Dropshipping: Three Things To Avoid When Choosing A Niche
If you've decided to build an online business on the drop shipping model
, your first move will be to find a niche in which to operate.
By narrowing your focus to this one area you will be able to target specific search engine keywords and bring your web store to the attention of those who are looking for the goods or services you provide.
Niche operation is sensible, but finding the right niche can be a problem. It's almost impossible to say what the right niche consists of, but it's easy to list some things you should always avoid.
The first is lack of commercial intent. Most people begin by working with a google keyword tool to find out how many searches there are for a specific term in any one month. This is very useful. It tells us that people are looking, but it doesn't say why.
If I were to choose a general term such as jewelry, having made sure I was spelling it correctly for the region I expect to sell in (in the UK for example, it is quite different)
I could look the keyword up in google to find an enormous number of searches, but that wouldn't tell me how many people were planning to buy, how many were planning to look, how many were hoping to read celebrity gossip, how many were looking for information and how many were interested in making their own.
Search for a commercial intent tool and use it on the keyword you are interested in to find out what percentage of the searches end in sales.
Too much competition can be a problem within any niche. Some fields are fiercely competitive, electronics for example, but competition is a strange thing.
It's easy to scope out the competition by typing the prospective keyword into google; you then investigate the unpaid results that come up on the first page. Sometimes appearances can be deceiving.
If the top sites are big stores this can be a good thing, they won't typically spend time optimizing their product pages and this gives you a chance to do a better job. If the top sites have already been carefully optimized then it's better not to take them on, move on to something else.
The biggest cause for disappointment when choosing a niche is financial. Before beginning you should set out your financial goals and check whether the niche you want to be involved in can possibly achieve them.
This is a simple process of working backwards. Let's say your goal is to make 120,000 a year, or 10,000 a month. Is this turnover or profit?
If profit then your turnover will typically have to be double, or 20,000 a month assuming you sell your products for double their cost,(though if, for example you sell designer handbags, you may able to do rather better than this.) What will the size of an average sale be? If $100 then you will need 20,000/100 sales to achieve your turnover, that's 200 sales per month, about 7 sales every day.
Doesn't sound too bad. Of course if your product sells for $50, you'll need 14 sales per day and so on. Many websites have a conversion ratio of 1 in 100; for every 100 visitors, 1 will buy.
If you need 14 sales per day, that means you need 1400 visitors per day to your site, which means that IF you can achieve the number one spot on google, which will usually get you 40% of the traffic for a keyword, you need to have a keyword which receives more than 3000 searches per day. If your product sells for only $25 you will need at least twice that number.
These simple sums can prevent expensive mistakes developing a niche which cannot provide the sort of income you are looking for.
Fortunately the drop ship model means you will never pay for inventory you can't use, but you will lose time and the effort of developing a web site, so rather take care and do the arithmetic before hand so you can be sure of choosing the right niche for your needs.
by: Kirsty Hale
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