The instinct of the novice entering ecommerce is to sell everything to everybody. Given the progress of ecommerce technology, it is as almost easy to set up an ecommerce website with a million products as it is to set up one with ten products. Sure the likes of amazon.com and ebay.com do seem to sell everything, but new player might be well-advised to find a niche.
If you do have to target multiple niches, do consider the option of setting up a network of niche ecommerce websites.
Also note that finding a niche is not only about spotting a gap in the market. It is also about developing expertise and authority in a certain product line, and customer demographic. The right niche could be the primary driver of your ecommerce success.
Common Approaches to Identify A Worthy Niche
There are multiple approaches to finding a market niche. Some work, and others have high risks of failure. The following are some approaches that you can consider:
- Follow your passion.
- Focus on a segment that you have a lot of experience in.
- Find a category with lots of searches in popular search engines, and little competition.
The Common Niche-Finding Approaches Might Fail
The above three are the most common approaches I have read on the Internet. However, they are not necessarily the best.
For example, following your passion ignores the demand for your products and services. It also disregards the quantity and quality of competition. The premise is that passion will overcome any competition. In the real universe, though, some corporations have so much money to throw in your face that they can either buy you out, which isn't necessarily bad, or they can advertise until you starve to death, which is necessarily bad. Focusing on your area of expertise is an approach that suffers from the same limitations.
On the other end of the spectrum are those who suggest finding an area where there are many search queries and little competition. While this is closer to a more business approach, it lacks precision. For example, how do you know if there are a lot of buyers or simply a lot of interest? There is an important distinction between the two, namely money.
Keyword Analysis Is About Traffic Not Sales
Keyword analysis only tells you what people are "Googling." It tells you nothing about what they are spending money on. It is only about traffic, not about conversions. Of course, you cannot have conversions without traffic, but I'd rather convert 20% of 1000 visitors than 1% of 10,000.
A Balanced Approach to Finding Your Niche
Find a niche that has low competition. Focus on the low competition and do not get discouraged if there aren't many buyers. Of course, there should be some demand, but do not necessarily go with mainstream ecommerce products. Ecommerce is still in its infancy. It is better to find a niche here you can become the leader and rise with the ecommerce tide.
Competition Analysis Is Key for Niche Domination
Before settling upon a certain niche, find out if there are any established players in it, and then analyze their structure and activities. Examine any materials you can from their websites, such as customer comments, FAQs, forum discussion, to determine what products and services they offer, what special marketing programs they are implementing. Use commonly available services such as Alexa or ComScore for some guidance about the volume and seasonality of traffic.