Very often, people make up their minds to start a drop shipping business long before they even pick a specific drop shipping niche or product they would like to focus on. Picking the right drop shipping niche and products to sell is often one of the biggest challenges you will face before your drop shipping business takes off. Some people pick products based solely on their passion. Whereas this can serve as a good starting point, running a profitable business entails a lot more than simply selling products you like. Here are some steps to follow when choosing a good drop ship product:
Step # 1: Evaluate the Demand
It obviously makes no business sense to start selling a product without first evaluating if there is sufficient demand for the product to sustain your business. Luckily, there are some online tools that you can use to try and gauge the demand for various products:
- Amazon and eBay: Amazon and eBay are good places to get inspiration and see what other people are selling. There are hundreds of different product categories on these sites. The most viewed categories tend to appear near the top of the list. These include things like Fashion & Electronics.
- Google Trends: Google Trends is a great tool that you can use to find a lot of information about a wide range of products. This includes information about search volumes, demographics, seasonality of products and the search trends for various products.
- Watchcount.com: This is free online app that you can use to learn about people who are watching various products. The app tells you exactly which products are selling the most and can help you pick a good niche.
- Compete.com: This is a good website where you can find a plethora of useful information about any website. Though it’s a bit pricey to use, Compete.com provides information about how different websites get their traffic (both paid and organic) as well as demographic information to help you find the best groups of people to target.
Step # 2: Analyse the Competition
Analysing the competition is the next vital step before you settle on a certain niche or product. Analysing the competition, however, can be quite tricky. On one hand, too much competition might mean there is a healthy demand for the product, but you will have to expend much more effort and time building decent traffic to your site. Too little competition, on the other hand, might mean that you will have an easier time getting good amounts of traffic, but it might also mean that there is little demand for the product.
One of the best ways to analyse your competition is by searching for websites on Google that are ranking highly for specific keywords. These are likely to be the sites you will have to compete against to get a high rank. This is where good SEO comes into play. Your drop shipping site has to rely heavily on organic traffic that comes to you through search engines, meaning you have to make every effort to rank highly in SERP (Search Engine Results Page).
Here are some factors to consider when analysing the competition:
- Linking Domains: Even though inbound links are not as important as they were to Google search algorithms as they were years ago, they are nevertheless still important. The more quality links that a site has, the higher the rank it gets from Google. It’s important that you check how many inbound links your competitors are getting to give you a good idea what it takes to compete at their level. Google also gives a high rank to sites that attract new domains as opposed to sites that get their links from the same sites over and over again.
- Authority of Competing Websites: Google not only looks at a site’s inbound links, but the authority of the sites linking to such sites.
You can verify a site’s Page Rank by using SearchStatus Firefox, a Firefox browser extension. Any site with a PR of 5 or more is considered to be a high-authority site. If most of your competitors have a very high Page Rank, then be prepared to face some really tough competition as far as page rank is concerned. If the businesses you are competing against are Australian, try to use a domain name extension such as .au on your eCommerce website to help you rank higher for your Australian customers.
Step # 3: Analyse yourDrop Shipping Niche
There are several things you need to look at when analyzing your drop shipping niche:
- Selling Price: The selling price of the product is a very important consideration. Generally speaking, it’s best to pick products in the $100-$200 range. You can, however, pick much cheaper products if they have high margins and strong demand. It’s possible to find products with profit margins in the 70%-80% region, especially if they are low-priced. Margins in the range of 20%-30% range are, however, more common and are considered satisfactory. If you would like to sell big ticket items, you should be prepared to offer a high level of customer service including things like live chat and direct calls.
- Market Size: The larger and more established the market, the less you might have to advertise and spend on things like PPC (Pay-Per-Click).
- Market Age: Is your product geared more towards younger or older people? While most people nowadays are web savvy, there is still a sizable group of seniors out there who don’t have a lot of experience with online shopping. These older citizens might be much less willing to trust anyone with their credit card information. If your products are mostly targeted at this demographic, you might have to accept other methods of payment other than online gateways.
- Product Rarity: You obviously don’t want to sell a product that people can easily find near their malls or stores. Unless your products are seriously discounted, many people would still rather shop at their convenience store instead of waiting for days for a shipment to arrive.
- Product Obsolescence: Some products, electronics and mobile phones in particular, tend to become obsolete rather fast. When you deal with such products, you will have to update your website often whenever you remove older products and add newer ones. Luckily, in a drop shipping business, this is not a critical consideration because you don’t stock large amounts of inventory that risk becoming devalued if the products become obsolete while you are holding tons of them in your stores.
- Is this Your Passion?: As aforementioned, it’s not a good idea to start a drop shipping business, or any other business for that matter, based solely on you being passionate about a product. Unless there is a ready market for the product, you are likely to become quickly disgruntled if your passion fails to sell well. Being passionate about a product, however, is a big plus because it makes it easier to become enthusiastic about it. This kind of enthusiasm can rub off into your customers and help you succeed in the business.
Finding a good product to drop ship might sometimes take a few trials and errors before you can find something that really takes off. But by following these guidelines, you can make that process much smoother and quicker rather than trying to rely blindly on luck.