When you start a dropshipping business, sourcing and selling from sites such as AliExpress may seem like the surest way to quickly launch your online store without any inventory risk. While your speed to market may be just a few hours, it is crucial to be mindful of the fact that millions of other online stores have taken the same path. To win in ecommerce, your dropshipping product mix needs to be differentiated and is arguably the most important part of developing a strong, sustainable retail brand. Although it may seem logical to offer as many products as possible, from sources such as AliExpress, to appeal to as many customers as possible, this is seldom the case. On the flip side, having too small of a curated selection can narrow your customer funnel, causing you to fall short of meeting your customers’ needs, which can ultimately limit your profit potential with a dropship model.
The most successful dropshipping businesses devote research, testing, and analysis, after scouring sites such as AliExpress, Wish, and Shein to find reliable dropshippers and niche dropshipping items to sell. The lesson here is that your product mix needs to be differentiated to hit the sweet spot with your customers.
The perfect product mix will carefully balance your resources and profitability while still catering to the specific needs of your market. Once you’re confident in your strategy, it’s important to monitor and test it to make sure it stays relevant as the dropshipping landscape and your customers’ needs continue to evolve.
Let’s discuss some key reasons that your product mix is so important, along with some tips to develop and optimize yours.
Differentiating Your Brand as a Dropshipping Business
In addition to factors like customer service and experience, your product mix is essentially your brand identity. It is, after all, why customers shop with you. In classic marketing theory that stems back to the 1940s, a key business success is having a unique selling point or proposition (USP). What’s different about your brand that customers can’t find elsewhere – a product or experience that makes them choose your store over your competitors and keeps them coming back for more?
For you particularly, this may manifest as a combination of products and their price points, as well as any special services or offerings. One product-specific strategy is to offer niche products from independent dropshipping suppliers. Depending on your offerings and audience, you can benefit greatly from featuring products that aren’t widely distributed across millions of retailers on the web.
Take for example Syght Glasses, a company that made nearly $2,500 in 5 weeks by importing specialty gaming glasses from China. Or Hello Matcha, a dropshipping business that capitalized on the niche trend of matcha powder to make more than $900 in just 3 days!
Image credit: Shopify
Segmenting and Satisfying Your Customers as a Dropshipper
Ideally, you’ve already created buyer personas for your ideal customers. Once you know who your customers are, think of a strategic product mix as a secret weapon for engaging them and keeping them happy. When your products are consistently fine-tuned to cater to a specific audience, you’re carving your space as a leader. Customer segmentation is a key for an effective business.
Knowing who you’re selling to and what makes them tick can create a powerful, streamlined business model. Every decision you make – from dropshipper partnerships to dollars spent on advertising – are more likely to hit home and generate your desired sales and brand awareness goals.
This creates a positive feedback loop. Your ability to speak to your customers’ needs makes them happy. Making them happy develops brand loyalty and secures them as long-term customers. Research shows over and over that retaining existing customers is much more profitable than constantly finding new ones. Harvard Business Review reports that acquiring a new customer can be as high as 25 times more expensive than keeping one, and a customer retention rate of just 5% can increase profits by an incredible 25% to 95%.
Maximizing Your Profits with Dropshipping Products
Enticing dropshipping products + a positive shopping experience = higher profits. A pretty straightforward formula, don’t you think?
Once you’ve made your initial decisions, it’s important to keep tracking and refining. This is what sets the best brands apart: they have their ears to the ground, always listening to their customers, examining their behaviors, and looking for ways to keep them engaged and excited.
One strategy for keeping your audience captivated is creating buzz around expanding your existing product line or offering a new product, which translates to residual revenue. Think of the frenzy over every new iPhone model that’s ever been released. To get some inspiration, drill down into your current performance metrics to see what your customers like the most, and experiment with adding new products that are likely to pique their interest.
Keep reading for some actionable tips on how to do this.
Apply the “Data Triangulation” Concept
You may be familiar with the Pareto principle, or the 80/20 rule, which says that 80% of your business will come from 20% of your customers. This also extends to products: 80% of your dropshipping sales will be for 20% of your product mix. When you crunch the numbers, this means 64% of your revenue will be your top customers buying your top dropship products.
Data triangulation is examining these factors to find the sweet spot. Who are your top customers, and which top products are they buying? How can you build off of this momentum – expanding your product line to capture more interest, offering added incentives like free shipping, promoting on different platforms or channels, or otherwise?
Image credit: Econsultancy
Of course, these exact numbers aren’t always the case, but it’s a time-tested and valuable guideline for understanding supply and demand.
Tips to Develop and Optimize Your Product Mix
Use Google Trends
Google Trends is an awesome free tool to see how often users search for a particular phrase on Google. This can help to test your predictions about how a new product might perform in your store (because let’s face it, intuition alone doesn’t always mean the highest success).
For example, take a look at the Google Trends results over the past 5 years for a “subscription box.”
While this trend experienced its highest growth during the 2014-2015 year, it’s still continuing to climb. If you look closer, you’ll see that subscription boxes spike from late November to mid-December every year, meaning they’re a popular holiday gift. This means that as a general rule, you might have more success breaking into this market during the holidays, provided you have a strong offering and competitive strategy to keep up with more established brands.
Within the main search of “subscription box” (or whatever else you choose), you can also drill-down based on:
- Region, which can help global brands identify ripe target markets around the world
- More than 25 categories. For this search, some of the most relevant might include Beauty & Fitness, Food & Drink, Games, Health, Sports, and Travel
- Type of Google search, like web, Images, News, Shopping, or YouTube
If you’re interested in learning more, check out Shopify’s great tutorial on how to use Google Trends to start and run a business.
Consider Niche Dropship Products
Niche products will naturally attract a relatively smaller audience segment than more popular products. While this may seem counter-intuitive, there are several key advantages that can make the strategy worthwhile. It can fulfill the goals we mentioned earlier: brand differentiation and customer segmentation and loyalty, all of which can lead to higher profits. It can also be more affordable, as niche products are often available at lower costs.
It can also give you a leg-up on your competitors. When you feature less available products, you’ll also get a boost in search engine optimization (SEO). Less competition means that Google and other search engines are more likely to display your store higher in search engine results pages (SERPS). Web studies show that nearly one-third of all SERP clicks go to the top 5 results.
See this chart showing search results for niche wedding dress results. As the product gets more specific, competition decreases – leaving ripe opportunity for brands that have great products and strong strategies to sell them.
Image credit: Ecomdash
Use Your Performance Data
In Google Analytics, go to E-commerce > Product Performance to see clear-cut metrics.
Once inside, you’ll see side-by-side comparisons that include total revenue and each product’s percentage of total sales.
Image credit: MonsterInsights
When sizing up your best-sellers, there’s more to look at than just sales volume. Consider:
- Products that have a high click-through rate (CTR), or ratio of clicks to impressions. For example, a product that’s displayed 1,000 times but gets 100 clicks has a lower CTR than a product that’s displayed 100 times and gets 50 clicks. Just because a product has more clicks doesn’t necessarily mean it’s a top-performer.
- Products included in orders with the highest total revenue. Is there a group of products that always seem to make their way into your biggest orders? Tap into the products that appeal to your biggest spenders, then incentivize and build off them with new or niche products.
Time periods throughout the year where a product sells more, like the example above where subscription box searches spike just before the holidays.
Research, Strategize, Measure, Repeat
A well-sculpted product mix takes several considerations into account, like branding, audience, and competition. Top-performing stores do their research, track their performance, and tweak their strategy with changing markets and demands. If this seems like a daunting process, remember that there are a myriad of tools and platforms out there to help with this process.