What Is a Niche Product?

Examples of Niche Products and Reasons Why Choosing a Niche Product for Your Online Ecommerce Store Increases Your Chance of Success

If you are considering entering the world of ecommerce, I highly recommend that you focus on a single niche product. There are good reasons why this is the best idea. We’ll get to that, but first things first.

A niche product is simply a narrowly focused sub-category of a broader, more general category. Think in terms of navigating a large website - perhaps one devoted to lawn and garden products. The home page of a lawn and garden website would include many shopping categories such as seeds, chemicals, tools, power equipment, etc. The power equipment navigation might be further sub-categorized into chainsaws, lawn mowers, weed eaters, etc., any of which could be considered a niche product. These sub-categories are very specific with only individual product models residing within them.

Niche product examples:

artist easels (part of the larger art supplies category)
ferret cages (part of the larger pet supplies category)
solar water heaters (part of the larger solar equipment category)

I'm sure you get the idea.

niche products for success

Reasons Why Choosing a Niche Product for Your Online Ecommerce Store Increases Your Chance of Success

I created and operated my own successful ecommerce business and I know that there are good reasons why focusing on a niche product rather than a broad category will increase your chance of building a successful online business.

Favorable Search Engine Rankings – it is much easier to rank in the search engines if your site is very focused. My ecommerce business focused on a specific pet category. I ranked on page one in google’s organic search results continually (for seven + years) for my niche product keywords. My position varied from one to four at any given point in time. I outranked large competitors (e.g. Petsmart, Petco) who sold the same products. I had a healthy amount of traffic and google page rank but was nowhere near my large competitors in terms of overall traffic and page rank. So why did I outrank them in the organic search results? I outranked them because I was focused on a niche product and had incorporated simple search engine optimization techniques (a topic for a later article) into the building of my website.

You Become Recognized as an Expert – if you sell a narrowly focused line of products, it is very easy to become a bit of an “expert” in the field. This is especially true if you are interested in the products that you sell. I have pets that I love and it was easy for me to learn about the products that I sold. It was fun and enjoyable to make recommendations to customers based on their wants and the needs of their pets. Customers perceive value in knowing that they are purchasing from a small business that is knowledgeable about the products that they offer. I can pretty much guarantee that I know answers to questions about these products that the customer service reps at my large competitors do not. Having knowledge and a helpful attitude provides your customer with a sense of comfort in making a purchase from you. Happy customers will talk about their more than satisfactory transaction with your company with their friends, family and colleagues. Customers share this sort of info via many methods including social media, forums, direct conversion and more. Incoming links to your website from many of these methods will also prove to benefit your search engine ranking.

Streamlined Order Processing – focusing on a niche product line limits the number of vendors with whom you must deal which adds to your overall order processing efficiency. Assuming that you have established relationships with manufacturers who will drop ship product for you (a recommendation and topic for a future post) and are familiar with their processing times and order procedures, you will be able to offer accurate, consistent information to your customers in regards to shipping time frames/expected delivery dates. Online shoppers want to know before placing their orders, how long it will be before they can expect to receive their purchase. With limited SKU’s (stock keeping units) from a small number of suppliers, you will be in a better position to provide them with the short answer. If you offer too many products from too many suppliers in too many different locations, the answer to the customer who ordered ten different products will quickly become confusing or complex. Focusing on a niche product line with a limited number of models helps keep things simple. Simple enhances your order processing efficiency and translates into exemplary customer service in the eyes of your customers.

Better Profit Margins – Part of the process of selecting the best niche product (a lengthy discussion for a future installment) includes an acceptable profit margin. Ideally, you want to find a niche product that offers a healthy amount of profit per item so that you are assured that each order processed provides enough profit to make processing that order worth your time and processing costs. In other words, you should not focus on a niche where the average retail price is too low. If we go back to our lawn and garden example, focusing on lawn mowers which have fairly high retail prices, would be much more profitable than focusing on seeds which have a much lower retail. When focused on a niche product line that offers an acceptable level of profit, you will find that your margins are consistent and what you expect. In contrast, if you are selling products from the broad lawn and garden category, it is possible to process orders with very little retail value and consequently very little profit. If you only make $1.50 on a pack of seeds and you just processed an order for a single pack, you have lost money based on the labor involved in processing the order, emailing the customer, checking the vendor invoices, etc. A well selected niche product line that offers acceptable margins will protect your business from such a scenario.

To summarize, if you would like to establish an internet retail business but lack substantial capital to invest, a niche product line (preferably drop shipped from your supplier) is the best way to proceed (in my opinion). Focusing on a niche makes it much easier to rank in the search engines and compete with large competitors. Find an item that you like, brand yourself as the authority on the product, understand the importance of strong customer service and you will be well on your way to establishing online income from the comfort of your home.

If this topic interests you, be sure to visit merryseeker.com. I am creating a step-by-step outline(in progress and based on my experience) for how to start and grown your own internet retail business.

Updated: 04/06/2012, Merryseeker

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katiem2 on 04/07/2012

Very well done, anyone who's in need of understanding what a niche is will find out without a doubt here. Great guide and helpful tips to succeed in eCommerce.

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