According to eMarketer report, global eCommerce sales reached $22.049 trillion in 2016 which is 6% more from the previous year, and the trend is nothing but growing. The vision to start an online business has become the “gold rush” of the 21st century. However, unlike finding gold, business is not about being lucky. You gotta be smart and know how to find a niche that will succeed against all the odds.
Thus, if you want to end up on the winning side, you can’t rush the process.
Why take the time?
Everybody who considers opening an online store wants to earn money online, but 8 out of 10 online businesses fail within first 18 months of their launch! As during the legendary times of gold fever, the odds are pretty grim. The difference is, this time, you hold your fate in your hands!
Choosing a niche is not like picking new tiles for your bathroom from a catalog. You can’t just point to one and hope for the best. There are a few stages you should word through before settling on a final concept.
STAGE 1: Exploration
There are two types of people who start an online business:
- Those motivated by passion
- Those motivated by profit
Both of the predicaments have their advantages and drawbacks. While those motivated by profit will struggle with the overwhelming choice of products options, those inspired by a passion for an idea or a hobby will struggle with keeping an objective eye that so essential in business.
Whatever your drive, to get the best results, you should work through all of the stages in niche selection and keep an open mind until you have all the data.
1. Identify Interests & Passion
We love spending money on the things we are passionate about. No matter what the price, if we’re crazy enough about the idea, hobby, or lifestyle we’re willing to pay it. This simple premise makes investing into passion an excellent choice of business niche.
You can decide to go for:
Your Interests & Passions. Make a list of what you love and what intrigues you. It’s always good to start with the things you are familiar with. Selling something you yourself use and are passionate about will make it easier to connect with your customers as well as provide expertise other stores might lack.
Don’t skip this step even if you know what hobby you want to focus on!
If nothing else, this is where you think of various specializations and variations you can take on. For example, you are crazy about fishing. That’s great, but “fishing” is a broad market that can be broken down to several niches. Will you take an organic or homemade angle? Will you focus on one spectacular product or will you sell multiple? Each hobby hides a well of unexplored and untapped niche ideas; don’t let them pass you by!
General Interests & Passions. You might be crazy about your hobby, but you also might be the only one (or one of few) which is not great for business. Therefore, enrich your list with other possible hobbies and interests you see are doing well. Have a look on social media or ask your friends and family. You can still keep it somewhat related to your passion. For example, if you love fishing, but neither of the niches turns out to be particularly profitable, you can focus on other outdoor sports and activities
NOTE: Whatever you choose, be specific! Remember, niches go beyond general market definition. If you are crazy about organic coconut oil, write out all the possible niches that go with it like coconut oil for hair, for skin, for cooking, for healing, etc.
2. Identify Pain Points
The other concept we never hesitate spending money on are the notorious ever-present pain points. Don’t limit the word “pain” to physical experiences. A pain point is anything that causes nuisance and frustration be it a product or service.
Looking at the market from the pain point perspective can add a further specification to your already selected business niche or be the core of your online business venture.
How to identify the pain points?
- Make a list of things that bother you, your friends and family in your everyday life (in general or related to particular hobby).
- Make lists of pain points in the eCommerce industry. Pain points exist everywhere. Don’t just think about what you sell but also about HOW you sell it. eCommerce is riddled with pain points people complain about. Can you make it better?
- Brainstorm ideas on how these problems could be fixed. Ask your friends or neighbors; ask online on forums or social media. Gather as much intel as possible.
3. Identify Trends
Last but not least, turn on your laptop and dive into the world wide web in search of trends! Trends are worth exploring mainly because they can take your store to the top relatively quickly, earning you the traffic you would normally spend two years building.
However, many people make the mistake of investing into a trend that is already in its full bloom and swarming with providers. If there is a trend you already see everywhere, don’t go into it unless you have something extra to offer. Instead, search the web for clues of new rising trends.
How?
Cross-reference findings of several different online tools:
- Google Trends. Google Trends is an incredible free tool that lets you explore the most trending topics, searched words on Google. You can see what’s trending right now according to industry or look up a five-year history of any keyword meaning you can easily see which trends are rising and which are falling in popularity. You can research the term’s popularity globally or according to the country. If you want your research to be more specific, take advantage of some of the best free online keyword tools available.
- Social Media Hashtags & Mentions. Invade Facebook, Instagram, and Twitter and check out the most trending hashtags. What are people talking about? Any products or services worth looking into?
TIP: You can use Google Trends and social media to assess the popularity of the niches you listed in the previous two steps. As an objective assessment of your ideas is the next stage of your “how to find a niche” quest.
STAGE 2: Determine Profitability of the Chosen Niche
How do you know your product will be profitable?
As mentioned above, you will need to check the liability of your ideas against Google and media trends. There is no point in selling something people are not looking for, is there?
Besides the obvious online “background check”, there are a few objective rules to consider:
Questions to Ask:
Are Products Relatively Light & Easy to Ship (or otherwise deliver)? The bulkier the product, the higher the shipping cost. Free shipping is getting increasingly popular, and if you are not able to afford it even to your most loyal customers, it might cost you dearly. Heavy, hard-to-deliver products are not the best choice for a small online startup.
How Big of a Markup Can You Afford? Big and long-term products such as Computers or mobiles typically sell with a minimal markup (5–10%). Also, they are one-off purchases unlikely to repeat in the near future. While you can sell a few more expensive, long-term products, make sure your niche is accessory-rich. With accessories the markups range from 100% to 1000% and, better yet, people are willing to pay the price. Buying a laptop is a big deal but earphones or a charger?
So, focus on (or at least include) selling products that you can mark up 100% or more. It will also keep you from trying to base your business solely on low prices. Trying to match the low prices offered by Amazon or eBay is a death sentence. Focus on the uniqueness and specialization of your niche!!!
Is Your Product difficult to Find Locally? If your product can be easily accessible in a classic retail store, you will have difficulty captivating your clientele. Why would I order something online if I can drive down the road and get it instantly?
Is it disposable? In other words, are you likely to have repeat buyers in a short period of time? Returning customers are the ones that drive your revenue, after all.
Is there a consistent demand or is your product seasonal? If you are basing your business on seasonal products, make sure to have something to offer for every season. Or, ensure your peak season can cover the off-peak months without running your business to the ground
Is the price range affordable to your target audience? The opinions on what is the best price of online products differ widely. We believe it is essential to match the price range and “price flexibility” of your audience. “Price range” is what they can afford, comfortably. “Price Flexibility” is what they are willing to pay for their passion or pain point. Remember, the price has to be convenient for you as well as your customers.
These questions will help you to trim down the list of your ideas. Take the finalists to the 3rd and last stage: Market Research.
STAGE 3: Market Research
The last stage is crucial in selecting a business niche that can withstand the pressures and demands of a market. It helps make an objective overview of what you are up against.
1. Identify Main Competitors
Prepare yourself for some intensive Googling. Start with a more general search and slowly narrow it down. This way you will be able to identify the big as well as the small fish.
You need to know who are the big players to see what is the product and service standard on the market and the little ones because, like you, they are trying to challenge that standard.
Look up and make a spreadsheet with the name and website of your competitors. Search for:
- “Buy XY online”
- “Buy {niche} XY Online” or “buy XY for {niche} online”
- “buy XY for {niche} {country/city}”
- “buy XY for {niche} {perk}”
Example:
- Buy coconut oil online
- Buy pure coconut oil for hair online
- Buy pure coconut oil for hair USA online
- Buy pure coconut oil for hair USA one-day delivery
- Etc.
Slowly but surely narrow down the search to type of business you are thinking of launching. Once you think you exhausted all the options, move on to the next step.
2. Spy On Your Competitors
Now it’s time to make the most of your list and analyze all of them from the bottom to the top.
Assess the following details:
User Experience. What is the first impression upon landing on their site? Which things do you notice first? Is there anything you don’t like or find distracting? Does it feel organized or more chaotic? Does the website make you want to buy or, at least, browse around?
Shipping & Payment Options. What shipping and payment options are on the menu? More than one? How much does the shipping costs? Are any of the payment options unconventional?
Responsiveness. Is the website responsive to devices? Does it feel comfortable to shop from a phone? Does the store have an app or also sells on other platforms?
Prices. What are the prices? Can you match them or offer better quality and service?
Social Media. What networks do your competitors use? On which of those networks do they have more followers? What’s the tone and style of communication? How often do they post content? Do they interact with their customers, if so, how? Also, what people say about them on social media?
Email Marketing. Create a fake account on the competitor’s site (make sure you do it from the incognito browser). Observe and take notes on how often and what do they communicate to their customers via email (promotions, birthday gift cards, discounts, blog???)
Leverage SemRush. Type in URLs of your competitors and check out what keywords (organic as well as paid) they list for on Google and how much backlinks they have. You can also analyze their traffic since their launch and compare your own growth with theirs.
Stay Alert with Google Alerts. Google Alerts sends you immediate notifications based on pre-selected queries. It’s the perfect virtual spy that lets you stay up to date with all the mentions and gossip about anything that interests you.
3. Identify the Prevailing Problems in the Industry
Based on the research you conducted you will be able to determine the most pressing issues in your domain as well as your potential to add value to the market.
What can you offer that is not already there?
What do customers complain about?
Where can you step in and become the hero?
Make a list of improvements and values you are able to bring to the table. Naturally, a niche that is underdeveloped will be the bet. However, do not forget to consider the situation holistically. Make sure you are actually able to deliver the values that are missing.
Bottom Line
Finding business niche is a crucial step in launching your online store whether you are a newbie or an experienced entrepreneur. Leveraging the right gap in the market no one noticed before can be your ticket to success!
Remember!
- Explore objectively! Don’t get stuck on bad ideas just because you like them. This is business.
- Weigh your options and be realistic. Is the profit worth the hustle?
- Research. Research. Research. Learn from the mistakes of your competitors, not your own.
If you have any questions, comments or a story you would like to share, please don’t hesitate to drop us a comment below!
