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 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:
Evaluate the demand of products offered by your drop shipper
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. While you are exploring the larger platforms, start thinking about how you might be able to leverage them as part of your Omni Channel Sales Strategy
- 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. Google Trends is a useful tool for e-commerce store owners as it can help to identify new trending products that you have not thought of selling before, and at the same time it can give you insights as to why some products may sell better throughout different times of the year. This of course can translate into useful and intelligent metrics that come in handy when you are ready to start marketing a particular product or a whole product category.
- SaleHoo: The SaleHoo directory membership is not only must have for all online e-commerce entrepreneurs for the purpose of sourcing products from wholesalers and drop shippers, but it also features powerful product trend analysis tools that allow you to identify the best possible profit margin products.
- 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.
Analyse the Competition – If high profile e-commerce competitors are selling the products, they have most likely done their homework.
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.
If you are after advice on starting your e-commerce website, please reach out to DropShip Carts. Australia’s leading e-commerce web development company for new entrepreneurs.
Analyse your Drop Shipping Niche
There are several things you need to look at when analyzing your drop shipping niche:
- Selling Price: When it comes to deciding on what price points to target with your new drop ship supplier reliant website it can be very easy to be attracted to the higher profit margin products. The reality
is, that whichever price points you choose, there is a correlating liquidity ratio. In simple terms, you will sell ten times more products in the $1 to $100 price range then the $1000 – $2000 price range.
There are sellers who do not mind processing many orders and stack up their profits that way, and at the same time there is an equal amount of sellers who prefer to only deal in the higher end of the market and only deal with high priced, higher margin product drop shippers. Both have their advantages and disadvantages. More on this topic can be found in our article: Product Pricing Strategies for a Drop Shipping Business.
- Market Size: When you are considering a specific niche, one of the most important things to take into consideration is the size of your target market. You obviously do not want to go “too-niche” restricting your potential pool of customers to a very small select few which would make your operation unprofitable. Getting the product mix just right is the key to succeeding in drop shipping.
- 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 them, in their local 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.” This statement has become less true recently as I have now noticed that e-commerce prevalence has crept up on everyday consumers to a point that nowadays people do not mind shopping online and waiting longer for their products to arrive. I have italicized the above statement as it was interesting for me to refresh this article now in 2019 and notice how things have changed since 2016, the first time this article was published on our website. Things have definitely changed noticeably. People don’t mind waiting and even paying extra for shipping over visiting their local store which in most cases is the result of the lack of time or sheer laziness.
- 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.
Finding a good product category 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.
Another related article to check out is Picking Your Dropshipping Products