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The Quick Guide to Selecting a Niche for Your Dropship Business

By Megan Hudson

The Quick Guide to Selecting a Niche for Your Dropship Business
"Don't find customers for your products, find products for your customers." - Seth W. Godin - Author and former dot com business executive.

Dropshipping is fast becoming one of the go-to business models for the 21st century. It offers numerous advantages and is an excellent stepping stone for entrepreneurs with variable budgets. 

All you need is an eCommerce platform or website to sell your products, and those can be set up easily and cheaply through a third-party supplier. Then it’s up to you to pick the products you want to sell, establish a supply chain, write your product descriptions, and do the marketing. The actual manufacture, storage, and shipping of your products are all handled by your supplier.

While all of this makes it easier to get into the business, it does mean that you aren't in control of the full process. You have to rely on your suppliers. That's why it’s so important to do your research first and figure out your ideal fit in the marketplace. 

These are the top four elements you need to consider when determining the most profitable dropshipping niche:

1.    Research your market

There are two ways to go in dropshipping - completely niche and no competition, or something already popular. Either way can work for your business; it’s just about picking the right option for you and who you want to sell to. 

Going completely niche means that you have minimal competitors. That is great because it immediately gives you a unique selling point (USP), which is something all businesses are always looking for. However, it can mean that you have a limited target market and that you have to put in a lot of work to educate the consumer about why your product is worth buying.

On the other hand, having a little competition (or even a lot) isn’t always a bad thing. It means that there is a market for the product and that the market is currently buying. You also don’t have to focus on consumer education. You just have to find a way to differentiate your business from others.

2.    Make sure the price is right

One of the ways you can differentiate your business is to come in at a slightly lower price point than other sellers. However, you do risk not gaining enough profit this way, so it’s essential to research what a good price point is for your product and for your market.

Start by looking at what others are using, or similar products if yours is unique. Then look at what suppliers are selling the products for. You mustn’t forget to factor in shipping costs and any transaction fees that may occur. All of this information will help you to come to a price that is fair and a profit that’s adequate. It’ll also help you to analyze your business model properly.

Something else to consider is bulk discounts – if applicable. People like to be able to get a little more for their money. Your supplier may also offer a discount if you sell larger volumes at a time.

3.    Pick reputable suppliers

As mentioned, this is the one area of a dropshipping business that you don’t have control over. In fact, it’s the hardest part about getting a dropshipping business right – ensuring you have good suppliers. They will make or break your company.

Your first step should be to find as many options for your product as possible. Then you can compare prices, delivery times, tracking options, and most importantly, reputation. That last point is something you should do a lot of research into and make sure you are comfortable with the answers you find.

Another great point for getting as many companies as possible to be suppliers is that you have a backup. You can always switch to a secondary option if your number one supplier is out of stock or lets you down at any point. Knowing you can jump to a different but comparable supplier will give you peace of mind. Your business won’t have to slow down and order fulfillment is almost guaranteed.

4.    Know your product inside and out

The better you know your product, the better you’ll be able to sell it. The best salesperson is always someone who uses the product and believes in it themselves. This is because you can share your personal knowledge and love for it with anyone who is listening.

This will also help you to market the product better because you already have one great review – your own personal stamp of approval. It makes a good story for marketing to tell customers that the reason you are selling this product is that you personally use it and want to share its benefits with the world.

You are also in a strong position to answer questions about how the product works, where it comes from, and what users can expect on delivery. Your personal experience provides you with your unique selling point.

Get ready to start selling

Getting a handle on these four areas of your business will ensure you have a solid foundation for selling in your chosen market. It’s also important to go through the list in order, as the answers to the first point will inform your decisions on the next point, and so on.

To summarize: 
1.    Understand who you are selling to and who your competition is
2.    Settle on a price that will sell and will give you a good profit
3.    Find a supplier or several you are comfortable using
4.    Get to know what you are selling so that you can market it well

This is the start of a well-thought-out plan that should go a long way towards ensuring your dropshipping business finds its niche.