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How to Find a Product Niche for Your First Online Store

Let’s say you’ve been thinking about starting an online store for a while. What is the first step that you’ll take? Figuring out the right product to sell! One would assume that evaluating opportunities for the products you are considering would be the obvious next step. But you’d be surprised at just how many people casually pick a product that interests them and start an online store. Missing the ‘evaluation’ step can you up for failure!

In this post, we discuss how to find the right product niche for your online store. But before we get to that, let’s look at the definition of a niche product.

“A niche product can be defined as goods or services designed to present features that appeal to a niche market.”

These are usually high quality and made in small batches. Think handmade leather bag or a unique coral necklace.

Why sell niche products?

If you are not selling niche, then you are selling general products. A general store is like Walmart — selling to everyone. You are trying to appeal to the masses, which could be a fatal mistake. Marketing yourself as ‘one stop shop’ for everything made perfect sense when it was difficult to access a range of suppliers. With the advent of the internet, has changed the game. Now you have to niche down in order to be ‘found’. The deeper into the niche you go, the less competition you will have. Customers often see niche businesses as specialists or experts in their niche, so they will be more willing to pay a premium price for the product.

“When you speak to everyone, you speak to no one.” – Meredith Hill

With that being said, here are six ways to find a product niche that sells.

1. Find products your customers are passionate about

Let’s say you love cats. Now you are scrolling through your Facebook feed and an ad pops up of a cat hoodie. You’d feel the urge to buy it, wouldn’t you? The point is that you’ll want to splurge on products that align with your passion. A mountain biker would happily spend hundreds on lightweight accessories. Someone following an organic lifestyle wouldn’t mind splurging on handmade skincare products.  

The good news is that there are plenty of tools available to help you research your market.

  • Social media channels like Reddit, Facebook, Twitter and Pinterest are a great way to find out what people are talking about.
  • Google keyword analytics and google trends are great tools for discovering trending topics and interests. But be careful of fads. Fads are trends with a short lifespan.

It is equally, if not more important that, you are also selling your own passion. Starting and running a business is hard. There’ll be many times you’ll want to give up when things get a little too rough. It will be your passion for the product that will see you through those times and push you to keep going. If you really love something, you’ll also be better at selling it. Your passion will help you craft a brand that connects with your audience in an authentic and a meaningful way.

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2. Look at products that have the potential to generate profits

Like I mentioned, you want to find a niche that you are passionate about and one that also has a growing community of enthusiasts. However, you also need to make sure that you are focusing a niche that has the potential to generate profits.

Let’s say you love a good workout and going to the gym. The fitness industry is also a growing market and you know it has a huge potential. Would it make sense for you to start a business selling workout gear or gym equipment? Gym equipment will probably have higher profit margins, but what are the chances of someone making a $3000 purchase online if they are not familiar with the brand? On the other hand, buying a pair of sports shoes or unique gym gear is a far more easy decision for a consumer to make even if it’s from an unfamiliar brand.

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3. Look for a small and lightweight product category

When you are just getting started, you won’t have the volumes to justify hiring a warehouse and/or to outsource your logistics to a third party. Most probably you’ll be packing and shipping goods from your kitchen table until the business picks up. So the smaller the product and the easier it will be for you to pack and ship it, the better. (Large products like furniture have higher profit margins and you can make good money selling them, but when you are starting out, it is recommended that you start small.)

4. Look for products with high perceived value

Consider products that can be made at a low cost but can be priced high due to their perceived value. This is not an easy task, but if you can identify a product that fits the bill, you’ll have a better chance of making a success of your shop. Ever wondered why jewellery is one of the most profitable product categories for an online shop?  

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5. Spot the Trends

You will need to stay on top of the latest trends and capitalize on them before they become ‘too popular.’ This is a tricky one because as we all know, most trends don’t last. However, the upside can be huge. You’ll have early adopter advantage with a leg up on SEO, and you can establish yourself as a credible brand in your industry early on. Think about the products that have been trending in the recent years: mindfulness, slow living, healthy living, conscious choices.

6. Local availability and local demand

It’s good to think about the local demand, even if you have an online store. The people in your geography can be more easily converted into paying customers due to shorter delivery time and more favorable shipping rates. Even from an SEO point of view, due to less competition, it’s easier to rank high for local searches. Plus, any grassroots marketing endeavors have a higher chances of success if your product has traction in your local area. For example, if are living in a university town and you notice there is a high demand for second-hand furniture, this might be a niche worth considering for your online business.

 

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While it’s tempting to just dive into your new online business, take the time to step back and carefully evaluate your options. Remember, the product you choose will influence every business decision you make. Do not casually pick products that interest you. Consider the factors discussed in this guide before making a decision.  

 

How did you choose the product niche for your store? Please share in the comments below!

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