Your dream of sitting on the beach and running a successful e-commerce business starts with choosing the right niche and validating your business plan.
I’m dreaming. Are you?
If you’re planning on diving in to e-commerce (like we are), the first step is to research and decide what niche to attack. If you want to compete in today’s competitive e-commerce world, you need to build a sustainable brand. Churn and burn e-commerce business models fail.
Since this is our first adventure into this world, we wanted to conduct our own analysis. We analyzed over a 100 niches and narrowed down our choices to 30.
To avoid making mistakes along the way, we asked some of the top e-commerce entrepreneurs in the game the following question:
What is the single biggest mistake entrepreneurs make when choosing their first e-commerce niche?
Their responses are below (and in no particular order):
The biggest mistake is going after catalog depth instead of trying to own a buyer persona. The idea of customer centricity and solving for customer lifetime value instead of transactional margins is still something that hasn’t sunk in for many entrepreneurs, and it involves solving for earlier in the buying cycle and using up-sell, cross-sell, and re-selling strategies to retain customers once you’ve acquired them.If your strategy is to have the cheapest prices or the most options, you're going to get crushed. - @MallikarjunanClick To Tweet
Sam Mallikarjunan is the Head of e-commerce Marketing at HubSpot. Sam has consulted hundreds of businesses on implementing ROI-driven inbound marketing programs. He is the Author of “How To Sell Better Than Amazon” as well as over a dozen other Ebooks and webinars. He also runs Inbound e-commerce. Follow Sam on Twitter and LinkedIn.
The single biggest mistake entrepreneurs make when choosing their first e-commerce niche is they don’t do enough research (I know I didn’t!). Often, a niche may look promising from far away, but as you get deeper and deeper in it – usually after launching and investing some money into – more competitors turn up, customers seem a lot more finicky, and it seems a lot more difficult than it actually was.
Solution: validate your niche in advance before diving head first into it.
Shabbir’s been selling stuff online since he was 10. He now runs a full e-commerce business – on a shoestring budget and blogs about his journey on Bootstrapping E-Commerce. Follow Shabbir On Twitter.
A true niche means there’s not many competitors relative to demand. If you’re fortunate enough to truly find a niche not already infiltrated by Amazon and others, understand that if you’re successful, it won’t be long until competitors spring up. Consider vente privee, subscription boxes, dollar razors, yoga wear, moustache wax…
Invest heavily in your brand, and never rest on your lead. Customer loyalty is hard to come by, especially in the online age. Always be acquiring new customers — this may include “joining” competitors like Amazon marketplace at the point your offering is no longer niche. It may be diversifying and expanding your product offering ahead of the competition.
It may be exploring new business models like subscription boxes. Don’t take for granted that anything successful inevitably will be copied.
There really shouldn’t be any huge missteps as far as understanding the demand and competition in your first e-commerce niche. Ideally, prior to committing to a niche, you should invest a few hundred dollars to test setting up campaigns in AdWords and Facebook Ads to promote whatever the heck it is you’re trying to sell.
Send this test traffic to landing pages with signups for more information and see what the interest level is. From there, it’s just a matter of using the data available to you (impressions, clicks, conversions, etc.) to figure out if there’s enough demand and commercial intent for the niche you’re testing.Use ads to figure out if there’s enough demand and commercial intent for the niche you’re testing. - @larrykim Click To Tweet
Larry Kim is the founder of WordStream, a leading search marketing software and services provider based in Boston. He regularly shares his advice and insight with over a million visitors a month at his WordStream Blog and is a top contributor for leading industry publications including Inc.com, Search Engine Land, Search Engine Watch and Social Media Today. Follow Larry on Twitter.
Ask yourself, “in the long run, why should customers buy from me?” If you’ve got a drop-ship business with no competing advantages (i.e. pricing, fulfillment, customer service, etc.), and can’t think of any legitimate, unbiased reason for someone to buy from you, then you don’t have a business. You’ve got a dream of getting rich quick.Ask yourself, “in the long run, why should customers buy from me?” - @PointBlankSEOClick To Tweet
One relevant follow up question to ask in a fair amount, but not all, e-commerce spaces: “Does Amazon sell this?”
In a lot of cases, they will, and you should stop & think of why anyone in the future would go elsewhere for this product. Maybe you do have a pricing edge. Maybe your products are private labeled & can’t be easily identified on Amazon.
Whatever the reason is, you should have one, or else you’ll lose all your business in the long-term to Amazon (if not in the short-term).
The single biggest mistake entrepreneurs make when choosing their first e-commerce niche is not doing the proper research upfront. There are two critical things that need to be done before selecting a product and niche, those two things are, evaluation and validation.
Evaluation is a careful analysis of 17 key criteria that can help you identify the strengths, weaknesses, opportunities and threats of your niche selection.
For a detailed description of each of the 17 evaluation criteria, check out this post. I’ve also developed a tool that will take you through each of the 17 criteria and give you a score on your product/niche viability.After you've evaluated your niche, you should then validate your product idea. - @RichardABLSClick To Tweet
After you’ve evaluated your niche and have a much better understanding of all factors surrounding your choice, you should then validate your idea.
This differs from evaluating your niche greatly as validating it actually requires you to create some type of real world setting and attempt to actually sell your product to your selected market. This can be done easily through creating a mockup store or landing page and directing traffic at it.
If you can’t make enough sales during the validation step, it’s a good sign that you’ll have a difficult time entering that niche.
The issue we see from e-commerce entrepreneurs is a lack of pre-planning and research before diving into a niche that is either too broad or too narrow.
Creating an online store that sell electronics is way too broad for most first time e-commerce entrepreneurs. Conversely, building an online store around people who buy socks for their dogs and live in the Northeast United States is probably too narrow to be sustainable.
Do you homework, find out what subsets of larger niches exist that may be underserved, and determine if there is a market there to sustain e-commerce business growth.
The biggest mistake most people make when picking their niche site is that they don’t stick with it long enough and adapt to the market. Of course you need to have a decent idea, but way too many people don’t stick with their idea long enough. You also have to adapt, so if you see a certain item is getting a ton of sales, or people are interested in something else don’t be afraid to pivot.
My first store didn’t get a sale for a few months, the original idea needed to be changed, there was all kind of things we needed to do differently. It wasn’t that it was a bad idea, the problem was I had the wrong angle.
I’d say the biggest mistake is choosing an over-saturated niche/market. This will most certainly make for an uphill battle from the start. You will be competing with hundreds or perhaps thousands of other well established sites.
These sites will have a stronger domains (SEO) and more than likely get better pricing on the same products you are trying to sell. They can ultimately get more traffic and sell for a better price than a brand new website.
For a beginner, I would recommend targeting on a niche that is not over-populated. This should help to get rankings a bit easier and have less competition on pricing.
Chris has over 12 years of experience in Interactive Marketing & Digital Strategy, with a focus on SEO, Social Media & Demand Generation. He is an avid Football Fan, Golf Enthusiast & Ambidextrous Bowler. Check out his personal site. Chris can also be found on Google+, LinkedIn, and Twitter.
The biggest mistake new entrepreneurs make when choosing their first e-commerce niche is not clearly understanding how they’ll be unique and differentiated in the marketplace.It's no longer enough to be able to provide a customer with products with reasonable customer service - @youderianClick To Tweet
You need to have a core aspect of your business that is different and valuable enough that customers will be willing to pay for it. Sadly, too often new store owners don’t think this through and get frustrated as their business fails to gain traction.
Andrew left the corporate world to become an e-commerce entrepreneur. He blogs/podcasts about his e-commerce store over at E-Commerce Fuel. Follow Andrew on Twitter and listen to his podcast. It will pump you up!
The biggest mistake entrepreneurs make is not testing their product idea before they invest in launching. If you want to be a successful business a year from now, you need to think through your product a bit more than simply launching to see if people like it.build a loyal base that will follow you to your #ecommerce site when it is ready. - @TraceWallClick To Tweet
Use marketplaces or sites like Kickstarter to get a feel for market readiness, and also build a loyal base that will follow you to your site when it is ready. Customer acquisition is one of the hardest parts of running an online store.
Build your community first, launch with them and you’ll already have a loyal base, and a tested, tried and true product. That’s the way to success.
Don’t be a Get Rich Gary. Those stories are rare, and usually missing a lot of strategic details that helped those businesses scale so quickly. Be smart, don’t go into debt over an idea. Test it out, use the internet to your advantage and earn customers before you launch.
The biggest mistake is getting caught in the keyword research paradox of volume versus competition.
These tend to operate on different axes when evaluation commercial verticals, however, when it comes to e-commerce I would say they’re more so the opposite ends of the same spectrum, so you have to find something in the middle instead of focusing too much on either end and getting caught.
First time ecompreneurs will start their keyword research and often get caught in one of these two extremes;
- They find a bunch of head and body keywords with a LOT of search volume and get really excited about the size of the market, without taking the proper steps to dial in just how hard it is going to be to rank for those terms, or
- They find a whole bunch of long-tail terms with virtually no competition and start salivating about how easy it is going to be to start getting traffic and making sales, all the while not realizing that there is no competition because these are not actually commercial terms.
If you fall victim to landing on either end of this spectrum you’re going to end up burning out your cash and resources either competing against prohibitively competitive terms or ranking for a whole bunch of keywords that have no purchase intent and hence do not create sales.
The very first thing any new ecommerce entrepreneur should invest in is understanding their target audience and ideal customer. The good news is you can use search data to do market research and use a repeatable process to understand the realistic rank potential of your target keywords.
The biggest mistake I see drop shippers making when choosing a niche is not having enough margin on their products. It’s tough because you can’t find out what your margins will be until you start setting up accounts with suppliers, but you need to have a website up before you start contact suppliers for credibility.
It’s a chicken/egg problem, really–you have to choose a niche before you know what your margins are going to be. This means that you can’t get too attached to your first idea–you might have to set up several basic sites for different niches and start contacting suppliers for all of the niches before you find out what the margins are and you can actually settle on one.
The important thing is to keep pressing on–to not get discouraged if your first or second or third ideas don’t work out.
Leighton Taylor is an e-commerce consultant, designer, and developer who helps startups and small businesses build successful online stores on Shopify. Check out his website, envision and follow him on Twitter.
A lot of people look for products which are popular and selling well, but that’s like looking for the niche which has the most competition. Dig a lot deeper. Think about complementary products or a “niche of niche”, but whatever you do don’t try to jump on the latest bestsellers bandwagon!whatever you do don't try to jump on the latest bestsellers bandwagon! - @webretailerClick To Tweet
Whenever I meet a new client, I always try to understand the history of their business and how they came about. I have seen a trend change in recent years – 5 years ago, most businesses who contacted me had been operating longer than the internet is old.
Due to this, they never needed to choose a niche as they were already successful in the real world. A huge proportion of businesses I talk to now have no offline presence and built their business to operate solely online.
It’s a nice trend and it brings back that old 90’s dream of running a successful business from your garage. One of the biggest mistakes I see time and time again with new online businesses when selecting their niche is to be greedy.So many entrepreneurs pick a niche based purely on the search volume of their main keyword. - @MJanawayClick To Tweet
Search volume is obviously a good trait for a niche to have but generally, the higher the volume, the more difficult it is to rank in search engines – almost to the point where it can become unachievable. While search volume is undeniably important, for me, competition (or lack of) is the most important factor.
The single biggest mistake entrepreneurs make when choosing their first ecommerce niche is not doing their homework first. Most entrepreneurs are quick to want to sell the latest trending products, but chances are, many others have beaten them to the punch. If you want to compete with the masses then I would suggest spotting any gaps in that niche market to win over customers.
However, if you don’t want to compete, I would suggest finding keyword opportunities in the Google Adwords planner to find your niche. Finding keyword opportunities requires strategic research. Look for products or services based on search queries potential customers are using. Make sure there’s demand for those products and services by using Google Insights as well. You must consider search volume and competition, it’s here where you will discover new opportunities.
Kesar Long is the Enterprise PPC Manager at Web.com and a freelance web developer.
The biggest mistake that most retailers make is not staying true to a niche. It is much easier to break into ecommerce when you are the expert or authority on a specific category or demographic. It is easy to think that by adding more products or trying to appeal to more people you will sell more. This dilutes your brand and reputation as the leader in your niche.
Be sure to stick to your niche and grow by further establishing yourself as the expert. Try starting a store blog or a YouTube channel. This will increase your reach while staying true to your niche. You can switch things up when you are more established. Remember you will never compete with the big boys on the web with your selection alone. Offer what they cant or wont to stay ahead.
In the competitive e-commerce landscape where ten of thousands of online retailers compete against each other as well as against Amazon, the single biggest mistake entrepreneurs can make these days is not to choose a specific niche or choosing one with very low margins.
When choosing an appropriate niche based on in-depth research and market analysis, the biggest mistake would be choosing a niche in which it will be impossible for your brand to stand out.
Building a brand will allow you to take premium prices, compete on the best customer service rather than on lowest prices. Building a brand is not an easy task.
There are a several key components you’d like to focus on to begin with:
- Unique value proposition that addresses a strong pain or need
- High quality products
- Personalize the customer experience
- Make your brand and copy memorable
- Never treat your shoppers as dollars with feet but treat them the way you’d treat your family and friends
I don’t necessarily think there’s a mistake in choosing a niche, as you can sell pretty much anything online successfully. The thing that comes to mind first for me is that I remember reading about a guy who made six figures selling a $75 ebook on training parrots — if that can work, pretty much anything can.The most important thing is getting your first customers - @Beka_Rice Click To Tweet
I think most entrepreneurs, rather than making a mistake in picking a niche, make a mistake in “playing at business” — getting business cards, spending tons of time on optimizing their website, etc — before they need to worry about any of that.
The most important thing is getting your first customers: finding where they hang out online so you can get your product in front of them, making sure your product meets their needs, and that they’re willing to pay to have that problem solved. That’s the kind of thing that should be done before you worry about A/B testing, hacking Instagram marketing, or any other business strategy.
Beka currently writes for Sell with WP (an eCommerce for WordPress news site), and manages content for SkyVerge & ShopStorm (eCommerce software developers). Follow Beka on Twitter & check out her personal site.
To me, the hardest things about starting a new store is getting people to care.
So if you pick a niche only for financial reasons, it will be tough to know what products they love, how to talk to them or where to find them. But if you’ve picked a niche that you love or know a lot about, you’ll know exactly who you’re going after, what they want and how to sell them on it. An added benefit of loving what you do is that it’s easier to keep going when things get though!
Loving what you do is that it's easier to keep going when things get though! - @DennisMoonsClick To Tweet
Dennis is guy behind Store Growers. He helps e-commerce sites get more traffic and customers. Follow Dennis On Twitter
The single biggest mistake is picking an #ecommerce niche that's hot or popular right now. - @Siddharth87 Click To Tweet
Yes, these are good indicators of what types of products are doing well, but many entrepreneurs just jump in with me-too products hoping to capitalize on the demand. Eventually, as the buzz dies down or the niche gets saturated, they lose sales because they don’t really have a USP.
The best way around this, if you want to pick a hot niche, is to improve upon the product with a new design or USP so that you stay relevant in the future.
The single biggest mistake entrepreneurs make when choosing their first ecommerce niche is going too broad and too big. When your target market is everyone, your marketing is for no one.
Pick a single pain or an expensive problem people have, and build your store around solving that pain, and only that pain. That’s the fast track to building an authority in your niche.
When I ask people to tell me about their store, it takes several minutes. That’s too long. It should take ten seconds.
Use the fool-proof positioning statement formula: “My store helps TARGET MARKET solve PAIN. Unlike my competitors, UNIQUE COMPETITIVE ADVANTAGE.” Until your positioning is laser focused, you’ll struggle to market yourself and attract an audience. Do this before anything else.Until your positioning is laser focused, you'll struggle to market yourself and attract an audience.Click To Tweet
The biggest mistake is starting an ecommerce website in a niche you have no idea about. Too many people watch someone succeed in an industry and ultimately assume “I can sell that too! Seems easy enough!”I am a big believer in a thorough niche research before entering it. - @seosmarty Click To Tweet
Even more, I’d suggest any startup entrepreneur work in the niche (as an affiliate or even an employee) before deciding to start your own business in it.
Ann Smarty is the Community and Brand Manager at Internet Marketing Ninjas. She is also a host of two weekly Twitter chats (#VCBuzz on Tuesdays and #MYBlogU on Thursdays) and a regular speaker at the largest marketing conference Pubcon. Follow her on Twitter.
I truly believe the biggest mistake is choosing to sell products that you can’t sell with a simple conversation. Meaning, if you don’t know enough about your product, or if you cannot create stories and expert pieces around your products, you’re probably only going to build a vending machine.
Writing/buying thin copy isn’t a long-term option anymore. Google doesn’t like ranking bland vending machines. If you’re selecting to build an eComm site you really have to make it a labor of love and care about the products, the service, and the customers – if you want it to be sustainable.Google doesn't like ranking bland vending machines. via @billsebaldClick To Tweet
You’ll also want to consider the different collections you can make with these products. Since you’ll likely be up against some heavy competition (there’s a store for everything already!!!), you might struggle getting your primary categories to perform. But if you have enough variety and can create sub-categories that are unique, you’ll hopefully have a better shot at immediate traction.
For example, let’s say you’re selling guitar picks. You might have your standard thick, thin, and specialty picks as collections pages. But so do your competitors. But you have “outside the box” options – you could create “rock star selections” or “guitar pick jewelry” sub-categories. Now you have something to write about and build upon.
The mistake is thinking you can get away with a vending machine and not the “cool store with lots of information, expertise, and something new.” If you were Google, which would you rank? At the end of the day, Google’s trying to make their rankings look good for their own benefit.
Bill has practiced SEO since 1998. He started the SEO practice at a major digital agency owned by eBay and helped develop SEO products for one of the largest ecommerce platforms. Check out his site, Greenlane SEO and follow him on Twitter.
Big thanks to these experts for dropping some serious knowledge on us. Here is a quick recap on some of the key points:
- Planning and research is ESSENTIAL before diving into a niche
- Why will customers buy your product vs. the thousands of options on Amazon? Do you have the best branding? Are you the cheapest? Do you know their needs better?
- Focus on gross margins in the near-term (not just in the long-term)
- If your niche is already selling well online, chances are you missed the boat – find a less competitive niche
What’s Your Ecommerce Business Idea?
Let us know in the comments.
If you need some help coming up with an idea, feel free to download our e-commerce niche report. It’s over 100 pages of in depth niche research.