My girlfriend and I recently got a dachshund puppy.
As new dog parents, we’re constantly looking to get him new stuff. We ended up finding this website that only sells products for sausage dogs.
This got me thinking about how this was the perfect niche for a new ecommerce business.
It reminded me of the ecommerce business I sold last year, Laces Out. Laces Out only sold shoelaces, specifically, shoelaces for sneakers.
While the site wasn’t raking in millions in revenue, it was putting an extra $12,000 month of profit into my account.
By choosing this specific niche and selling a specific product, it made marketing, operating, and selling the business much easier.
In this article, I’m going to show you how to pick a “niche” for an ecommerce business.
NOTE: While this is applicable to anyone, it will have the most value to people looking to start their first ecommerce business.
What is an ecommerce niche?
A niche is a small market within an industry. Going back to our sausage dog example, the big industry would be pets. You can narrow / segment that industry to just be dogs.
But you can keep niching down into a specific type of dog, like how the sausage dog website did. This is called a sub-niche (a niche within a niche).
Niching down allows you to be hyper relevant to your customers.
This allows you to build trust, relevancy and sales much faster.
I choose to purchase dog products from the dachshund website because I trust their product selection over a generic one from Amazon or Chewy (even though the products are likely the same, just branded differently).
On top of that, the site performs really well in organic search, with very few backlinks.
They’ve established authority in Google without backlinks – they’ve done so by owning that niche.
If you’re willing to go small, you can grab market share much faster.
Wait! Before you “niche down”…
Before you pick a niche, there’s things to consider.
The further down the niche you go, the lower the market cap will be. a website that only sells products for dachshunds will have a smaller cap and less potential than a product meant for all dogs.
Niche products have a lower barrier of entry. This means:
- Less investments
- Lower costs
- Less competition
Now onto how to actually pick a niche.
We’ll be using this concept I call the low-high matrix. It breaks down what you need to consider before choosing a niche.
How to pick a niche with the Low-High Matrix
This matrix covers everything you need to consider before selecting a niche and a product to sell for an ecommerce business.
Let’s start with the low side of the matrix.
The Low Side
When choosing a niche and product, you want to sell a product that is low in:
When I was looking for inventory to sell for sneakers, I was looking at an investment of around $500k. But for just shoelaces, I was only looking at a few thousand bucks.
By choosing a low-cost item, I was able to get a ton of inventory for a fraction of the cost, which kept my initial investment down, which ultimately reduced the risk involved.
Note, I sourced my products from a vendor I found on AliBaba.
The shipping fees for heavy products will be extremely high, while lighter products like shoelaces will keep your initial investment low and will allow you to be more agile.
In addition, smaller / lighter products will be much easier to store as inventory once you have it. Larger products will require you to get additional storage space.
Selling tech products can be a pain because they are more prone to not working, breaking and requiring a lot of support. Broken products lead to customers:
- Wanting refunds
- Leaving bad reviews
- Putting a strain on your support
This is an area I strongly suggest you stay away from, unless you have prior experience.
Stay away from anything people put into their bodies, like supplements, pills, etc.
Unless you’re manufacturing it yourself, you really don’t know what kind of shit goes into these things. A lot of health products are untested and not FDA approved which opens you up to potential litigation.
You typically want to pick a product/niche that has low competition. The easiest way to check if a product has low competition is by searching that product on Google to see who’s ranking organically.
For the keyword “shoelaces,” Nike and other big brands weren’t ranking which allowed me to come in and rank instead which drove a ton of sales.
The High Side
On the opposite side, there’s some elements we want to look for that are “high”:
You can check a product’s demand by doing basic keyword research. From there you can tell how much people are searching for specific products in Google.
I also like to check social media (mainly Instagram) to determine how active and engaged the potential market is.
Picking a niche that you’re passionate about makes building a business easier.
I got into shoelaces because I love sneakers. This made creating content and looking at pictures about shoelaces enjoyable.
More importantly, you want to pick a product that the market is passionate about.
The sausage dog Instagram account has over 500k followers. This high-level of activity has the potential to push your content viral.
When picking a niche/product, I like to look for something that is a commodity, something that people buy every day.
You want to find something that’s not being dominated by brands and something you can private label.
If you can build a brand affinity (you cad do that through content, marketing, etc) and if you find something that you can private label, then you got yourself a business.
I like to look for something that regardless if the market is up, down, or in a recession, people are always going to be spending their money on it.
Some examples include:
Wrapping it up
It wouldn’t be wise to jump into a bloody ocean swarming with hungry sharks. In the same way, it wouldn’t be wise to jump into a niche that is dominated by big brands.
To start and grow a successful first time e-commerce business, you need to pick the right niche. If you follow the low-high matrix covered in this trusty guide, you will be miles ahead of the competition.
As always, drop a comment below if you have any questions or concerns.