How did you find your dropshipping niche?
Recognize potential and get started: niche trade via drop shipping
Experts in e-commerce know exactly: Trading within a market niche offers extensive advantages compared to serving mass markets: First of all, the reduced competitive pressure leads to stable and profitable price structures and thus to sustained high profits. The Internet offers optimal opportunities to reach a large number of interested consumers despite its niche position.
The positive positioning of your own offers on search engines is much easier in a niche area than in a mass market. Ultimately, the specialization in a clearly defined specialist area ensures increased trust between customer and dealer. Those who, as a beginner, are inspired by the idea of developing their company from a newcomer to a market leader within a reasonable period of time can usually only achieve this in a niche area. The established providers in the mass markets have long since expanded their market position and beginners can usually no longer catch up with them.
One of the main reasons for the failure of young companies in the field of online trading is the inadequate capitalization of the newly founded companies. Clever founders strive from the outset to have a manageable cost structure and a realistic assessment of the initial course of business. The drop shipping business model has proven to be particularly promising. Since you do not have to buy goods at your own risk and do without storage rooms and logistics personnel, both the start-up and the operating costs are comparatively low.
In the following, we would like to introduce you to the advantages of trading in niche markets and explain to you why a combination with the DropShipping purchasing and processing system is so advantageous in this area of trade. We will deal with the great potential in e-commerce of our time, name the main reasons for the failure of young online companies and explain how to find specific market niches and fill them with promising concepts.
You will learn why trading in niches helps build trust between your customers and you, how you can place your own offers advantageously on search engines and how you can benefit from the comparatively high profit margins in niche trading. Using specific examples, we will finally report on why niche trading and drop shipping complement each other ideally and how you can optimally combine the advantages of both systems.
Online trade in Germany is booming and has achieved excellent forecasts
Online retail emerged as one of the winners from the global economic crisis. Like hardly any other industry, it was able to show moderate growth rates even in the main crisis year of 2009 and expand further in 2010. One of the main reasons for this is the growing willingness of German consumers to buy their goods over the Internet. While more and more citizens are using the possibilities of the new media, the mistrust of buying with a click has decreased significantly. Following this trend, more and more online retailers are pushing their diverse business ideas into the markets and presenting products and services online.
A distinction can be made here between companies that have expanded their originally classically oriented business area to the World Wide Web and those whose companies were founded specifically for online trading. Nowadays it is almost barrier-free to start selling goods on the web. The required resources and technologies are available to every interested founder free of charge or for a small fee. Modern trading models such as drop shipping make it possible to set up a trading company even with limited financial resources.
While the situation on the labor markets motivates many people in Germany to think about self-employment as an alternative to dependent wage labor, entry into online trading is becoming increasingly attractive. Any attentive observer quickly realizes that the diverse areas of e-commerce are far from any market saturation. Many experts anticipate that the real boom in online retail is still ahead of us. Accordingly, there is great interest in setting up your own company in this area. As positive as the possibilities and prognoses are, self-employment in online trading also harbors risks that must be considered and taken into account.
The reasons why young online businesses fail
If you look at the market for start-ups in the e-commerce sector and follow the results of young companies during the first few years of their existence, you can see that around a quarter of the companies concerned do not survive the third financial year. The reasons for premature failure can be divided into different groups. On the one hand, many young entrepreneurs stop self-employed after some time because the daily strain, the stress and effort associated with the work or the achievable profits do not correspond to their original ideas.
Before actually setting up a business, young entrepreneurs should try to get the most accurate picture possible of what they can expect from self-employment in e-commerce. On the other hand, the failure is related to the inadequate sustainability of corporate financing. Even if entrepreneurs opt for a comparatively inexpensive start-up, the start-up costs are often underestimated and the achievable income during the first few months of self-employment is often overestimated.
Before starting the actual initiative, every founder has to deal comprehensively with the establishment of a reliable and practical financial plan. This is the only way to prevent deficits resulting from wrong ideas that can quickly bring a young company to its knees. If you only have limited capital available and still want to start your own business as an online retailer, you should deal in detail with the possibilities of drop shipping in order to keep your start-up costs and start-up risks as low as possible.
Practice shows that the chances of survival for young companies with a strong specialization in a clearly defined product area increase significantly. If a niche market with few competitors is chosen, the prospects for business success are further improved. If you combine both models, as trading via drop shipping and niche trading, you reduce the risks for the failure of newly founded companies particularly significantly. As a result, you keep your start-up costs as low as possible and increase your market opportunities right from the start by selecting a suitable niche for particularly interesting products.
Niche trade instead of the mass market: Recommended especially for beginners
For newcomers to e-commerce, it is much easier to establish an existence within a market niche than to venture into one of the flourishing but already well-occupied mass markets. One of the main reasons for this is the reduced competitive pressure, which, above all, makes it easier to get started in online trading. If you only have to deal with a few competitors, it is not so difficult to analyze and understand their trading structures, strategies and pricing policy and to position yourself accordingly with good opportunities.
For example, the price war between the market participants in a niche market is usually less pronounced than in a mass market. For the individual dealers, this is associated with higher profit margins, which help to overcome funding gaps, especially at the beginning of a professional existence. It is also easier to set up a range in line with the market in niche retail, as the target groups and their needs can be identified and taken into account more easily.
The best possible positioning of your own offers on search engines is particularly important for initial success in online trading. Everyone can imagine that a good ranking on Google & Co. can be achieved the better the fewer competitors are involved in the battle for the top spots. Ultimately, budding and new online retailers will forgive their start-up mistakes in a niche market more quickly than is the case in a mass market. This is mainly due to the lack of public attention, which allows those involved to commit one or the other mistake without the good reputation having been immediately lost.
Niche markets are less hectic, less stressful and less affected by pressure to perform than the well-known mass markets. Newcomers to online trading will discover a platform within which they can try out concepts and test strategies in order to significantly increase their performance through their own experience.
Discover market niches in a targeted manner and fill them cleverly
The prerequisite for trading within a market niche is to identify such product areas, which have so far been poorly represented. Many prospective dealers help them to reflect on their own interests, hobbies or previous knowledge. Anyone who uses their personal preferences to derive a sales area in online trading will benefit in several ways.
First of all, founders recognize more quickly the potential that lies in a niche area to which they themselves belong. This is where they benefit from the experiences and impressions they have been able to collect as consumers. For example, if you are interested in a special type of music, pursue an unusual hobby or belong to a certain scene, you also know the associated markets very well and can assess more quickly which types of offers can be advantageously placed in the corresponding environment. Furthermore, members of niche areas usually have a very clear and, above all, accurate idea of the potential target group. They know the needs of the respective consumers, are familiar with the factors that cause anger or frustration, and know where on the Internet they can meet their target group.
When it comes to the conception of attractive product ranges, it is usually easier for people who have a corresponding interest themselves. Both the detection of current trends and the selection of the most sensible and good products possible is much easier. Ultimately, the members of an interest group also find it easier to present products and communicate with their customers. Anyone who deals in products that interest them themselves has better prospects of reaching and convincing their target group with their product presentation. Of course, answering consumer questions is also easier when you are at home with your own range.
After you have discovered a potential market niche, you should first check how strong it is already represented in the markets. Research on the Internet helps considerably here. Which providers are already active in the relevant market, at what prices and conditions do they offer their products and what options do you have yourself to sell the corresponding items at comparable or even cheaper prices? If such research leads to a positive result, then one should not hesitate long to put the business idea into practice.
Step by step to become an expert in your own trading area
Anyone who offers their products within a promising market niche presents themselves to their potential customers as an expert in their own trading area right from the start. Manageable and clearly delimited product ranges, which have been consistently geared towards special consumer wishes, offer a wide range of options for documenting competence, specialist knowledge and expertise.
It already starts on the home page of the online shop. Here niche retailers can address their clearly defined target group right from the start in such a way that it becomes clear that you are dealing with a professional who knows what he is talking about. In addition to general information in the start area, the structure of the product navigation also shows that you are dealing with an expert who does not find it difficult to define meaningful categories and sub-categories that are precisely tailored to the selected product area. In addition, the specific product presentation offers ideal opportunities to position yourself as an expert.
Anyone who answers numerous questions about the properties of the products, their technical data or their compatibility with other products during the product description clearly shows that they are familiar with an assortment. At this point, competence creates trust and ensures that new dealers also have a good chance of convincing their potential customers of their own performance.
When trading within a niche, use not only the standardized elements of shopping sites on the Internet. Rather, offer your visitors significant added value by offering general information, advice, specialist articles and practical tips. These reinforce the perception of your competence and serve to consistently build trust between your customers and you. In this context, always make it clear that your service and advice do not end with the conclusion of a sales transaction. Instead, offer your buyers that they can always contact you with questions and problems after they have made a purchase. Remember that followers of special hobbies and interests are usually in close contact with one another. If you are recommended here as an online retailer, this will bring you additional customers and thus additional sales.
Google & Co. particularly like market niches
A key success factor in online trading is the position of shopping offers on the main search engines. Most consumers start product research on Google & Co. and choose their favorites for a purchase from the first search results that are shown to them. Placing your own offers here as well as possible has the highest priority for success-oriented newcomers to online trading. One can easily imagine that it is much easier to achieve a good ranking when the number of competitors and competitors is rather manageable.
If, for example, one tries to achieve a good position using general terms such as “television” or “mobile phone”, this is not possible without the use of considerable means of communication. If you offer a special aquarium pump, a special diving accessory or a spare part for a special technical device instead, the low competitive pressure helps you to get a better position right away. Although a good Google ranking is easier to achieve in niche areas than in mass markets, it is not without effort here either. Those who do not optimize their product pages for the search engines have little chance of being found here later.
Research the most important search terms and phrases for your product area on the Internet and rely above all on your product texts when implementing advantageous search engine optimization. These are decisive for the search engines when it comes to assessing how relevant your information and offers can be for interested consumers. Limit yourself to a maximum of one or two search terms per product page, as the search engines will otherwise rate their relevance lower. Do not only work with internal measures and methods, but also make an effort to build links well. If you succeed in getting recognized and well-positioned websites to link directly to your products and your shop, then you have already achieved a lot in terms of search engine optimization and you will immediately notice the results of your efforts in the form of higher visitor numbers on your pages.
From beginner to market leader: a good opportunity through niche trade
No matter how small you start with your own online trade: The aim of almost all sellers on the Internet is to maintain the most advantageous market position possible or even to become the market leader in their own product area. The less your product area has been represented on the market so far, the better your chances of achieving a good market position within a comparatively short period of time.
Anyone who tries to do this in a mass market is faced with extreme competition with the major providers in the industry, which is almost impossible to win with normal means. The big dealers on the Internet not only have the opportunity to invest considerable financial resources in optimal online marketing. Most of them have been represented in the relevant markets for years and have a clear lead over new market participants and entrants.
If you opt for a niche area in online trading instead, your chances of market leadership are much higher right from the start.You can get an overview of your major competitors here within a very short time. Monitor your competitors and get an idea of the strategies, concepts and techniques that each provider is working with. Let yourself be inspired by the methods of your competitors and strive to improve what you have observed and recognized in your own work.
Remember that market leadership is not possible without an excellent reputation with your customers. With this in mind, optimal customer service must always be the focus of your efforts. Only if your customers are so enthusiastic about your offers and your service that they will gladly return to you for further purchases and actively recommend your services in their own community will you have the opportunity to work your way to the top of the market step by step.
ext-align: left; "> Another prerequisite for a top position in your niche market is the permanent maintenance and improvement of your range. Anyone who is satisfied with what has been achieved here will quickly lose touch with more active providers Respond quickly and consistently to trends and new developments in your market environment. Those who have accustomed their customers to the fact that they are always provided with the latest information on the respective subject area on the shop pages will generate more repeat visits and correspondingly higher sales rates.
Big profits through high margins with little competition
Online retailers in mass markets are subject to extreme price wars. Since mass markets are represented by a large number of large suppliers, unbeatable special offers and promotions are the order of the day. The big dealers buy in considerable quantities of products and often purchase them directly from international manufacturers. With favorable purchasing conditions but also with mixed calculations and subsidized sales, such providers can significantly determine the prices on the market and quickly bring smaller competitors to their knees.
If you are instead involved in a niche market, you will encounter a limited number of competitors and mostly deal with smaller providers. The result is a stable price structure that enables the retailer to make comparatively high profits. Those who consistently use this potential can realize higher profits per sale and thus achieve an improved business result. The higher the profit per sale, the lower the effort associated with handling day-to-day business. This has a direct impact on medium and long-term operating expenses. Those who achieve their necessary profits with as few orders as possible can limit the required staff to a minimum or even do without employees entirely.
In addition, a stable price structure ensures improved planning ability. If prices fluctuate in a product area, it is almost impossible for the entrepreneur to make accurate forecasts with regard to the near future. If the market prices are reduced and your own prices also have to be reduced in the course of this, the business result also decreases. If, on the other hand, prices remain largely stable, accurate forecasts can be made about the further course of business, which will help the entrepreneur to control his company safely and solidly.
DropShipping and niche trading: a special combination
The founding of their own company is carried out by young founders with a good dose of enthusiasm, ambition and hard work. Although these are all prerequisites for a successful start to professional independence, the early phase after the opening can only be overcome and managed if costs and income are in the best possible ratio to one another. Especially in the start-up phase, start-up costs and ongoing expenses must be kept as low as possible. At the same time, income should flow as early as possible and ensure sufficient profits to finance the company.
If one examines the reasons that lead to the failure of young companies in Germany, an insufficient supply of liquid capital takes first place. Inadequate reserves ensure, especially at the beginning of one's own independence, that even minor crises or the failure of original forecasts to lead to dangerous situations. In order to significantly improve the starting chances, it makes sense to skillfully combine the concepts of drop shipping and niche trading.
Establishing via DropShipping prevents an initial range of products from having to be pre-financed. Such an advance purchase not only burdens the finances of the young company but also harbors considerable merchandise risks. New market participants in particular cannot fall back on experience with regard to the salability of certain products and thus risk being left with unsalable items that tear a deep gap in corporate financing.
If the goods are procured via DropShipping instead, the high costs of purchasing your own inventory are omitted, since the goods for sale remain with the respective supplier until they are finally sold. In addition, young entrepreneurs who rely on DropShipping do not have to set up their own warehouse and logistics structures. This not only saves space costs and expenses for the facility, but also enables operation with no or very limited use of personnel.
Once the decision to go with DropShipping has significantly improved the start-up requirements, a concentration on niche markets will allow you to enter the market as quickly as possible with numerous advantages. Niches can be identified quickly and checked for market suitability with comparatively little effort. Placing your own offers on the relevant search engines is also greatly simplified in view of the low level of competition. In this way, it is possible within a comparatively short time to direct consumer interest to one's own offers and to achieve the first sales at short notice.
Suppliers in niche markets position themselves specifically as experts in their own product area and thus gain the trust of their potential customers more quickly. Especially for newcomers to online trading, who do not initially have a public reputation and have a pronounced regular clientele, building trust is an essential factor for business success. It is also advantageous that niche markets are characterized by a stable price structure. In this way, medium and long-term planning can be carried out without the risk of large providers with extreme special offers influencing prices in the short term.
If dropshipping and sales within niche markets are consequently combined with one another, the result is viable and promising companies with good prospects for immediate success.
Examples of useful combinations of drop shipping and niche trading
Trading via DropShipping is much less widespread in Germany than, for example, in the USA. Nevertheless, this form of trade is currently on the triumphal march through German e-commerce and is constantly finding new followers. Almost every product can be obtained via DropShipping with a little research and negotiation skills. Products that are rather large, bulky and expensive are particularly suitable here. Wholesalers and manufacturers are already used to delivering directly to end customers. These suppliers do not have to be convinced of the advantages of drop shipping, as they have been practicing this form of trade for many years.
As a rule, the more expensive the product, the greater the profit that can be made from the sale. If you manage to cover your running costs by selling just a few products, you can make your company structure small and manageable over the long term. If the entrepreneur also decides on a niche market, he can also book its advantages for himself and the young company.
A good example of a useful combination of drop shipping and niche trading is the sale of garden sheds via the Internet. Dedicated dealers can offer their customers an enormous range of different models to choose from. By using DropShipping, these do not have to be purchased in advance but remain with the respective supplier, saving costs and storage. An own warehouse is just as unnecessary as a separate staff of warehouse and logistics personnel. While garden houses in Germany are usually mainly offered as a by-product area of building and timber markets, a corresponding specialist trade that specializes exclusively in small outdoor buildings is not adequately represented.
Against this background, it is comparatively easy to work out a good position on the search engines as a provider. Ultimately, a shopping site especially for garden houses offers optimal opportunities to offer the visitor great added value in the form of information. Here you can, for example, report on the size from which a building permit is required for the construction of a garden house and how this can be easily applied for. Tips and hints for the construction and maintenance of the garden houses will also attract the interest of numerous consumers and have a good chance of a high-quality position on Google & Co.
Corresponding information offers convey a lot of competence and thus ensure a high level of trust between the retailer and his customers. This example can be applied to many other product areas. Think of the trade in carports, prefabricated garages, whirlpools or the sale of furniture and other bulky items. Depending on your personal preference, a promising niche area can be quickly identified here.
Our practical tip for niche trading with DropShipping
If you are currently in the planning and start-up phase of a company in the online retail space, then you should think about both dropshipping and niche retailing. Anyone who wants to significantly improve their chances of surviving in the market can combine both concepts into an overall strategy rich in opportunities. To develop a viable Business idea a promising niche should be sought first. The founder can initially fall back on product areas that are directly related to his own interests, hobbies or previous knowledge. When making the selection, it should be taken into account that the planned products can be processed via drop shipping.
Large, bulky and expensive products are particularly suitable. Once the product area has been found and a market analysis has shown good sales prospects, the search for suitable suppliers can begin. First, consider companies that are already active in the drop shipping sector. They do not have to be convinced of the advantages of the trading model first. Not only negotiate the pure purchase prices with the selected partners, but also actively address the conditions and the procedure in the event of returns, complaints and warranty cases.
Even if the selected product area is not particularly prone to returns, it will still happen from time to time that a customer withdraws from the purchase. If no specific agreements have been made with the supplier in this case, high costs can quickly arise that reduce the profit from successful sales.
Anyone who cleverly combines the concepts of drop shipping and niche trading with one another increases their chances of a positive market entry and sustained good business and benefits from the numerous advantages of both strategies.
In some retail areas, DropShipping can show its strengths particularly well, as you can see from our explanations on the subject of niche retail. In our next guide, you will find out how, as a DropShipper, you can move from Trade in large and bulky products can benefit.
About the author Sebastian Huke
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