How to Pick Products for Drop Shipping

Picking a niche is a huge hurdle for people that are new to drop shipping. This is a crucial decision with long-term consequences. Choosing a product based on your passion or personal interest is a big mistake; that is, if your aim is to make a profit. This is what you must do for your ecommerce business to be successful: Create your own product: you will be the only source of that product and can control distribution.

You will barely have competition which lets you charge a great price. Be able to access exclusive distribution or pricing: if you cannot manufacture your own product, talk to a manufacturer and see if you can get exclusive pricing. Offer competitive pricing: when you are selling at the lowest price, you will attract customers from other businesses.

The problem with this strategy is that it is a recipe for failure. Pricing wars will strip you of profits. Add value: you can set your business apart by offering important information in relation to your product. Add value in ecommerce: look for a niche that makes it easy to add value along with educational content. High-quality images: the images should give customers a good idea of what they are getting.

Multiple components: if a product needs any components, you will have a great opportunity of adding value. Confusing and/or customizable: products that are both customizable and confusing are perfect as far as adding value via content is concerned. Require installation or technical setup: this allows you to offer expert guidance.

How to Add Value to Confusing and Technical Niches

  • Make comprehensive guides for buyers.
  • Write detailed listings and product descriptions.
  • Create setup and installation guides.
  • Make in-depth videos on how the product works.
  • Come up with an easy-to-follow system.

Picking the Best Customers

Here are some of the clients that will benefit your business.

Hobbyists: people can spend ridiculous amounts because of their hobbies.

Businesses: they place huge orders in most cases.

Repeat buyers: they ensure recurring revenue.

Other Factors to Consider When Choosing Products

  • Perfect price
  • MAP pricing
  • Marketing potential
  • Lots of accessories
  • Low turnover
  • Hard to get locally
  • The smaller the better

Measuring Demand

No matter how good your product is, you will not make a profit if no one wants it. Here are online tools that help you measure a product’s demand. Google Keyword Tool: this shows the number of people searching for the product. Google Trends: this one offers more details than the Google Keyword Tool. These metrics help you quickly evaluate the strength of competition. Number of linking domains: if a site has multiple links on it, then it is powerful. Authority of competing websites: the number of links is not the only thing that matters, the quality of these links is considered as well. Qualitative metrics: these include site quality, site reputation, etc. Search results: use “incognito” mode on Chrome or force nation-specific results for unbiased search results.

In a studied case, the business is built around making coconut hair oil. The evaluation process involves asking yourself questions. Perfect answers are not exactly necessary; you can make educated guesses. These criteria focus on external factors such as trending trajectory, target customer, and market size, among others. It is not easy to perfectly gauge the demand or marketer size, but you should have an idea before investing resources. Make use of services such as Google Keyword Planner Tool or Buzzsumo. In Canada and the USA alone, there were more than 73,000 searches for “coconut oil for hair” and related keywords per month. This means that there are interested.

Who are you competing against? Know you competitors to avoid surprises in future. In the coconut oil for hair market, there are three main competition areas; commercial coconut products for hair, DIY recipes for coconut oil, and pure coconut oil. Is it a growing market, a trend or just a fad? You need to know the direction of the market. The search for coconut oil, according to Google Trends, has been growing over the last years. Can your target customers buy it locally? If they can already buy the product locally, they may not be interested in looking for it online. Who are you targeting? Use Twitter to see who is searching for your product. What is your selling price? Check other similar products from similar companies to see the average price. With that price, what will be your profit margin? What is your markup?

The markup will be your profit and cover your overhead. Consider the cost of raw materials and production. Compared to the selling price, can you enjoy a healthy markup? How many SKUs will you stock?  SKU’s are styles and types of products. The more you stock, the more hectic the business will be. Will you offer a subscription? Being able to offer a subscription increases lifetime customer value. A subscription would not work with coconut oil because people are likely to use it as needed. What is the weight and size of your product? Heavy products are expensive to ship and may turn away customers. Is your product durable? The more durable the product, the better. You will pay less for shipping.

Will you have to deal with seasonality swings? Seasonality wings will affect your cash flow. Coconut oil is not quite affected by seasonality swings. Does your product solve pain or serve a passion? Products that solve pain are more marketable. Coconut oil, for instance, solves the pain of dry hair. Is your product disposable or consumable? Disposable or consumable products are likely to win you repeat customers. Is the product perishable? Perishable products are a recipe for disaster if you do not make sales. Is your product regulated or limited? Knowing this will help you plan and be prepared. 

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