Welcome to step one of our 5 Step Method for Mega Sales This Holiday Season. If you missed our intro to this series, check it out here. In this installment of the 5 part series, I’ll show you how to find hot niche items that you can sell this holiday season and beyond!
I’m also going to show you my very own list of 4 quick checks I run to test whether a product will be profitable to sell. I’ve never shared this formula before – it’s one I use in my own personal business ventures – so keep reading as I unravel it!
How to find a niche that produces profits!
Niches are like diamonds; they are rare and if everyone could easily find them, they simply wouldn’t be as precious as they really are!
There is one big mistake that many new sellers make when they sit down to decide what to sell and that is selling whatever first comes to mind. This is usually electronic gadgets like iPhones, laptops or other popular items such as designer handbags or shoes.
These are actually the worst items you could attempt to sell – they have very low profit margins and very high competition from thousands of other sellers who offer the same items.
These products also require a very large initial investment. To give you an idea, Apple requires you to have an annual turnover of at least US$100,000 in most cases before they will approve you as a licensed reseller.
So instead of attempting to sell those kinds of items, what myself and all the SaleHoo team recommend is finding deep niche items to sell.
There are two steps for finding these profitable deep-niches:
2. Testing those ideas and separating the duds from the promising ones. This is where my list of 4 quick tests comes in, more about this soon.
Both of these steps are easy, but it can take time, so set yourself aside an evening, or a block of time that suits you, to sit down and do this. Try and do it in the next couple of days if you can, that way when I move on to the second installment in this series, you can follow along with me. If you can’t get around to it this week, don’t worry, just work at your own pace but remember, Christmas will come faster than you think
Step 1: Come up with niche ideas (the easy way)
This part of finding a niche is super easy. Essentially, all you need to do is write down a big list of products you can potentially sell. At this stage, you can go crazy and write down as many as you like.
You will make this task a lot easier on yourself if you create a spreadsheet in either Microsoft Excel or using Google Docs (sign up for Google Docs free here). The reason a spreadsheet is helpful is because later, when we actually test these ideas for viability, you can compare sale prices, sell-through rates and all those important numbers and pinpoint the best niche items.
You might find this task really easy, and you might already have a big list of potential niches in your mind. If not, gather up ideas by browsing around eBay or other marketplaces, Google lists of product trends, trawl Pinterest.com or just flick through magazines! Once you get started, you will find it easy to come up with ideas.
The key thing is to make a substantial list of potential ideas and note them down (preferably in a spreadsheet, as I’ve touched on).
Once your list is complete, it's time to test those products and determine whether they are worth selling!
Niches are items which appeal to a specific market. This is the first thing I check when I’m considering a new product, and it’s number one on my list of tests for finding a new niche.
Niche-finder test #1: Who would want this item?
If you want to know if an item is a niche, one of the first tests is to ask yourself “who would want this item?” if the answer is “everyone would” then it's NOT a niche item. If the answer is more specific like “women with sensitive skin” then you are probably looking at a niche!
Another example is if you sell a niche item such as organic cotton baby clothing, which is a really specific item, you will be appealing to a very specific market who want that line of products which is exactly what we want!
Right let’s move onto testing items for viability.
Niche-finder test #2: Check the sell-through rate
The sell-through rate of a product sells us how successful the item is, or how often it sells. Essentially, it tells us if there is too much competition, not enough demand, or if there is room to make a lot of sales selling the item!
This part of your market research is really important: What we are looking for is items that have a good sell-through rate and sell at a price that still earns you good profits. And without doing this testing part, you could easily wind up trying to sell items at a price that no one wants to buy!
One of the best ways to determine whether an item is viable is by checking the sell-through rate on eBay. The SaleHoo Research Lab is the easiest way to get this number:
If you are a SaleHoo member, your access to the SaleHoo Research Lab is free so just go to http://www.salehoo.com/labs and enter the name of the product you are researching.
Hint: Use commas to separate different product names so that you can test multiple products at a time.
Then view the sell through rate that the Research Lab generates. As I explain in the video below, a sell-through rate of above 50% is what we are looking for, so it looks as though ‘cloth diapers’ could be a good little niche!
If you are not a member of SaleHoo, you can check the sell-through rate by using eBay's Completed Listings data which shows you all the listings that ended in the past 14 days, and which ones sold, and which ones didn't.
Important Note: Although I am doing this series to help you this Christmas, don’t feel like you have to sell items that are Christmas related such as tree decorations or even things that are likely to be sold as gifts. Across the board, sales increase around Christmas and the holidays so even if you are selling something like mops, or my example above of cloth diapers, you can be confident that you will see an increase in sales leading up to the holidays. Around November and December, shoppers are in spending mode!
OK, once you have found the items that have a sell-through rate of above 50%, you can delete all the products on your list that don’t make the cut.
Now you are left with a list of items that are potentially great niches, but there are still a couple of steps you need to take to be positive that you are going to sell the right item, which brings us to the third test that all niches must surpass before I will consider selling them.
Niche-finder test #3: Determine the correct make and model
Now you know which items are looking as though they will sell well, but to really be sure, we need to dive a little deeper and look into makes, models and any other specifications that the items you are researching might have.
If you skip this step, you could overlook some crucial details about your chosen item. Here’s an example: Using my cloth diaper example from earlier, in the image below, you can see that blue cloth diapers have a much less lower sell through rate than “Grovia cloth diapers” (Grovia is a brand on cloth diapers). Knowing this, I can accurately pinpoint the brand of cloth diapers that buyers are looking for.
Most products have a lot of variations that you need to take into account and do a quick bit of research on in order to know exactly which type sells best. It’s all about being as specific as possible when you do your research. For example, if you are looking into selling lawn mowers, you might find that lawn movers have a sell through rate of over 70%. But, if you dig a little deeper, you might find that regular lawn mowers only have a sell-through rate of 35%, but ride-on lawn mowers have a much higher sell-through rate. Or perhaps John Deere mowers have a higher sell-through rate than Husqvarna. The point is that you need to determine exactly what it is that shoppers are purchasing.
The SaleHoo Research Lab makes this a lot easier, but if you don’t have access to the Lab, just use eBay Completed listings to drill down and determine the exact products you need.
As with the previous step, note down the specified products with good sell through rates and delete the ones that aren’t as profitable.
Niche-finder test #4: Find a supplier with the right price!
Here comes the 4th and final crucial test: Can you find a supplier that can sell you the products at a price that still allows you to make a profit?
Sometimes, you visit a wholesale website, get a price for a product, then compare it to how much the product sells for on eBay and the numbers just don’t add up: How can an eBay seller undercut a wholesaler? Well, sometimes they can!
There are a couple of reasons why this happens:
1. The eBay seller IS the wholesale supplier. This doesn’t happen often, but sometimes wholesalers sell their items direct to the public via eBay, as well as in bulk orders to retailers. It pays to ask your supplier whether they sell direct to the public because it is virtually impossible to undercut your supplier and still make a profit.
2. The eBay seller has purchased in very large quantities or is a preferred reseller. Plenty of eBay businesses aren’t just your typical mom-and-pop -home-businesses. Many of them are medium to large companies with huge buying power. This means they can afford to spend $50,000-$100,000 per order from their wholesaler which earns them some very competitive prices on items. These sellers are always difficult to compete with.
3. By far the most common reason you see lower prices on eBay compared to on a supplier’s website is because suppliers don’t usually display bulk buying prices on their website. You often need to login to their website or request a price direct from them in order to see how much you can purchase items for.
Here’s how to run this 4th and final test on your product:
Use the SaleHoo Research Lab or eBay Completed listings to find the average sale price of any item. Using the SaleHoo Research Lab is the easiest way, just search the name of the product and look for the median end price.
Using eBay Completed Listings, you need to run a search as I showed in the video above and add up all the ending prices that are shown in green.
Count up 50-100 Completed Listings sale prices, then find the average. You find the average by adding up all the sale prices, then dividing that number by the number of individual number of sale prices. Finding the average shouldn’t be difficult, but if my explanation on how to find the average is confusing, try this.
Once you have the average selling price of the item, you need to compare that to what your supplier can sell it to you for. Make sure you take eBay and PayPal fees, or any other costs associated with selling the products such as website hosting, into consideration when finalising the price point.
So what now? After you have followed along with this method, you will have at least one niche item that passed all of the 4 tests I outlined above.
Next up, you need to find a supplier! Furthermore, you need to find a supplier that has good prices that allow you to make a profit. I’ll show you the best way to do this in my next instalment of this 5 part series. Even if you are not a SaleHoo member with access to our Wholesale Supplier Directory, we have solutions for you, too. Keep an eye out on your inbox.
In the meantime, get to work on finding new niches to sell this Christmas (and beyond!)
Quick action steps to get you started based on what we covered in today's post:
1. Open a Google Docs or Excel spreadsheet and fill it with ideas for potential products to sell
2. Get product ideas from Pinterest.com, the SaleHoo Directory, or just by flicking through magazines
3. Test those ideas for their viability using my list of 4 tests that items must pass before I consider them niche-worthy! Be patient and persistent during this process and remeber what I said at the beginning: Niches are like diamonds; they are rare and if everyone could easily find them easily, they simply wouldn't be as precious as they really are!
Next up: Find a supplier that can supply you with these products (at a price that still allows you to make a profit. I'll cover this in the next installment of this series. Keep an eye on out on your email inbox - I will let you know when it's ready.
P.S. Want to know the best way to undercut other drop shippers and make more profits? By selling on your very own website! Break away from eBay fees and constant policy updates and enjoy the freedom of your very own Store!