5 Tips for Choosing the Best E-Commerce Niche for Your First Product

If there’s one thing we’ve learned from recent world events, it’s that e-commerce is poised to become an even bigger part of our lives than it already is. Not only can you easily manage an e-commerce store from the comfort of your own home, but the demand for e-commerce has never been greater.

According to accumulated data from eConsultancy, e-commerce sales in the United States for March, April and May grew by an average of 126 percent year over year. In China, the growth in online sales continued even after the country allowed phased reopening of brick and mortar businesses.

Of course, success in e-commerce doesn’t happen simply because you happen to have an online store. While marketing and other factors certainly play a role, much of your success will come from choosing the right niche for your first product.

1) Focus on What You Love

Starting your own dropshipping business makes you an entrepreneur. And one of the most important rules for any entrepreneur is to pick an area that you are truly passionate about.

As Asim Dalal writes for Entrepreneur, “With passion, an entrepreneur possesses an inherent fuel and inexhaustible stamina that constantly drive his actions forward. This superior energy helps overtake and surpass various challenges and injects a certain indescribable strength to continue pursuing goals when difficulties arise.”

When first deciding on your product, consider the niches that you are most passionate about. Maybe you’re a sports fanatic. Or maybe video games are more your thing. Starting with such a niche in mind will help you come up with ideas for products that you will actually enjoy selling. This can make all the difference in helping you develop the drive needed to succeed in e-commerce.

2) Identify Trends, Not Fads

After identifying a few potential niches you would enjoy working in, it can be helpful to look at current trends within different industries.

Remember, these aren’t fads. Fads are things like fidget spinners or the Harlem Shake — they explode in popularity overnight, but a few years later, they’re nowhere to be found. Trends are products that see steady growth in popularity and have true staying power.

Product categories that could count as a “trend” include items like dog beds or handmade jewelry. These categories have seen a steady increase in popularity over time, growing over several years.

Google Trends offers an easy way to identify trending products. Historical data can help you see whether a product is establishing itself as a lasting part of the market, or if it is merely a fad.

3) Find Gaps Among Your Competitors

After you’ve identified a trending product, it’s time to check out the current competition. This is where you can determine if a particular product category is already oversaturated, or identify ways that you can stand out and differentiate your products.

This is where being passionate about your product niche comes in handy. If you’re obsessed with camping, it will be much easier to discover if other retailers have overlooked products that you consider essential for your camping trips.

Sometimes, you’ll be able to differentiate yourself by offering a product others in your niche don’t sell. Or you could sell a product with different features or aesthetics. You might find that beating your competitors on price is the way to go.

By taking a deep dive into the top sellers in your niche, you will be better able to identify the product categories where they are falling short and where your first product could have a bigger impact.

4) Use Keywords to Find Sub-Niches

Keyword research can also be extremely helpful in identifying sub-niches and additional product ideas. Use generic keywords related to your niche as a starting point.

There are several free tools that can help you identify top search autocompletes or related keywords to a particular entry, such as Soovle or Ubersuggest. These tools can also help you identify the level of competition for different keywords, making it easier to judge where there is more opportunity for rapid growth.

Better yet, the keyword research you do to identify sub-niches or come up with product ideas can also help you determine which keywords to focus on for future SEO and PPC campaigns.

5) Watch the Margins

Not every e-commerce business takes off overnight. When doing your research for your first product, you should carefully consider what your profit margins will be for each product sold.

Knowing the cost per product for manufacturing, taxes and order fulfillment will help you determine the pricing for your products, as well as how many units you need to sell to break even. Finding the right manufacturer is a crucial step in this process.

To sell your products, you’ll need to price them competitively. If a product has a low profit margin, you may need to sell several hundred before you turn a profit. On the other hand, if your product has a high profit margin, you can be successful even if you have a relatively low sales volume.

While not every e-commerce or dropshipping venture is going to be a success, dialing in on the right niche for your first product will set a strong tone for your store’s future. By doing your research in advance, you will be able to identify a product that will build a solid foundation for your online brand.