If you’ve always considered starting an online e-commerce business, but you haven’t known where to start, dropshipping can be a good place. Many people question whether or not dropshipping is still a viable business model as we head into 2020, and it is, but you have to create a quality website and even more important than that, you have to choose the right niche and products.
When you choose a niche, it can be a balancing act in many ways. You want a popular product, but some popular products can either mean the market is oversaturated, or you might face challenges setting up a merchant account and advertising.
For example, Products are a popular product right now, but you may have to apply for a high-risk merchant account, and you may be prohibited from advertising the products on social media.
Also, you want a product where there’s not so much competition that it would be impossible for you to stand out, but at the same time, you don’t want a niche so narrow that there’s not enough demand.
The following are tips to keep in mind to identify a potentially profitable dropshipping niche in 2020.
How Much Profit Do You Need Per Sale?
A big part of choosing a product niche is going to justify the profit margins of the products in that niche.
If you choose a niche with a higher purchase price, then you’re going to have higher profit margins in most cases.
With that, you do have to think that it can take longer to sell more expensive items, and it can be more challenging to convince people to splurge on them.
You also have another option, which is choosing cheaper products but focusing on volume.
If you’re not sure which direction to go, it’s possible to do both. You can select a niche where there’s diversity in product prices.
This allows you to sell more expensive products with higher profit margins along with less expensive products for volume.
Rather than searching only for a niche that’s popular right now, if you want to build a sustainable online business, you also need to be thinking about potential future trends. This can sound like a lofty goal, but there are realistic ways to do this.
For example, you can use Google Trends to help with your niche research. Google Trends lets you look at keywords and then figure out their popularity over a certain period of time.
Some other general considerations to keep in mind when choosing a niche for dropshipping are:
There is a price point at which people will spend money and make an emotional and perhaps impulsive purchase without taking too long to overthink it. That price is usually around $100 to $200. If you go too far above this, it’s going to mean slower sales because customers are going to want to think about the purchase for longer and they’re going to do more research in most cases.
Think about a niche that people are passionate about. There are certain niche categories that have a solid and engaged following.
If you want to be able to diversify your product offerings, look for a niche where there are a lot of accessory options because then people can buy more things from you.
Look for a niche and products that aren’t easy to get otherwise. If you choose a niche and the products in it are something that people can buy anywhere, it’ll be tough for you to stand out.
Read More: 10 Unmatched Benefits of Being a Dropshipper
Some things that can make for a bad niche include:
Products with deadlines
Electronics because these can come with a host of technical issues so you’ll face customer service problems
If you choose time-sensitive products and then they don’t arrive on time, you’ll again have customer service issues
Don’t choose products that are too personalized
Once you have some niches you’re considering, break it down and view them within the context of certain criteria.
One area to focus on is competition. Look at other dropshipping stores and make sure you aren’t looking at a niche that’s too saturated. You also want to avoid a niche where the most popular products are dominated by a national brand because you’re going to be going up against customer loyalty.
Think about shipping as well—you don’t want something too heavy because it will cut into your profit margins in terms of shipping costs.
Finally, don’t choose a product where there are preferences as far as style and size because you’ll have a high return rate.
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