Find Your Niche with Our Profitable Niche Selection Guide
Note: this post has been updated to reflect the newest information about dropshipping 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!
That's because it's only getting easier to research the profitability of a niche product before you start building your dropshipping 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.
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This guide will cover the first and arguably, one of the most important steps in building your own profitable eCommerce business: selecting profitable 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.
Selecting a niche can make or break your dropshipping business making it one part of the dropshipping 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). Let's start with what makes a niche 'good':
Products that have a lot of styles.
Products that have a lot of variation.
Products that customers can wait for due to its uniqueness.
- Have Wide Varieties of Size and Design
- Have Wide Varieties
- People Don't Mind Waiting
- Hundreds of Style Options
- No Brand Loyalty
Products that are too personalized (ie apparel).
Products that have emotional attachment.
Products that have deadlines.
- Time Sensitive Which Will Cause Customer Service Issues
- Technical Issues Which Will Cause Customer Service Issues
- Very Personalized Products
- High Return Rate
4 Guaranteed Methods for Finding Profitable Niches
When searching for a profitable niche that's good for the dropshipping model in 2020 you'll want to use these four methods that I have learned from more than a decade in eCommerce.
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 dropshipping 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 launched, 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.
It's not hard but there are a few methods that you need to know in order to successfully select a profitable dropshipping product.
Keep reading to learn all the details, plus step-by-steps of my favorite methods to research the current profitability of any eCommerce niche.
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.
Here are some more action tasks that will help you brainstorm a long list of profitable niches.
- What are the last five items you bought online?
- What do people like to do on vacation?
- What are the hobbies of your family and friends?
- What's the most expensive item in the room you're in right now?
- 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 dropshipping 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 Dropshipping 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 dropshipping. 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 Profitable 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 dropshipping today. The first (and most important) tip I will share on finding a profitable niche when dropshipping is SELL EXPENSIVE ITEMS!!
Based on my experience, the average net profit when dropshipping 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 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:
Getting Started and Finding Your Winning Niche
Finding a profitable niche is the most important factor that goes into building a successful dropshipping store. To help get you started brainstorming dropshipping products, here’s my list for the most profitable niches in 2020
While it's still very possible to make a lot of money with niches that only provide the opportunity for one-off sales, I do believe that as we move into the future, the more opportunities for monetization, the better.
Any questions? We’d love to hear from you. Leave a comment and we'll keep the conversation going!
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