How To Research Dropshipping Niche

Finding the best products to sell in your online store is a daunting process for many entrepreneurs, especially if you are new to the ecommerce industry.  Entrepreneurs must fill their stores with premium quality products that can appeal to different customers from all around the globe.

Ecommerce and digital trends change quite fast due to the wide variety of products available in the market. However, it is not impossible to establish a profitable dropshipping store as it is getting easier to research the profitability of a niche product.

1. Take your time selecting a profitable product niche

The niche selection process is one of the first steps entrepreneurs should take when starting their ecommerce business. As such, it is crucial to ensure you conduct adequate research on which products are most appealing to your target market and their level of profitability.

Selecting the right product niche contributes to making or breaking your dropshipping business. As such, you do not want to rush this process.

Generally, there are two types of product niches when it comes to establishing a business. There are good product niches, which refer to those that generate a considerable amount of profit.

Often, these products come in a wide selection of variations and styles and appeal to customers due to their unique features. Such products include furniture, lighting, and rugs.

On the other hand, there is a bad product niche, which is often quite non-profitable.

The bad product niche often includes products that have an emotional connection to the customer, contain deadlines, and are personalized for a specific customer. Such products include bedding, electronics, and seasonal products.

Related: Click Here Find out the best niches for dropshipping!

2. Analyze the profitability of your business

Most entrepreneurs begin a dropshipping business to make money. As such, it is vital to find a product niche that allows a healthy profit margin over the wholesale price to ensure your business gains as much profit as possible.  Therefore, search for products that have a high buying price.

Most drop shippers have a profit margin between 15%-20% over the wholesale price. The more expensive the product is, the more money the drop shipper makes. For instance, if you have an order of $300, your gross profit per sale will range between 40%-60%.

Similarly, it is vital to note that selling expensive products can contribute to a slow-moving business, especially if your products do not have demand. Alternatively, you can choose to sell a high volume of cheaper products to make high profits.

The key to having a healthy profit margin when selling more affordable products is to ensure you are making a lot of sales. More so, having a diverse set of products can also increase the number of sales and total profit in your dropshipping business.

Diversify your product inventory to increase your revenue streams. However, do not forget to select products that appeal to your customers and likely to discourage them from shopping elsewhere.

3. Closely monitor your competitor

Once you figure out a potential product niche, it is also crucial to research what your potential competitors are doing to generate maximum sales. If your potential product niche has more than four to five strong dropshipping competitors, it is best to look for another product niche.

It is safer to find a product niche with fewer competitors as it gives you more room to level up with them. After finding a potential product niche, take a closer look at how established your potential competitors are in the field.

Check their brand credibility and whether they have a long list of happy and loyal customers.

It is also vital to keep in mind that if there are not many competitors in your potential product niche, there might not be too much market for such goods, or you have found an untapped dropshipping niche.

4. Consider future trends

As mentioned earlier, ecommerce and digital trends tend to change quickly. Drop shippers need to keep up with their target markets and their patterns to ensure they do not run out of business. 

Once you figure out your potential product niche with healthy profit margins and low competition, you should find out whether the products are likely to sell in the future. Ascertaining the future of your potential product niche aids in building a reliable and sustainable dropshipping business.

Resources like Google Trends are an excellent place to start when trying to figure out the future of your potential product niche. Search for specific keywords relevant to your niche and find out their popularity over a set period.

For instance, most people cannot go anywhere without their mobile phones, and no one wants to carry around a phone with a low charge. As such, power banks have become an increasingly popular must-have for many people.

As years pass by, more mobile phones are making their way into the market, proving that the trend is not going anywhere for a long time.

5. Consider the seasonality of your products

Entrepreneurs have to be brutally honest with themselves to ensure the longevity of their business. Similarly, it is vital to question whether their potential product niche will sell throughout the year.

If it does not sell throughout the year, will the products make enough profit for your business during the peak window to ensure its sustenance for the rest of the year on low sales?

Product seasonality can be categorized into three: highly seasonal, semi-seasonal, or year-round.  Highly seasonal products are those that only sell at a particular time in the year. It is best to avoid these types of products, but are a good source of secondary income.

Such products include Halloween costumes or fireworks.

Semi-seasonal products are those that have high demand at a particular time of the year but do not completely dry up for the rest of the year. Such products include sporting gear and equipment or outdoor furniture.

Year-round products are those that sell optimally throughout the year and have a spike in sales at certain times during the year. It is also vital to make sure that your customers will always think of you when they want to purchase from your product niche.

Find a product that you can sell recurrently to the same customer and ensure that you will inspire their loyalty.

For instance, if you choose to sell consumable or perishable products, you have made it in the drop-shipping business. Your profit per sale is likely to be minimal, but since you can sell many and repeatedly, the small profit margins will soon add up.

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Wrap up

There is no such thing as the perfect product in the dropshipping business. However, with proper research, weighing, and elimination, you are likely to land in a profitable product niche.

Therefore, use the guidelines above to find a profitable product niche, market it effectively, and offer excellent customer service to ensure your dropshipping business takes off, with the potential of going further ahead than your competitors. Do not forget to keep an eye out for the latest trends in your chosen product niche to ensure the relevancy and sustainability of your business.

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