How to select the best niche for Dropshipping

Selecting the best niche for dropshipping is one of the biggest and hardest hurdles that you will come across in this journey. Even after the years of experience doing dropshipping, still selecting the best niche for a new dropshipping store is an overwhelming task for me.

As you can understand, if you select the wrong niche for your new dropshipping store, all your investments (money and time) will be wasted. Therefore, there is nothing wrong with spending more time to do research and select the best niche for your new dropshipping store.

Over the past 8 years, I have developed my own formula to find the best niches for dropshipping. It is a step by step process. Before we get started with our process of finding a niche for dropshipping, let us discuss a bit about this thing called “niche.”


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Why do we need a niche for dropshipping

Why do we need a niche for dropshipping? Well, as you can understand, the dropshipping market is exceptionally competitive. There are thousands of sellers in this market. So, if you need to penetrate this highly dense market and start selling, you must need an effective marketing strategy.

When it comes to marketing, it is easier and effective to target a small group of audience with similar interests. If you target a small group with similar interests, you can build your brand message to resonate their interests. This boosts your chances of making a sale, like magic.

Related: How to select a target audience and target market in e-commerce

So, how to select the best niche dropshipping? Let us see.

This niche that you select can make or break your dropshipping business. So, let us be careful and go through each step.

How to select the best niche for dropshipping

  1. See what is trending on Amazon or Trendhunter.
  2. Check the trend of demand.
  3. Verify the size (envelop to shoebox packing) and price ($25-$50).
  4. Calculate the potential profit margin.
  5. Find the average CPC (cost per click) and SEO difficulty.
  6. Check reviews to find customer’s pain points.
  7. Research for marketing opportunities.
  8. Check for the room for value addition
  9. Ensure the availability of suppliers

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Step 1
Select the best niche for dropshipping by seeing what is trending in the market

I know some people search for fresh niches without any sort of competition for dropshipping. Earlier I did the same. But, later I realized, there is no point of searching for the niches without any competition.

No competition = No demand

No demand = No (less) sales

So, rather than wasting your time looking for the niches without any competition, it is better to surf the trend. In dropshipping, the big players are the usual trend-setters. They spend a lot of money on marketing to promote products, making some niches popular.

Then, as the micro players, we can select the same niches and easily piggyback the popularity of such trends and sell our dropshipping products. That is why we need to search for what is trending in the market.

How to find the trending niches in the market

I usually start by looking at Amazon best sellers or Amazon most wished for lists to find popular niches. Then again, recently, I have started using the Trendhunter tool. It uses some AI magic to find popular products. Also, you can keep an eye on the trending projects on Kickstarter to see what niches will get some good traction shortly.


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Step 2
Select the best niche for dropshipping by checking the trend and turnover

It takes time to create a dropshipping listing and to market the product. So, what would happen when the popularity of your niche is not consistent. What if the demand of that niche is seasonal or just a pulse, which diminishes quickly. 

So, it is better to check the trend of people’s interest in your niche over time. To test the trend of interest, you can use Google trends. Google trend is a free tool, where you can see the google search statistics. There you can select the country of your interest and period of data to see the search trends.

Which types of trends that you should avoid

It is better to avoid seasonal or pulse trends as niches, as the usage of your store or listings is going to limited to a minor period.

Also, you may have noticed some products get new versions or updates frequently. So, the value of previous versions depreciates quickly. If you select such products as your niche, then you might have to keep updating your listings more frequently.

avoid-seasonal-trends-in-dropshipping
avoid seasonal trends in dropshipping
Pulses of popularity for products
pulses of popularity can diminish quickly

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Step 3
Select the best niche for dropshipping by selecting the optimum product size and price

Selling smaller products can be profitable in many different ways. With smaller products, you can usually get free shipping options, and you can do the same for your customers. And, even if you have to pay for shipping, it would cost you much less than shipping a large package.

Also, if you offer “Seller pays for returns” policy, then with smaller packages you don’t have to pay much with returns. As a rule of thumb, I always select products that can be packed in an envelope or a shoebox.

Selecting the price range

I don’t sell anything over $50. The reason is, when the price goes up, the customers usually expect extraordinary customer service from your dropshipping store. This doesn’t mean that you can have a crappy customer service. But, it is much relaxing to work with the customers in this way.

Also, I don’t go below $25. Otherwise, your time won’t worth a single sale.


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Step 4
Select the best niche for dropshipping by checking the potential profit margin

Pricing the dropshipping product is a complex process, and we have to talk that in another post. But, at this stage, you can quickly have a rough calculation based on the below points

  • Shipping Cost 
  • Marketing Costs (Typically around 30% of the price, for the Facebook ads)
  • Platform charges (if you sell on Amazon or eBay)
  • Transaction fees
  • Currency exchanges margins
  • Taxes
  • Allocation for refunds (Typically 5%)
  • Running costs for any other tools or apps in use
  • Your profit margin (40% – 50%)

So, with your new niche, if you cannot keep a margin of 40-50% for the profits, maybe that is not the best niche for dropshipping.

Related: How to price dropshipping products


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Step 5
Select the best niche for dropshipping by checking the average CPC and SEO difficulty

You can use the CPC (Cost-per-click for the ads) for the keywords of your niche as a confirmation of the popularity. If the CPC is high, you have a competitive niche.

While it is better to have competitive niches for dropshipping if your CPC gets higher, your ad costs will get higher too. Therefore, you need to find the right balance for your CPC and competition. As a rule of thumb, I target a CPC of around $2-$3 for a $25-$50 product.

Also, if you are planning to run a content marketing strategy (mainly a blog) to promote your products, it is essential to evaluate the SEO difficulty too. By having a blog on your dropshipping store, you can maintain good traffic to your store.

Step 6
Select the best niche for dropshipping by checking the customer pain points

Do you know the best way to sell a product? The best way to sell a product is by not selling the product. Yes, you heard that right. That is one of the best marketing lessons that I have learned over the past years. Instead of trying to sell the product, try to sell the solution that your product can solve.

Do you remember that “1000 songs in your pocket” ads for the iPods? If they tried to sell the product, it should be written as “1GB storage for MP3s”.

sell the solution - best niche for dropshipping

Related: What you can learn from Apple’s marketing

So, you can leverage the same tactic and find the best niche for dropshipping by selecting a solution for customer pain points. But, where can you find the customer pain points? You can use the Amazon review section to find the customer pain points.


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Step 7
Select the best niche for dropshipping by checking marketing possibilities

When you select the best niche for dropshipping, make sure to check the opportunities for creating effective marketing strategies.

For example, check for the possibilities for cross-selling and up-selling. And check if you can create super effective customer retention strategies based on the niche of your dropshipping store.

Related:

Step 8
Select the best niche for dropshipping by checking the room for value addition

If you go through some of the dropshipping online stores, you will notice that they are just “buying” and “selling” these products. This basic buying and selling strategy will not work for long. If you need a sustainable shop with long-term profitability, you need your customers to remember your store. You need a method which makes your store special. These methods can be your unique selling prepositions.

Related: Why you must need a unique selling proposition for your business

How to add value to a dropshipping product

Now, the question is, how you can add value to a product in dropshipping? You don’t even get to touch the product.  But, you can add some value to your products by providing some additional services. You can make an instructional manual, user guides, or troubleshooting guides for your products. Or, you can provide over-the-phone customer support to teach them how to use it. People love to have excellent customer support; and in this way, you can easily compete with other sellers in your niche, even pricing your products higher than they do.


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Step 9
Select the best niche for dropshipping by checking the availability of suppliers

When it comes to dropshipping niches, it is not much hard to find suppliers. However, you have to know a few things to avoid low-quality suppliers and fake Dropshipping suppliers. So, when you select a niche, it is always beneficial to have multiple suppliers for the same product. We will discuss this more in our next guide of How to find Dropshipping suppliers.

#Tip – We did some research for you and found that below categories of products sell pretty well online. (UPDATED 2019)

  • Consumer electronics
  • books
  • clothes
  • fashion accessories
  • mobile phone accessories
  • small household tools
  • office supplies
  • Pet supplies etc.