The Anatomy of a Profitable Ecommerce Niche
Starting up an ecommerce business is easy.
These days, all you need is an idea what to sell and you are pretty much done.
You don’t need any technical expertise anymore. With low cost, hosted ecommerce systems like Shopify or Big Commerce, all technical aspects of building up a site are taken care of for you.
With Paypal and other payment processing companies, you don’t have to worry about having to go through complex processes to get approved in a bank as a credit card vendor.
With a dropshipping model, you don’t even need to invest any money in stock.
What’s causing the problem then? It’s actually picking up a niche you want to get into.
With countless online stores operating today, selling everything from sweets and candybars to complex medical and laboratory equipment, with cars and planes in between. You can order pretty much anything you want online and most of the time, you can choose between different stores to get the item from.
As a result, the competition is fierce and you can be certain that making it in ecommerce will take a lot of time and effort. I am not saying that it can’t be done, just that it will be hard. And thus, finding a perfect niche becomes even more important. Let’s face it, the last thing you want is to realize that you have spent time and energy on something that can’t bring you money.
The Anatomy of a Profitable Ecommerce Niche
There are certain things you need to take into the account when considering if a niche is worth getting into:
Market
First of all, there has to be a market for whatever you are planning to sell. In fact, a lack of market is one of the most common problems with niches. Sure, it might be a good idea to sell custom widgets but if there is no one interested in buying them, or there are only a handful of people who would, you won’t be able to generate enough sales to stay in business.
There is a number of ways you can check if there is a market for a product. Some of my favorite ones include:
- Checking Google search volume for the product name / type
- Checking if anyone advertises for a product (if companies are willing to spend money to advertise a product, there must be people interested in buying it, right?)
- Researching how many potential competitors you have and how big they are (if you have a number of big competitors, again, it’s a sign that they are able to stay in business in the niche. A good sign if you ask me.)
Money
Next, your potential customers must have the money to buy the product.
Again, it’s one thing to bring a great widget to the market but if your potential customers have no money to pay for it, you are done.
Reach
You also need to be able to reach your prospects relatively easily. In other words, the best niches are those where people research products on Google or other search engines, use blogs or other online sources for recommendations.
With this you would be able to reach them quite easily. But consider audiophile market for instance, most of the marketing for that market would have to be done through industry magazines and publications, trade shows and other quite expensive forms of advertising. Not ideal if you ask me.
Expertise
A perfect niche is also a one where you can show your expertise. It doesn’t mean that you need to know much about a product you are thinking of selling. It means that it is something where you will be able to add value relatively easy.
For instance, I don’t cycle, yet I know how to ride a bike, I have done so since I was 6 or 7 and I can easily write about cycling for my store, the happy bike. However, if I was to sell laboratory equipment, I would be in real trouble. I know nothing about it and also, I don’t think I would be able to learn this stuff quite easily….
Why do you need to show expertise?
Showing expertise is one of the most effective ways to stand out from your competition. A store that offers extensive info on a product, advice on best usage and more not to mention delivers great support (which is really only possible if you know the product back to back) stands a much greater chance at getting the order.
Profit
Lastly, the niche must offer you a decent profit. In other words, you must be able to sell products at a decent margin to make money. If you sell a product that costs only $10, regardless of how great it is, your profit will be in a region of $3-$5 at most, meaning that you will have to sell hudreds, if not thousands of items a month to make any decent money.
If, on the other hand, you sell one for approx. $100-$200, you can sell less products and still make a much higher profit each month.
How to Pick a Niche
One of the questions I am often asked is how to choose a niche, where to look for inspiration when coming up with ideas for products to sell online. As much as I would like to answer this question, there is obviously no golden formula for that. However, there are certain things you could do to get inspiration:
- Check out your passions
First of all, check out your passions. See if something you are passionate about wouldn’t made a great niche.
Why? Becuase it is far easier to sell something you know a lot about than a completely new product.
- Scratch Your Own Itch
Perhaps there is something you lack or have a problem you are looking to solve? This could make up for a good niche inspiration also.
- Review Your Recent Purchases
Similarly, your recent purchases can offer some good inspiration for finding a ecommerce niche. In fact, I know of many highly successful stores that have started this way.
- Recent Purchases by Those Around You
If your purchases offer no inspiration, look at those made by people around you. Perhaps your friends have purchased something that might spring some ideas?
- Most Popular Products on Sites like Amazon
Review popular products on sites like Amazon (not to mention your own browsing history). Quite often those products might prove to belong to niches that are hard to get into. Yet still you might find some nice gems there.
- Q&A Sites
Check out what products people inquire about on Q&A sites like quora.com. It is by far the least possible source of inspiration, however, I still wouldn’t rule it out. You might come across a conversation there that might spring some really interesting ideas.
Conclusion
Finding a perfect ecommerce niche is a tough business decision. Certainly, it isn’t one that you can base on a gut feeling. It should be well calculated to ensure that you have a chance to make money in it. Follow the advice above and you shouldn’t have many problems with coming up with a niche idea.
Your Turn
Did you find a perfect niche for your ecommerce store? Let us know how did you come up with the idea for it.
One thought on “The Anatomy of a Profitable Ecommerce Niche”
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Great post Pawel!
I have a great article to compliment this one. It’s a break down of 18 things to evaluate/consider when choosing an ecommerce product/niche.
Reverse Engineering the Perfect Ecommerce Product:
http://www.abetterlemonadestand.com/reverse-engineering-perfect-ecommerce-product/