Oct 19, 2020
 in 
Ecommerce

How To Choose A Dropshipping Niche

W

hen you are opening a dropshipping store, it is generally best to cater your business to serve a specific niche audience. Rather than trying to serve all types of people, focus on a small, identifiable market. The more specific you can get, the better, as long as the market size is aligned with your goals. Most big brands start out catering their marketing to a small group of people, and while other people may also choose to purchase, this acts as the north star for guiding their marketing efforts. 

Dropshipping niches to choose from
There are tons of different options available, but which one is right for you?

What is a Niche?


According to Shopify, a niche is “a segment of a larger market that can be defined by its own unique needs, preferences, or identity that makes it different from the market at large”. Let’s look at some examples. 


Everybody needs to purchase food in order to live. This is a huge category that can be broken down into hundreds of smaller categories - niches. One such niche is baby food. Not many people are buying baby food. For the most part, only parents. We can divide this market even further, if we would like, and look at the even smaller niche market of organic baby food. Chances are, consumers in this niche are shopping for the same reasons -- healthy, organic food for their children -- so we can identify this market and cater our marketing to it. 


Fitness is another giant industry filled with smaller niches. Fitness can refer to running, yoga, working out, track and field, and much more. It would surely be difficult to build a brand that people associate with all aspects of fitness, but relatively easy to build a brand in a smaller niche such as Crossfit. Crossfit athletes follow the same principles and do the same exercises, so it will be much easier to learn about the market and cater your offerings towards it than it would be to target fitness as a whole.


Why use a Niche?


Defensibility: By marketing to a specific niche, you can differentiate yourself from your competitors, and create a defensible brand position that the bigger brands won’t (or can’t) interfere with. Rather than having a million customers that sort of like your brand, you can drill down and find a thousand customers that absolutely love your brand. Even though you won’t sell as many products, you will be more likely to retain your customers, more likely for your customers to refer their friends, and more likely to come up in conversations or search results for the niche you are focusing on. 

Using a niche in dropshipping allows you to target a market, which is much more effective than throwing your money around everywhere.
Digital marketing is about targeting, not mass-marketing.


Targeted Marketing: Another key benefit of marketing to a niche is that your marketing budget will be used much more effectively. If your online store sells products in 20 different categories, how do you choose which one to focus your marketing efforts on? Or do you try to stretch your budget across them all? Also, when you receive visitors on your website, it can be difficult to know what they were looking for. By focusing on a small niche, you can focus your efforts on finding customers in that niche. Sure, there will be less of them, but you’ll know what drew them to your website. This also makes for more effective retargeting ads and look-a-like audiences on Facebook, since all of your customers will have a common interest in your niche. 


Branding: Think about your favourite brands. I’m sure there are many examples that come to mind - Nike, Apple, Coca-Cola, Disney. Now ask yourself this: how many of those brands have products in completely unrelated categories? Would you trust a Nike brand computer? Or a Coca-Cola smartphone? There are definitely enough people in the world that someone would give it a shot, but the majority of us would be apprehensive. This is because those products would not be consistent with their brand. If you want to build a brand, it’s much more effective to start with a niche and expand from there than to take a scattershot-approach between a bunch of different industries. We’ll leave that for Richard Branson, and acknowledge that it is an unsuitable strategy for most beginners. 


What to look for in a Niche

If only it was this easy to identify a good dropshipping niche.
Okay, so you're sold on using a niche. But what should we look for?


When you’re evaluating niches, you’re better off picking something that aligns with your interests. Don’t just pick something you know nothing about because you think it would be profitable, or because you see other people doing it. You want a niche that you can add value to. Something that you wouldn’t mind working with for the foreseeable future, or that you want to learn more about. You might think that you’ll never get tired of fidget spinners or cat-printed yoga mats, but you need to think about the long term. Is that really what you want to spend the next few years working on if it takes off? 


In terms of physical products, you will also want to pick a niche where the products have a lot of variation. If there is only one type of product in the market, then you’ll face a lot of competition. You want a niche with products that the customer would recognize, but maybe they haven’t seen your style yet. Let’s take a look at smartphone cases for example. The smartphone case industry is huge, with thousands of different styles available. You can probably find a style in your niche that doesn’t have a lot of competition, despite having some demand. You could make your cases out of wood, with hand-drawn pictures of elves on it. You could make commemorative designs for local events. The possibilities are endless, and it’s fairly safe since each individual element has been tested before.  

You'll also want to find a niche with some products that can't be purchased locally. If your customer can just go to the store down the street from them and buy the exact same thing, then they probably won't want to go through the hassle of shipping it.

Also, some of the best products to dropship are those which are appeal to impulse buyers. Have you ever seen something online and thought to yourself "wow, I have to have this"? That is exactly the type of emotion and excitement you are trying to invoke in your customers. The quicker you go from them first seeing the product to them buying it the better. You don't want them to have a chance to talk themselves out of it.


What to avoid in a Niche


When evaluating your ideas for different niches, there are several things you will want to steer clear from. The first and most obvious one to avoid is highly breakable objects. If you are just starting out as a dropshipper, your fulfillment process will likely just be whatever the supplier offers. If you think that you can sell frail glass sculptures and have them arrive intact, then sooner or later, one might arrive broken. It’s best to avoid highly breakable products from the get-go, and return to those ideas when you have a bit more experience or resources. And, if you do decide to ship breakable stuff, then at least order yourself some samples first. Double-check what condition the items are when you receive them, because once you start selling to customers, you’ll have other things to worry about. 

Breakable products aren't good for dropshipping
Having an order arrive broken is never fun.


Another major thing to avoid is pseudo-branded merchandise. When you are looking for products on a website like Aliexpress, you will come across products that seem to be branded with names you recognize. You’ll see Marvel products, t-shirts and posters from Netflix’s Stranger Things, and the list goes on. You might be initially drawn to these items because of their relevance to pop culture, but there's a 99%+ chance that these products are illegitimate. Marvel is owned by Disney, and Disney is definitely not allowing their products to be sold by some store on Aliexpress, or wherever you found it. If the products are real and you’re able to turn yourself into a distributor, great. But selling illegitimately branded products is a great way to get your store shut down before you even get any traction. 

Illegitimate products on Aliexpress
Selling knock-off products is a great way to get in trouble.


You will also want to avoid niches where the products are large or heavy compared to the value they bring. For example, starting a dropshipping store that sells cheap bowling balls is probably not the best idea. If you want to sell premium products, that’s one thing. But selling low-ticket items with high shipping costs is a great way to go out of business. Leave these opportunities for businesses that have better distribution channels. Pre-assembled furniture is going to be difficult to ship. At the very least stick to furniture or big items that ship disassembled in a box, and only when the price point makes sense. 

Couches are not a great niche for dropshipping. They're too big !
Bulky furniture is not great for dropshipping.


Lastly, you’ll want to stay away from niches where unbranded products have a hard time competing with branded products. Electronics is a good example of this. Sure, you can sell someone an unbranded iPhone case, but chances are they won’t be buying a smartphone off you anything soon. Electronics are expensive, and people want to buy from established brands that they trust. Not to mention all the issues with international customers, breakable products, product liabilities, and warranties. You can sell accessories or electronics, but you’ll want to stay away from some electronics themselves, as well as other high ticket items that people want branded. 


Product Availability


In an ideal world, you could dropship in whatever niche you wanted. But, in reality, not all product categories and niches are available on every dropshipping platform. Most dropshipping beginners aren’t going to be setting up their own agreements with suppliers, and they will instead be powering their stores with dropshipping apps such as DropCommerce and Oberlo. This means that we will also have to choose a niche that actually has products in those categories on that platform. 


It might be best if you come up with a few different ideas for stores, and you use the product availability as another dimension in deciding which one to pursue. If your first choice does not have a suitable selection of products available to you, then you might want to move on to your second choice. 


Takeaways: 


  • As a beginner, catering your products, marketing, and branding to a specific audience is important. It’s difficult to get started, and the more specific you can be with the market you are trying to reach, the better chance you have of reaching it. 
  • Pick a niche that has at least some alignment with your interests. You might be able to work on something you don’t enjoy for a little bit, but eventually the novelty will wear off, and you won’t enjoy working on it anymore. 
  • You want to find a niche with products that invoke an emotional response in your customers, and that they can't easily find locally.
  • If you’re looking to start a dropshipping business, you’ll want to avoid niches with products that are very heavy, very large, and where consumers won’t easily give you their trust. 
  • It’s best to focus on products that can be tweaked to have a different style. Sometimes the best ideas are simply the intersection of two of your interests. Rather than inventing something completely new that consumers might not like, you can just add a different flavour to what currently exists.
  • Before you get your heart set on a niche or set of products, make sure that you can source them properly. Most dropshipping beginners will stick to DropCommerce or Oberlo, so those should be the first places you check.

If you liked this article, then make sure to check out the following:

One Product vs. General Stores - Which One is Right For Your Business?

4 Ways to Monetize Your Website

What is Dropshipping? The Ultimate Overview

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