The very first step to start a dropshipping business is to choose a niche. And this is where a lot of people falter.
Should you follow your passion, or follow the trend of hot products that are “guaranteed” to sell?
A niche is a category or an industry. Clothing is a niche, but you can drill down further and choose women’s wear only, or athletic wear only. But how do you even choose one?
There is so many advice out there—much of which is just noise that drowns the very essence of niche selection.
Some say you have to sell what is hot and then just copy the ads of other dropshippers. Others say follow your heart. Which way should you go?
Today, I will share with you some of the most important tips to help you choose your niche.
These tips are based on my experience and that if my friends in the dropshipping community.
These people have shared their successes and failures to me, and I want you to get to know them, too.
As always, there is a caveat for every choice that we make, but I will touch on these issues as we go along.
By the end of this tutorial, you shall be ready in choosing your dropshipping niche the right way.
Passion or Money?
Should you sell something you love even if there is no market, or should you sell a hot product that you despise?
Both of these options are dangerous if not done right. Choose passion with no market, and you are dead in the water.
Choose a trending product, and your days of dropshipping are over once the interest is gone.
The key to deciding is to find a good balance between the two.
You cannot just sell a product you love if only a few people are interested in it. For example, Segway. This used to trend, but no one buys this now.
But also, you also cannot endorse a product that sells like pancakes if you know nothing about it.
To strike a balance between the two, start with identifying your passion.
Here are some questions that you can ask yourself to help you find out what you love:
- If you were to stop working with a consistent amount of money coming in, what will you do? What will your hobbies be?
- What subject matters do you find yourself searching in Google all the time?
- Whenever you go shopping, which department do you head to most often?
Passion should go beyond emotion. All of us have different passions. You need to choose one that is also backed up by knowledge.
In addition to knowledge, do you have experience with it?
How could you sell mobile phone accessories of you really have no passion for phones? Or clothing for women when you cannot even differentiate a stiletto from a loafer?
As you can see, your passion niche is something that you know about. Why is this important?
By the time you open your store, your customers will bombard you with questions. Is the clothing made of cotton or polyester? Is the battery of the drone lithium-ion?
Your failure to provide reasonable and smart answers to these queries will have an impact on how your customers perceive you.
You need to be an expert about what you are selling because this is one of the things that will help you drive success.
As far as profitability is concerned, it is going to be difficult to find a reliable source of data.
As you can see, there really is no centralized repository of information about dropshipping.
No one can know for sure how many cellphone cases have been sold from China to the US or worldwide.
Even if you find sellers who can quote statistics, these numbers are not reliable.
What I suggest that you do is to stick to a reputable dropship supplier tool provider, such as Oberlo, Spocket, Dropified, and SaleHoo.
These companies have thousands of dropshippers that use their tools.
Because of this, they have enough data to support which products from their suppliers sold the most and which ones are tanking.
SaleHoo, for instance, have a feature called MarketLabs. It is a data-driven analysis laboratory where you can find a list of top-selling items per category.
And when I say top-selling, I mean really top-selling.
These are items sold by dropshippers who use the SaleHoo tool. SaleHoo can even provide you with the average listing price of the product that you have selected.
The other option is for you to use Google Trends. It is a free tool where you can see how people around the world are behaving as far as search is concerned.
With Google Trends, you will know how a search term is trending on the Google search engine over time.
As you can see from the screenshot above, the search term for drone worldwide is now only at the 50-ish level.
In Google Trends, the rating of a search term is between 0 and 100. A rating of 100 means that the search term is at its peak.
With a rating of 50, it means that people are still looking for it, but not as much as they used to.
As you can see from the chart, the search is for the last five years, and there are spikes that happen frequently—the peak is always during December.
What does this tell you? There is a consistent demand for a drone, but it peaks during Christmas!
Trending or Normalized Products?
What would you choose to sell, hot products or those that have an established customer demand? What are the best dropshipping niches?
An example of a trending product is the fidget spinner. If you look at the chart below, it only spiked in 2017. Now, no one is interested in it.
If you build your dropshipping store based on trends, you will find yourself in a very bad position once the trend is gone.
While you can ride on its strength while it is hot, that business model is not going to last.
On the other hand, the search term for a baby toy has a consistent trend for the last five years, peaking from November to December.
After the holiday, the search for the term is back to normal. While the demand is not as high as it is during the holidays, there is a demand for baby toys.
So, how do you find a delicate balance between the two?
Should you choose the toy niche, make sure that your ears are in tune to what is hot.
Add the fidget spinner at a time when everybody is crazy about it, and then take it off your product list once the frenzy is over.
However, never build a store that is based on a trend. If you do that, your store is standing on a peg leg, and it will come to a crash.
Low-Ticket or High-Ticket?
So, will you sell kayaks worth $1,000 each or t-shirts at $25 a pop? Both of these have pros and cons.
High-ticket items give you more room for profit, and low-ticket items do not.
If you think about it, you can have as much as $200 for selling kayaks for $1,000 each from high ticket dropshipping suppliers.
What this means is that you only need to sell one kayak to make a gross profit of $200.
On the other hand, you need to sell 40 pieces of t-shirts if your profit for each is only $5.
As you can see, the numbers tell a story. However, the issue with selling kayaks is that not a lot of people are going to buy it.
You can only sell your kayak to a select few individuals. How many people out there are going to shell out $1,000?
Besides, it is going to take you so many follow-throughs to make that sale.
For a t-shirt, it is an emotional purchase, and it is easier to convince people to pop $25. Also, t-shirts obviously have more variations than kayaks.
T-shirts are universal—everybody wears them, whereas kayak is a deep niche product. A t-shirt, however, has thousands of sellers and you will be competing against all of them.
There is no right or wrong answer between these two. But if I were to give my two cents, the t-shirt business is a better option than the kayak if you are a beginner.
Open a t-shirt store and get the hang of marketing.
Once you have improved your marketing skills, you can venture into big-ticket items.
Also, you would have saved enough money by that time to sustain your big-ticket store.
Remember, a big-ticket store may not be able to sustain itself for the first several months, considering that a person will take that long to decide whether or not to spend $1,000 for it.
The key to finding the right niche is balance. It has to be a sustainable choice—something that you understand and care about.
More importantly, it is must be a niche where you can find demand.
Niche selection may sound easy, but this is the part of the dropshipping business that really requires a serious study.
You cannot expect to succeed in dropshipping if the niche you selected is a bad choice. You must also now the dropshipping niches to avoid like a plague.
Like most things in business, there is no secret to choosing your dropshipping niche, in the same way that there are no secrets to trading stocks.
Niche selection has to be carefully chosen based on what you know and whether there is enough number of people interested in your product.