How to Choose a Dropshipping Niche (Step by Step Guide)

By Neilsberg May 16, 2022 Dropshipping Niches

Choosing a niche for dropshipping is tricky as well as an important step in starting your dropshipping store. It isn't as straightforward as starting a blog or a channel on social media. 

When you start a blog or a channel, you can surely go with something that you are passionate about. Becoming an influencer or a subject matter expert in that domain could be all that you aspire for. 

But with a dropshipping store of your own, being famous doesn’t directly translate into money. The number one reason for opening a dropshipping store is to earn money. If it is a side hustle, you can treat it as a passive income. Or if you are dedicated to your dropshipping store, it may be the only income you have. 

In either case, earning money is of utmost importance and thus you need to have that on your mind from day one itself. In a dropshipping store, as the logistics and product is taken care of by the supplier, you are one hundred percent responsible for the marketing. So, the niche that you choose is something that you can do marketing for. 

For example, if your passion is fashion and you are a sensation on social media, it would be a lot easier for you to market the fashion niche. In the same scenario, just imagine that instead of fashion, you chose a pet niche. You could have made that choice for any reason, maybe, someone told you so, or it looked profitable. In any case, if that isn’t something you can do marketing for, it wouldn’t translate into sales and thus won't be termed as a wise decision.

In this article, we will help you understand the steps that one must take to choose a niche for their dropshipping store wisely. Let's first start with knowing more about dropshipping niches and what they actually mean.

What is a dropshipping niche ?

A dropshipping niche is a combination of a product category and an audience profile that is most likely to be its target customer segment. Both, the product category and the audience profile is an integral part of a dropshipping niche definition. 

Let us understand this with an example. A water bottle is a simple utility product that in its simplicity, is a container to store water. Categorically, it is simply just a bottle. But in terms of usability, it has a ton of use cases. Same water bottle can be used by a kid in school, a fitness enthusiast in a gym, a commuter in his / her car, an elderly person for their morning run etc. Thus, as you can see, when a product has so many use case scenarios, their functionality itself won't be enough to define a sales & marketing strategy.

So your dropshipping niche could be Fitness - if you want to target the elderly person or a gym-goer. Whereas it could be Baby and Children - if you want to target a school going kid. Thus when you decide on a buyer profile along with the product, you sort of define a niche.

In other words, you won't be just selling a product, but a lifestyle. Your product will be a means to fulfill a hobby, a passion or accessorize someone’s lifestyle. Once you are able to identify the lifestyle, you will have a much better chance of reaching a targeted audience and to achieve sales.

Is picking a dropshipping niche important?

Of course, it's the most important step in starting a dropshipping business. Unless you are able to gain clarity in terms of what you want to sell and whom you want to sell to, it will be extremely difficult for you to run your business. If you don't have clarity, your dropshipping journey could be very frustrating, time consuming and loss making. 

But if you are able to identify a dropshipping niche that you will be able to do marketing for and something has a good demand, you are very likely to have a successful dropshipping business. Having clarity about the product and its marketing strategy, will help you take decisions logically and plan your business accordingly.

On the other hand, if you do not choose a dropshipping niche that suits your marketing strength and is a troubling product, you will lose confidence in your business and that's something no one wants to do. According to our research, more than 90% of the dropshipping business fail because the store owners weren’t able to pick the right dropshipping niche for their needs.

Can one dropshipping niche be better than the other?

The answer actually depends on you. Theoretically, you are just selling a product and it wouldn’t matter what you are selling. What actually matters is knowing who you will be selling your product to and how you will be able to get them in your store.

For example, if you look at Amazon or a big box store, you can pretty much find anything that you wish, from a humble bag of $0.25 chips to a $10000 diamond necklace. To them, the target customer is pretty much the full country. They aim to fulfill all needs for everyone and thus carry pretty much everything that is possibly available.

But your store is not Amazon or Walmart. Millions of customers won't come and shop in your store on their own. The truth is that you will need to call them into your store. You will need to become an expert in marketing and create awareness for your store. All these are difficult things and cost a lot of money.

Thus based on your marketing capabilities, you will be able to identify yourself more with one niche than the other. Once again, it is an important step and you should do it as early as possible in your dropshipping business journey. 

5 steps to choose a niche for your dropshipping business

# 1: Identify demand of niche that you want to dropship

When choosing a niche for your dropshipping business, the first thing that you should start with is to identify its demand. If there is no demand for the product, it makes absolutely no sense to have it in your store. You may argue by saying that you are passionate about it and can do an amazing job in marketing. But the thing is, no matter how good it seems to you, if it doesn't have a demand, you can’t do anything about it.

Via your dropshipping store, your goal will be to satisfy demand and not to create it. Be very clear, you will not have means to create demand just because you like the product or are passionate about it. If the demand doesn’t exist, you can’t make a business out of it.

Luckily, there are a ton of amazing online tools that you can leverage to identify demand for a dropshipping niche. We have listed the best ones below.

Google Keyword Planner

Google, undoubtedly is the number 1 search engine in the world and has the best data available on the internet. Fortunately, Google makes the search volume data publicly available via google keyword planner in its ads dashboard. 

You can reach the keyword planner by clicking on the Tools and setting >> Planning >> Keyword Planner

As a next step you can click on Discover new keywords

On the next screen, you can choose Start with keywords and enter the name of the niche you want to know more about and then click on Get results button.

Within a few seconds, you will be able to see the numbers from the keywords planner. 

  

Few things to know in the keyword planner data:

  1. Keyword ideas : These are the keywords that Google will recommend based on your search and its relevance to the other keywords available.



  1. Avg. monthly searches: This is the number that matters the most for your research. The higher the average monthly search, higher the demand will be for your dropshipping product niche.

Please note that the numbers shown are average. You should be able to gauge if the demand is seasonal or constant throughout the year. If the numbers show a trend of seasonality, note it down.

For example: Christmas shopping peaks between Thanksgiving and the New Year, thus it will show a  higher number for that time of year. 

Seasonal products are tricky as you may end up with a store that generates sales only in a few months of the year. 


  1. Three month change: This will tell if there was a spike in demand due to something that was one off and you should take that into consideration while choosing it.

For example, there was a big spike in face masks demand due to COVID-19 pandemic. You can’t base your sales based on those numbers, as it won't repeat again ( we seriously hope so).

The lower the change, the more stable the demand is, and something you should look forward to.


  1. YOY change: This will tell the change in numbers compared to the month a year ago. Once again, this gives a signal if the demand is stable or one off.

  1. Competition: Good data to know whether the niche is competitive or not. Don't always aim for low competition, because it could be possible that there is no sales and that is why other businesses are not considering it.

If you are just beginning into the dropshipping world, we will recommend aiming for medium competition in the starting.


  1. You can ignore other columns for your research as they aren’t applicable at this point of time.

Pro tip: A lot of dropshippers find success and much better return on ad investment with social media marketing. Try using keyword planner to gauge demand in general and don't give too much thought into the bidding and other data. The chances are that you may never find a need to use ads on google in the short term.

Google Trends 

Google trends is a goldmine for your dropshipping niche research. It is an amazing tool to get the insights in one go. The keyword planner tool gives you the raw search figures. On the other hand, you can use google trends to get much quicker insights into the demand.

You can get to the google trends at the link : https://trends.google.com/trends/

On the screen, you will be able to enter the product that you want to know more about.



In our example, we will take Face mask as a product to know more about.



Once you choose face mask from the dropdown, to get to the screen below, you need to select a few options:


  1. Region: You can use the dropdown to choose Worldwide or to select a country or a region you are targeting. By default, it will pick the country you searched from. It is very important to filter the data, because if the demand is not in the market you are targeting, it may not be of any interest to you.


  1. Time range: By default, it will be Past 12 months. We recommend choosing a longer time range to get a better insight. Choosing 5 years or 2004 - present, will give you a much better idea. For example, in our search for a face mask, we expect it to have a spike during the pandemic time, and to bottom out towards the end of 2021.


  1. Categories: You can use the categories to further align the product search with the intended category. For example, a face mask can also mean a serum based mask and not the cloth mask that you may have in mind. 


  1. You can ignore the other filters for now, as you are basically not looking at the trends within the google domain of web search, image search, news etc.

As you can see in the image above, the face mask trended for a while during the pandemic and is on its downward journey as expected. Thus if you were thinking of having face masks as a niche for your dropshipping store, it may not be a good idea at this point of time. 

You can also have a look at Interest by region / sub region, related topics and related queries to get a deeper understanding of the trend with respect to the niche that you have searched for.

Pro tip: It is wise to get in the early stages of a trend. That is where the most money is. Whoever identified face mask trends in the late 2019 / early 2020 might have made a lot of sales at that point of time. But it is not something that is relevant any further and you should thus stay away from such trends.

Meta for Business : Audience Insights / Facebook Audience Insights

Meta ( formerly Facebook ) is undoubtedly the number one choice when it comes to social media marketing. With the data spanning across Facebook and Instagram, you have the power to reach out to pretty much every human that is connected to the internet. 

If used well, it can give you a very good idea about demand for the niche you are interested in. Using the filters, you can get the estimated audience size. 


You can get a good estimate of the audience size using the filters as listed below:

  1. Location: You can target a specific country, region or city. Add as many locations as you want. For our example, we have chosen to target on the country level and have used the field as the United States.
  2.  Age: Choose an age range of your target audience. Please note that the age range starts from 18, and if you are targeting products for an age group less than 18, you may have to use indirect filters. For example, babies don't shop for themselves and thus you can use the profile for mothers, when determining the audience size.
  3. Gender: You can select from All, Men or Women
  4. Interests: This is the most important criterion to use for the filters. Spend some time thinking about what to use. If chosen wisely, it will get you a very good data approximation of the audience size. For example, when you type baby, you can select from many suggestions and get its audience size.


If we select baby bottles, the audience size gets filtered down from 43 million to 5 million. You can similarly filter it further to match your audience.



  1. Language: If you want to target a specific audience who speaks a particular language, you can filter using that as well.

Along with the audience size, the tool gives excellent insights into the top cities within the country we selected.


Other platforms 

If you are planning to use other platforms such as TikTok, you can find similar tools within their advertising dashboard. 

# 2: Identify availability of niche that you want to dropship

The next most important thing to note while choosing a niche for dropshipping is its availability in the local marketplaces. As you already know, the biggest disadvantage of dropshipping is the shipping timelines. It takes a couple of weeks for the order to get delivered. 

Given the trend of same day shipping, you really need something amazing to get the customer ready to wait for weeks for your store to be able to deliver the product. If it is something that they can buy from a big box store or an online marketplace, you will not be able to make a business out of it.

Of the millions of products that are available to be drop shipped, if you are able to identify a set of products that are not readily available, you surely can get good sales. As each and every demographic is different, there is no one perfect way to have conclusive research of the availability. We have listed below a few approaches to get you started. Feel free to add more as per your convenience.

Visit local malls

A neighborhood mall is the first place you should visit and check if the products that you have shortlisted are available readily. Do remember to visit kiosks, as they tend to have a lot of such trendy products from time to time.

Plan a visit to the nearby bigbox store

Stores such as Target, Walmart also have sections where you can find products similar to the niche you might have shortlisted for your dropshipping store.

It would be a great idea to visit these stores and check if they have something similar in their stores. As a beginner, you may actually be mistaken that the products from your dropshipping supplier are exclusive and won't be available anywhere else. But the truth is that dropshipping products are never exclusive. 

By design, dropshipping business has many middlemen involved. As one would expect, the manufacturer of the product would ideally like a ton of sales and thus would contact as many distributors and suppliers as possible. So there is a very high probability that you will find the same product at many places. 

One other thing to consider is that many of the successful dropshippers opt for a branded product, once they have enough capital and sales strategy. So even though the product is available from the same supplier, you might have to compete with a branded version. As such, customers trust a branded product more and thus you need to check if it is the case with your shortlisted products as well.

Browse for the product on Amazon

These days it is extremely rare that a product isn’t available on Amazon. But still it will be worth checking it out. If the other sellers are also selling the same set of products, and at a price point you won't be comfortable with, it will be prudent to give the product a pass. It won't be worth your time.

Having said that, do remember that most likely you will be doing the marketing on social media channels. Thus it is not a direct competition with Amazon, as most of the customers that you will acquire on social media won't do a direct price match on Amazon. This of course is valid, if you do invest in making an eye catching marketing collateral and offer a value to the customer in some manner. If you plan to use the stock images as is and don’t have a way to provide any additional value, you will have a tough time selling the product.

Reverse image search on Google

Another place that you need to check is your dropshipping competitors. As they may rename the products, it would be extremely difficult for you to find them using simple web search. However, a google image search is a wonderful way to find out who your competitors are. Most likely they will be using the set of images that dropshipping suppliers provide, and thus you can easily identify if they have the same product or not.

If there are a ton of competitors selling the same product, do think twice about selling them on your website. Unless of course you can find a way to market them better and to be able to sell at much better prices compared to the competitors.

#3: Check marketability of your dropshipping niche

As mentioned above, unless you can market your product well, it won't be a sustainable business. Dropshipping is a highly competitive market and as every dropshipper has access to the same set of products, successful dropshippers are the ones who have found a way to do amazing marketing. 

Do remember that your dropshipping will need a ton of marketing and you can’t afford to acquire customers at an unhealthy CPA. Even if you price the product at 3 - 5x of the supplier cost, there will be so many other costs involved that you will need to have a strategic plan to do a cost effective marketing.

There is no one theoretical way of doing marketing that one can read about and implement. It is actually something that will need a lot of testing using multiple campaigns on different platforms using many sets of marketing collateral and acquisition strategies.

Many times, you will come across a product, for which there is no way you can do a cost effective marketing. In such cases, it will be better to not waste time and money trying to market these un-marketable products. Identifying such products at the beginning of your dropshipping journey is actually a key to the success of the store.

We have listed a few ideas below, to get you started with identifying the marketability of the dropshipping niche you have shortlisted.

Advertising on social media channels

Try searching for the product niche on any of the social media platforms you prefer and click on as many as you can. You will be able to see a couple of promoted search results that you refer to. Once you have clicked on a couple of ads, you will also see them appear in your feed in a few hours. 

These ads will help you in two ways:

1) Firstly you can see if there are lots of ads, then there must be sales too. In the promoted ads, also look at the comments. That will give you an idea of sales. Mostly you will find customers asking for the status, commenting on the quality and many other things in the comments section.

2) Secondly, you can look at the ads and decide if you will be able to create something similar. As a general rule of thumb, do not get an idea of copying someone’s ad. It is unethical and also ineffective at the same time. Try creating an impression that will show you as a trustworthy store that the customer can purchase from.

Influencer marketing potential

The easiest way to acquire customers is to do influencer marketing. Using this approach, you can do a partnership with an influencer, who for a fee can promote your product to their followers. As long as the economics work out, it is an amazing and super fast way to reach the target audience in no time. 

Do remember to not fall in the trap of vanity metrics of just the number of followers. When identifying the influencers, do look at the interaction numbers in terms of comments and post likes. This will tell you if the page is active and have a community that you can leverage for your store.

Google shopping campaigns

If you can uniquely showcase your dropshipping niche, Google shopping campaigns can also be a cost effective way to do marketing. Let us emphasize the word uniquely again. If you are planning to reuse the stock images given to you by the supplier, then the shopping ( or any image based ) marketing strategy isn’t for you. 

Reusing the same set of images won't give you a realistic chance of acquiring a customer. The only way to get a customer in this case will be via price competition. The seller with the lowest price will win the customer. Trust us, if you compete just on prices, you are bound to fail sooner than later.

#4: Check profitability of your dropshipping niche

After you have shortlisted a dropshipping niche based on its demand, availability and marketability, the other thing that remains as a high priority is dropshipping niche’s profitability. If you can’t get profits out of it, there is no point wasting even a single dollar or a second on your dropshipping store.

We have covered the profitability in detail in how to choose a profitable dropshipping niche. You can read and learn more about it over there. 

To briefly explain the calculation of the profit, we have listed the formula below:

Total Expenses = Total Product Cost + Shipping Costs + Website Hosting Charges + Products Return Cost + Infrastructure Cost + Marketing Cost + HR / Customer Service Charges + IT Maintenance Costs + Marketing Collateral Costs + Overhead Expenses

Total Revenue = Product Selling Price * Number of Orders

With all of the above, you can calculate the profit as the difference between total revenue and total expenses.

#5: Estimate orders count of your dropshipping niche

Along with every other thing, one last thing that you need to consider is a way to identify what kind of sales volume you can expect for that particular dropshipping niche. After all, if you receive just a handful of orders, your entire efforts in terms of marketing, sales and store setup won't be worth it. 

Fortunately, there are a few ways you can guesstimate the sales volume beforehand. Please note that these are rough estimates and you can’t guarantee a similar or better result for yourself. But with these estimates, you can be a lot more confident in terms of expectations for your store’s sales volume.

Orders to imports ratio

One good trick to know about the sales volume is the orders to imports ratio. If you are planning to ship via Aliexpress, for every product you can see a number of imports and number of orders. The number of imports is how many times the product was imported by different dropshippers. The number of orders is the number of times the product was ordered by customers. 

In the example below, you can see that the product was imported 38540 times and the number of orders received were 81. That is a pretty bad sign of sales volume.

To look at another example below, you can see that the product was imported 659 times and the number of orders received were 2941. These kinds of numbers are the ones that you should be after, as you can expect a decent sales volume. In the majority of cases, it will be for low price items. 


Pro tip: As a beginner, choose a dropshipping niche that isn't a high ticket. The number of sales are relatively higher and the customer acquisition is also manageable. Customers don't think a lot for lower price items and have a lot of chances for impulse shopping. Whereas, for higher ticket items, they may take a couple of weeks before ordering the item. In many cases the sales volume of lower priced items is more profitable than the volume of high ticket items. Additionally, dealing with lower priced items will give you more experience and any returns or overhead cost will also be on the lower end.

Product order trend

The number of orders actually won't matter if they are part of a one time spike due to a season or an event that is not going to repeat. Thus don't choose a dropshipping niche just because it has a lot of orders. 

Always look at how the order volume is averaging in the last 3 - 6 months. You can do that using product analysis in the dropshipping center on Aliexpress. Once you put the product URL in the product analysis tab, you will be able to see the sale volume over a time range.

As a beginner, choose a dropshipping niche with stable sales volume. At least this way, you can do a good sales projection for your dropshipping business.

Conclusion

Choosing a dropshipping niche can make or break your business. It is the most important step in starting ( or scaling ) your own dropshipping business. You should follow a 5 step approach when identifying a dropshipping niche for your store. 

The steps namely identifying demand, availability, marketability, profitability and the sales projection can give you all the parameters you would ever need to spend time and money with confidence on your business. Even if you are looking for just a passive income, choosing a niche is all the more important, as a wrong choice will impact your time management and may distract you from your main source of income. 

As always, if you have any questions or need any help, just drop us a line and we will be glad to help.

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