niche, I put together an updated list of 187 profitable niches to sell online. This guide will help to take the guesswork out of niche selection.
Click the image below to get your free copy of 187 PROFITABLE Niches plus 3 of my favorite techniques for advanced niche selection.
DOWNLOAD: 187 Profitable eCommerce Niche Ideas