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Dropshipping Step 5: Niche Selection

August 16, 2020

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A store with hand crafted ornaments, including plates and light fixtures. This is an example of a niche.

STEP 05: CHOOSE A NICHE

First off, what is a niche?


niche is a specialized or focused area within a broader market.


For example, fishing is a niche within the sporting or hobby market. Break this down even more into focused target niches, such as bass or carp fishing. You can super target these again into bass or carp lures.


Businesses choose niches to differentiate themselves from the competition and become "experts" in a specific field.

General or niche store? Money or passion?

How do you choose a niche?


Do you go with your gut and pick a niche you think will be successful?


Or do you sell a range of unrelated products hoping most of them will be winners?


There are two types of online general stores:

  • The universal general store that sells a little of everything (like a Walmart), or
  • niche related general store (like PetSmart), which sells a lot of different products but within the same niche. 
A general store featuring candy, toys, books, a dog on a counter and an assortment of other goods

Example of a general store that sells just about anything


An online niche store will generally focus on a broader niche, such as pet products, and specialize in one specific area, such as cat products.

A niche store, specializing only in guitars

A niche store, specializing only in guitars


There are dropshippers that go even further and create niche stores for a single niche product. I don't recommend this though as it limits you somewhat in terms of your target audience and reach. 

 

Here's an example of a specific niche product. 

Magnetic levitating LED light bulb

Novelty products have their own dedicated landing pages/sites that market only one product.

So which type of dropshipping store do you choose? 

This is where the money or passion comes in. What's your motivation?


Should you choose money over passion, then you'll go after products that are trending.


If your sole purpose is to make money and burn through different trending products; that's fine. It's possible to make a bit of money in a short of amount of time.


Chasing trending products though, takes a lot more work than pursuing a passion. If you choose trending/hot products, then you will constantly be busy with product and market research.


Trending products don't have a very long shelf life. You always need the next big thing already lined up. 


Choosing a niche based on a passion might be easier in terms of product and market research, but you might end up with more competition.


It doesn't matter which approach you use. I've used both and even a combination of the two.


After years of creating and then discarding online stores, I've found the following to be the key:


The most balanced approach is finding a niche in which you can identify yourself as an expert and then hunt for trending products within that niche. 


The secret is to be different in your approaches and identify yourself as an expert.


Let's take the pet products niche for example. Specializing in only cat-related toys is very niche specific.


Thus, making your brand unique will give you an advantage over all the other cat-loving feline pet stores.


Finding trending products within this specific niche will significantly boost sales.


Diversifying is also a key in becoming an expert.


Instead of just selling cat-related products (specifically for cats), why not focus on the owners as well?


Cat-themed jewelry or scatter cushions or t-shirts, etc., can tie in nicely with your feline-themed store.  

Novelty cat house in the shape of a giant mouse
Novelty sterling silver ring in the shape of a cat. The cat's tail forms a heart.

Novelty cat-cave for the feline + novelty cat ring for the owner = $$$



How to choose a dropshipping niche?


The easiest way to go about picking a niche is choosing one that you have an interest in.


Being passionate about your specific niche will make your work so much easier. 


If you're not sure, then answer the following questions. Write your answers down.

These questions might help you pick a niche you have an interest in:

  • Which websites do you visit the most?
  • Do you read or follow any blogs?
  • Are you an online shopper? Who do you buy from?
  • Which pages or accounts do you follow on social media?
  • What are your hobbies?
  • Are you a collector of something?

Now look at your answers and find the same or similar niches.


If you find any overlapping interests, then that is what you should focus on as your niche.

If you want these questions in a PDF to download/print, then visit the Additional Resources section at the bottom of this post.

When answering these questions, I learned that I was business focused in everything I do. My interests ended up being entrepreneurship and business, which is obviously not the best of niches for a dropshipping business where you want to sell products... 

If you find yourself in my position and your interests point to a niche that doesn't sell products, then you can look at selling trending products.

This is what I did with my dropshipping business. But remember, I don't recommend going this route. This is strictly a short-term, hit-and-run business plan. 
Falling coins
You go in hard, make some money and move on as soon as the fad fades.

It can make you money fast, but the returns are short-lived and you constantly have to look for the next big thing. 

You pick up some valuable experience along the way, which is why I can generate $10k a month from my dropshipping side hustles.

If you’re looking for a niche based on making a profit as quickly as possible, ask yourself these questions:
  • Who has been the fastest growing online retailers in your country over the last year? Statista is a good resource. Check out these links to give you an idea of what to look out for: 
  • The Deloitte Report on the "Global Powers of Retailing", is an in-depth report highlighting the biggest and most successful retailers in the globe. It provides insights into why these retailers are as successful as they are.
  • We can find useful insights and tips at Modern Media's post on "The Fastest Growing E-Commerce Stores of 2019."
  • Check out "The Fastest Growing Online Shops in the United States" chart from Statista. Visiting these sites might give you an idea why they grew so much in 2019. 
  • Oberlo has some interesting information on niches. Visit their YouTube Channel for their Top 20 niches for 2020. On their website, they also have a post with stats about the most profitable niches. 
I'll go into more detail about how to choose trending products in Step 5: Choosing Products. For now, we're just focusing on finding a niche. 

An Apple Mac with a sales graph on the screen. The graph is curving upwards.

Dropshipping Tools to Help Find Your Niche

Wikipedia’s List of Hobbies

If you weren't able to identify a  niche using my questions, then use the Wikipedia List of Hobbies to look at all the different hobby niches out there.


Scan through the list and if something pops out at you, write it down. 


Once you've worked through the entire Wikipedia List, whittle your own list down to only ten niches, then down to five and finally down to three.


Choose your favorite niche and keep the other two niches in the back of your mind. 


Focus on that single niche and start doing research on winning products in that niche. (More on that in the next post).


Businessman holding out a thumbs up

The Advantages to Choosing a Niche You are Passionate About

  • Because it's something you have an interest in or a love for working on your niche is a lot easier.
  • You're more likely to stick with it when the going gets tough.
  • If you know your niche, picking products are much easier than searching for trending new products.
  • You will also be more likely to pick winning products in a niche you are passionate about. Since you know what the prospective problems are in the niche, you can find products that solve these problems easier.
  • In addition, you also know why people are passionate about that specific niche, so you can find products that appeal to their intrinsic needs and wants much easier.
  • Because people are passionate about the niche, they are more willing to wait for their products due to its uniqueness.

Additional FREE Resource

Download my Dropshipping Niche Finder Questionnaire PDF here.


It's a free tool that allows you to narrow down your potential dropshipping niches.


I highly recommend you work through it. Click the banner below.



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Ippei Kanehara
Founder/CEO Ippei Leads

$52K per month providing lead generation services to small businesses

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