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Solving the Ecommerce Puzzle: 3 Steps to Carving Out a Winning Niche

You are poised to launch your own eCommerce business…

You have crafted your business plan. You have your infrastructure in place. But you’re just not sure which products will fly and which will flop.

You realize that you can’t sell everything – yes, that’s Amazon looming over your shoulder – and want to carve out a niche for your enterprise. Smart move.

Here are the three steps to take in making your decision.

1. Choose a Category that Fuels Your Passion

There are 11 top-level categories of niche markets that are primed for eCommerce success:

  • Sports
  • Kitchen
  • Office
  • Pet Supplies
  • Health & Fitness
  • Medical & Elderly Care
  • Maternity & Parenthood
  • Hobbies & Recreation
  • B2B
  • Patio & Garden
  • Home Goods

Nestled inside each of these categories are products that consistently outperform in online platforms, so one category isn’t inherently better than the next

However, these 11 categories are head and shoulders above the countless other categories where the market is oversaturated.

Because these 11 categories are all fair game, it makes sense to choose a category about which you’re passionate. If you have to stifle a yawn every time you think about cooking, baking, and entertaining, then “Kitchen” is the wrong category for you. But if you’re a gym rat or relentlessly training for your next triathlon, then “Health & Fitness” is right up your alley. If your spine tingles when you step into an office supply store but you feel faint when you think about a doctor’s visit, skip “Medical & Elderly Care” and instead go for the “Office” category. The bottom line: Select a category that will keep you interested and excited.

2. Get into the Mind of Your Potential Customer

mindreading

If you are passionate about your category, you probably already know what makes your customer tick, but give it some thought nonetheless.

Once you understand that moms-to-be want only the best for their babies, you can source uber-appealing high chairs and cribs.

Folks who cook and entertain are always on the hunt for the latest kitchen gadget, so by keeping your finger on the pulse of restaurant trends, you can anticipate customer demand and ride the sales wave to profitability.

Playing sports is intergenerational, meaning you can seek out products that your customers are likely to purchase for themselves, their children, and the entire family. The knowledge you gain by getting into the mind of your target customer will guide you in both product selection and your marketing efforts.

** Note **

You may thinking “wow, Anton… this all sounds great, but I don’t have any passions!”.  Don’t worry. While I do you believe that having a passion can help you build a better store from day one, I absolutely know it’s not necessary for long-term success. I’ve sold (and still sell in) many niches that I knew nothing about one first launching stores.  Choosing a passion is one technique for niche selection – you can also click here to see some more.

3. Carefully Choose Your Products

Take each product you’re considering and view it through five lenses.

  • Lens 1:  Competition
  • Lens 2:  Loyalty
  • Lens 3:  Pricing
  • Lens 4:  Weight
  • Lens 5:  Returns

First, scout out the competition.

If everyone is selling the same set of patio lights or is offering the same shower bench, it may not the product for you. Instead, seek out harder-to-find products – especially those that can’t be stocked by big box stores due to a number of styles or options available.

The second lens is brand loyalty.

Your most profitable products will be those that aren’t dominated by a national brand. In other words, forget the food processor (Cuisinart’s cornered that market) and instead opt for high-end blenders or juicers.

bigbrands1

Third, seek out products with high price points.

The higher the price, the greater the profit margin.

A 30 percent markup on a $10 item is just $3, whereas a 30 percent markup on a $1,000 item is $300.  This is where your knowledge of your potential customer is critical.

What big-ticket items are pet owners likely to purchase?

What about sports enthusiasts who live by the water?

The fourth lens is the weight of the product.

Shipping is expensive. Charging your customer for shipping a heavy item can be a disincentive for purchasing while offering free shipping on that same product can cut deeply into your profit margin. The winning combination is offering high-priced products that have low shipping weights.

At the same time, think about how you can beat your competition. The high shipping costs may dissuade them from selling certain products. Their fear could be your strength.

As a rule of thumb, we will not sell items that must ship via freight carrier for any less than $500.

The final lens through which to view products is the potential rate of returns.

Absolutely avoid selling clothing. Because of sizing issues and style preferences, apparel has an astronomical return rate.

Contrast the likelihood of clothing returns with the likelihood that a fitness buff will send back a high-priced stair climber. It’s apples and oranges.

While many product categories are flooded with sellers, the 11 categories we’ve pinpointed have tremendous potential for profitability.

When you follow your passion, know your customer, and filter out probable underperforming products, what remains will become the foundation of your successful eCommerce venture!

Anton Kraly
 

Anton is a the Founder & CEO of Drop Ship Lifestyle - an online coaching program for eCommerce entrepreneurs. He began selling online in 2007 and has built and sold multiple seven-figure businesses while leveraging the power of drop shipping.

  • Jake says:

    Hi Anton. Many of the niches in those categories have only a subset of items that sell for more than $200. So for instance if I got into the model railroading niche should I try to only sell things like complete train sets that go for more than $200? Wouldn’t this make the store look strange considering all my competitors have a wide variety of products? Do customers even care about this?

    • Anton Kraly says:

      Hi Jake,
      That’s a great question 🙂
      We still will sell the related products that are less than $200… however, we use then as add-ons and upsells.
      This is included in the Lead Value Optimization training inside of Drop Ship Lifestyle 🙂

  • Floyd says:

    Ok – let me play the devils advocate.
    Your writing sounds like nearly any item chosen has the massive potential of being returned – and there are so many people online saying that if you are clear with your potential buyers about everything from the get-go – the rate of returns is minimal.
    so – again – I’m not intentionally attempting to be negative here – just wanted to know what your thoughts are in response.
    for instance – what if it so happens that my “passion”… is clothing, fashion, etc???

    • Anton Kraly says:

      Then you can expect to deal with a higher than industry average return rate 🙂
      I’m not saying it’s not possible… company’s like Victorias Secret do it just fine. However, your margins will get killed. There are literally THOUSANDS of other niches that involve much less customer service.

  • shen says:

    Hi Anton
    Would Asian Tea be a good niche or are they just a terrible product to sell?
    Thanks in advance
    Shen

    • Anton Kraly says:

      Hi Shen,
      Those aren’t expensive enough! Buying traffic and maintaining profitability would be a real issue. I would pass on this one.

  • Tom says:

    Thank you, Anton. I try to absorp all your guidence.
    Tom

  • Marc says:

    Hi Anton,
    Great content thank you. I’m curious as to what the B2B niche is and how that is different than office?
    Thanks,
    Marc

    • Anton Kraly says:

      Hi Marc,
      Great question –
      There are are actually many niches that would fall into this space. Here are just a few:
      – commercial refrigerators
      – safety cones
      – building supplies
      – shipping materials
      Hope that helps!

  • Jennie says:

    Hi Anton,
    I just wanted to let you know that I appreciate all you do! I found you on YouTube last week and I have been devouring all of your content ever since. I hope to meet you at the 2016 Hawaii Retreat!

    • Anton Kraly says:

      Thanks for the comment! I’m glad you’re getting lots of value from my trainings.
      and I should have the details for Hawaii very shortly. I will send out an email once we confirm all of the dates 🙂

  • Jon says:

    Thanks for the share! I am working on niche selection for my 2nd store now. Perfect timing 🙂

  • Alma Johnson says:

    Hi Anton, thank you for the information. I found it to be very informative, and helpful. You brought out some good points which I can relate to. There were several good product ideas, which I never thought about, but is worthy of a effort to try. however, I am not in the position to start up another store at this time. I feel that this is a learning process for me and starting with such big ticket items make me nervous, and this is why I started with small tick items. Hopeful I will grow and get on board. Nevertheless, thank you for keeping me in the loop, I am learning.
    Alma Johnson

    • Anton Kraly says:

      You’re welcome. Alma! I totally understand how big ticket eCom products can be intimidating (especially if they’re large and heavy) but if you’re looking to create a real lifestyle business then high ticket is the answer 🙂

      • Alma Johnson says:

        I am sure and do have all intention of researching the idea as I move forword, once again thank you.

  • Natilee says:

    Thanks for the heads up! I have a few passions in that list and I’m looking to sign up for your course next pay period.

  • Setsuko says:

    Thank you Anton. It’s very helpful for a newbie like me.

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