When starting a dropshipping business, you should start a niche store first. This is one of our cardinal rules of dropshipping.
Many e-commerce entrepreneurs aspire to grow their businesses into huge retail brands such as Amazon, AliExpress, and Walmart. However, doing so is incredibly difficult, mostly because brands that sell everything to everyone are hard to build, scale and maintain.
In this article, we’ll unpack the following:
- The difference between a niche store and general store
- The merits of launching a niche store first
The difference between a niche store and general store
What is a Niche Market?
Shopify defines a niche market as a subset of a larger market with its own particular needs or preferences, which may be different from the larger market.
For example, within the clothing category, there are many different sub-categories or niches. Each of these niches appeal to a specific segment of buyers. From graphic t-shirts to yoga pants, you will find that the number of niches — and potential target markets — in this category are quite numerous.
Examples of Needs or Preferences within a Niche
Almost every market can be segmented by the specific needs and preferences of its buyers.
Some of the most common ways to define a niche are based on the following:
- Geography (the buyer’s location)
- Production quality (premium, high, moderate, low, affordable)
- Price point (high, moderate, discount, off-price)
- Demographic base (gender, age, income level, education level)
- Psychographics (values, interests, attitudes)
What is a Niche Dropshipping Store?
A niche dropshipping store is one that sells a specific product or a set of products with a specific feature to a narrow segment of buyers.
For example, Five Below is a chain of discount stores selling cool stuff for $5 or less to various customer segments, including children, adolescents, teens, and women.
Last November, the Wall Street Journal wrote a piece about Five Below, the Amazon- Proof Store.
In the piece, they cited underscored that while “many retailers are closing stores, Five Below … can’t seem to open them fast enough.”
And furthermore, “unlike other bargain stores like Dollar Tree or Family Dollar that focus on necessities such as laundry detergent and toothpaste, Five Below is the place to come to find things you didn’t know you wanted, such as squeezable foam toys called ‘squishies’ that have gone viral on YouTube.”
This chain of stores, which sells everything from Spalding basketballs to Bluetooth headphones and yoga mats for $5 or less, might be the most successful retailer you’ve never heard of.
Other Examples of Niche Stores
Glambox (For Him) was launched in May 2017, in response to the booming rise of male interest in grooming and general well-being (the Hipster beard trend was a key factor!). Particularly in the Middle East, male grooming is becoming the norm, yet the market offering still falls short of demand. That’s where Glambox For Him comes in!
Dog is Good
Dog is Good is a dog friendly lifestyle business that creates and markets gifts and apparel for dog lovers.
What Is a General Dropshipping Store?
A general dropshipping store sells everything to everyone. It is usually comprised of several different niches and target markets. These include, but are not limited to, premium and discount buyers, pet owners and fur lovers, as well as tweens and octogenarians.
Like Amazon and Walmart, a general ecommerce store helps you reach a broader audience of buyers.
General stores aren’t usually very profitable given the competitive landscape, but they are a good way to evaluate the niches that perform well relative to others.
For example, a general dropshipping store includes products from multiple industries. Such as Clothing, Electronics, Home and Garden, and Computers. The users who visit them will buy one thing from any of the niches.
What are the Pros of Niche businesses?
Having more visibility is a benefit of niche businesses that not only results in more traffic but also amplified presence on search engines and across the internet.
Dropshipping stores that serve a niche market tend to be unique, and sometimes have an interesting angle that draws the attention of buyers everywhere.
For example, an e-commerce business that features a new or innovative concept, such as cleaning supplies with all natural, non-toxic ingredients, will more likely grab the attention of media outlets than a business that offers cleaning supplies made of the same formula used by similar products in this category.
Getting in front of a subset of people who have a vested interest in your niche is more important than getting in front of a lot of people. However, getting in front of a lot of people such as through these media outlets also has its benefits. The more people who know about your business, the more people there are to recommend your business to a friend who fits the criteria of your niche market.
Traffic Converts More Efficiently
Traditionally, niche dropshipping stores target only a subset of buyers that are already interested in the niche. While this usually results in a smaller target market, this market already has a vested interest in what you’re selling, thereby making it easier to convert first time or recurring visitors into buyers.
Better Customer Relationships
Perhaps counterintuitively, having a small customer base has its merits. When you are engaging with fewer customers, you can more easily focus on nurturing your customers and understanding their preferences. Your contact with them can be more personalized, your follow-ups more frequent and pertinent, and thank you notes more genuine.
You can also start to learn how to personalize the experience even further. For example, you may be able to accommodate special requests and offer custom services based on the individual needs of your customers. Each of these practices will help you better address your customers, thereby enhancing your relationship with them and cementing their loyalty to you.
Word of Mouth Referrals
Another benefit of a niche store is that it is very word-of-mouth-friendly.
Customers in a niche are usually in frequent communication with others in that niche. This creates more opportunities to get the word out about your brand and the products you sell.
For example, expectant parents attend prenatal education programs where they may meet many other expecting parents. The same is true for parents whose children pursue a particular sport. These parents are more likely to brush shoulders at the same sporting events and tournaments.
When you have a highly specific product or service and are targeting a smaller, segmented market, chances are that there is either zero or very little competition.
It’s also much easier to connect with the target audience when you specialize in a particular niche.
As an example, there are millions of companies out there that sell ceramic mugs. There are fewer companies that sell ceramic mugs with images of a cat, and yet fewer that offer this product with your cat’s image on them.
The more specific your product or service, the fewer businesses there will be to compete with you for customers, and the harder it is for those businesses to reproduce the strategies that make you different.
It is important for companies to have competitors, but low competition is sometimes preferable.
The fewer competitors you have, the less you have to be concerned with monitoring the competition, especially competitive pricing.
By the same token, the more unique the product is, the fewer buyers there will be. Low competition is only a benefit when there is a significant audience to compete for. Understanding whether your niche includes buyers with a willingness to spend on that niche is important.
Save on Marketing Dollars
With niche marketing, you can get more bang for your buck and save big on your marketing spend. Furthermore, since you are confined to a specific person and a specific need, less focus is required on digging into your data to understand and keep up with their needs. You will also be doing less trial and error with your methods, which also can be resource-heavy.
Niche marketing is extremely cost-effective.
By contrast, businesses with a wide or general audience will have various customer segments to target within that audience. The mix of advertising — successful content, ads, and other direct communication channels — will look different for each customer segment, and catering your messaging to each segment requires particular effort and bandwidth.
When you target just one specialized segment, your job will be more straightforward. You can also dedicate your energy and attention to this one area, iterating the strategy over time based on more data and feedback.