Here’s the one of the Steps in Drop Shipping business – Niche Research!
Niche research is one way of looking for the perfect drop shipping niche. At the very beginning, you are overwhelmed with questions. What niche to think of? What to concentrate on? What if the chosen field won’t turn out to be as profitable and popular as expected?
It is typically recommended to choose a niche that suits your own interests and passions. That’s a nice place to start, and that’s a guarantee you will treat this business patiently and professionally. Still, if you want to build a profitable drop shipping webstore, you need to base your niche choice upon some reliable and measurable criteria.
That’s why we have created this Guide for your convenience!
Exploring AliExpress as the possible source
When we select drop shipping niches for our own stores, we evaluate their potential with the help of several parameters.
First of all, we visit the website of the drop shipping supplier we’ve previously chosen – most typically, it’s a seller’s store on AliExpress. Here we can check the relevant statistics to see if this niche and these specific products will be a good choice.
We use a five-star scale. The rating of 5 stars means that from the point of view of this separate parameter, this niche has an excellent potential. The rating of 1 star means that from the point of view of this separate parameter, this niche is not promising at all.
- AliExpress products quantity. We look at the number of items that can be found here upon the use of a particular keyword. We only include the items that have the free shipping option and the 4*+ rating.
- If we can find more than 2 000 items, the score we assign to this niche is 5*;
- For 500 – 1 999 items the score is 4,5*;
- For 100 – 499 items the score is 4*;
- For 1-99 items the score is 3*.
- The niche popularity on AliExpress. We set the same parameters and sort the items by the number of orders. Then we take the first 10 items and calculate the arithmetic mean of the number of orders.
- If the arithmetic mean is more than 2 000 orders, the score we assign to this niche is 5*;
- For 500 – 1 999 orders the score is 4,5*;
- For 100 – 499 orders the score is 4*;
- For 1-99 orders the score is 3*.
- Trusted supplier. We set the same parameters, take the first 10 stores, and evaluate them by the same parameters as AliExpress itself does:
- How long the store has been in operation;
- What its feedback score is;
- What the percentage of its positive feedback is;
- How much the items fit their descriptions;
- How good the communication is;
- How satisfactory the shipping speed is.
We consider all these parameters, but, in our opinion, the percentage of positive feedback is the most important. Customer satisfaction is the key factor to a store’s commercial success. This is why we calculate the arithmetic mean of the feedback score for these first 10 stores:
- If the arithmetic mean is more than 96%, the score we assign to this niche is 5*;
- For 95% – 95,9% the score is 4,5*;
- For 94% – 94,9% the score is 4*;
- For 93% – 93,9% the score is 3*.
Price setting aspects. We are surely most interested in the products and drop shipping niches where a considerable markup is possible.
It is exactly the case for the majority of simple basic goods offered on AliExpress because their prices are really low. It means there’s no problem with setting a higher price on our drop shipping website – it will anyway be lower than the price of competitors’ goods, so our customers will be satisfied with the purchase, and we will be happy with the profit.
To estimate the margin potential, we take the price of the most popular item in the niche and look this item up in 10 other online stores. We calculate the arithmetic mean of these 10 different prices (i.e. the average market price) and compare it to the price set by AliExpress seller.
- If the difference is more than 250%, the score we assign to this niche is 5*;
- For 100% – 249% the score is 4,5*;
- For 50% – 99% the score is 4*;
- For 1% – 49% the score is 3*.
Looking at the Google Trends
Fashion, as well as public interest towards different product categories and separate items, tends to change over time. You need to monitor it if you want to be sure that people’s interest to this niche is stable.
Google Trends is a wonderful instrument that gives you the necessary insight into general public interest towards particular products. This service is designed to analyse search trends, so it’s perfect for your business because it shows:
- How the search volume changes over time;
- What the most popular search terms are;
- Where the people searching for this term live;
- Whether the interest towards this search query is seasonal.
How to use it?
- Pick a product category. The easiest way to do this is to rely on Aliexpress and gather all its possible categories (e.g. electronics, home and décor, jewellery, etc.).
- Go to Google Trends and type in this category in the ‘Explore Topics’ field. Let’s take ‘knitting’, for example.
- Look at the result and try to analyze it using additional settings. For example, the graph below shows how the search volume changes over time, and, as you can see, it decreases gradually. To learn more about this dynamics, you can change some settings:
- Your region of interest;
- Time frame;
- Type of content;
- If the trend is ascending, the score we assign to this niche is 5*;
- For a flat trend the score is 4*;
- For a descending trend the score is 3*.
What’s quite curious, this example shows the seasonal interest towards a search query. There are types of goods (for example, Halloween decorations, Christmas gifts, etc.) that are in demand only within a limited period of time. There’s nothing wrong about having these products in your store if they are combined with some other kinds of offers (birthday cards, wedding decorations, etc.) that are not season-dependent, but it’s not recommended to rely on them solely.
Surely, you will also find it essential to learn more about the regions where this search query is the most popular.
Additionally, you will get the chance to see the most popular related search terms and estimate the speed of their popularity growth. This will be a very important piece of knowledge at the moment of planning your marketing and SEO strategies for promoting your drop shipping webstore.