How to Find a Lucrative Dropshipping Niche for Your Business

The first step in starting a dropshipping store is choosing a niche. A niche helps you build an audience, influences your marketing and content efforts, and makes it easier to create better products for your ideal customers.

But choosing a dropshipping niche is tricky. 

Should you build a store around products you’re passionate about? 

Should you pick a niche popular only in the US or think global? 

How do you know if these dropshipping products will even sell?

Regardless of the answers, you need to find an area of expertise to help focus your business and attract the right customers.

So if you want to start a dropshipping store but aren’t sure where to start, use the following guide to figure out a profitable niche. 

How to find a dropshipping niche

Without demand, it doesn’t matter if your business idea sounds amazing. If nobody wants your product, you’ll have a hard time making any money! As the old saying goes, it’s much easier to fill existing demand than trying to create it.

Fortunately, a number of online tools allow you to measure demand for a product or market. 

Facebook Audience Insights

Facebook is the largest social media network in the world. It has over 2.23 billion monthly active users, with the average US adult spending 38 minutes per day on the site. Facebook Audience Insights is a great dropshipping product research tool that can help you find niche markets and trends. 

Facebook Audience Insights is a free tool that helps you learn more about an audience. It aggregates information about Facebook users and helps determine the size of a potential dropshipping niche and the interests relevant to that niche. 

You can use Facebook Audience Insights to find information like:

• Demographics: age, gender, lifestyle, education, job role, relationship status, etc.

• Page likes: categories and topics that interest an audience

• Location: where people live and the languages they speak

• Activity: Facebook ads clicked, comments made, promotions redeemed, devices use, and more

For example, if you want to explore a dropshipping niche like fitness and wellness, you can type in any keyword and Facebook will show you how many monthly active people are interested in this niche worldwide. You also can see how many people are interested in a topic, their likes, and their location.

Let’s look at meditation, for example. You can see below that between 200M and 250M people on Facebook are interested in mediation globally. This is a good indicator that meditation could be a profitable dropshipping niche. 

You can also look at sub-niches, like yoga pants, buddhist meditation, meditation music, and any related interests to explore different dropshipping product ideas. The estimated size of your audience will change depending on the interests you include. 

You can refine this audience by location. For instance, if you want to target people in the US, you can search by just that country, then see this more focused audience’s top interests related to meditation in the Page Likes tab.

This information can help you see what topics people are interested in so you can better test different ad groups later on and get better return on your ad spend. 

Google Keyword Planner

The best way to measure demand for an item online is to see how many people are looking for it using a search engine like Google. Fortunately, Google makes this search volume publicly available via its Keyword Planner tool. Simply type in a word or phrase and the tool tells you how many people are searching for it every month.

There are entire training modules dedicated to using Keyword Planner, and we’re not able to cover the topic exhaustively in this resource. But keep the following three metrics in mind and you’ll be well on your way to getting the most out of this valuable tool:

Match type. Keyword Planner lets you select broad, phrase, or exact-match types when it reports search volumes. Unless you have a good reason to do otherwise, you should use the exact-match option. This will give you a much more accurate picture of the applicable search volume for the keyword. 

Search location. Make sure you look at the difference between local search volume (in your country or a user-defined region) and global search volumes. If you’ll be selling primarily in the US, you should focus on the local search volumes and ignore the global results.

Long-tail variations. It’s easy to fixate on the broad one- or two-word terms that get massive amounts of search volume. In reality, it’s the longer, more specific, and lower volume search queries that will make up most of your traffic from the search engines. These more detailed search terms are commonly referred to as “long tail” searches.

Keep this in mind when you’re looking at potential markets and niches to enter. If a search term has many variations that are actively searched for, that’s a good sign that the market is fairly deep with lots of variety and interest. But if search queries and related volume drop off precipitously after the first few high-level words, there’s probably less related long-tail traffic.

Google Trends 

The keyword tool is great for raw search figures, but for more detailed insights, a lot of people use Google Trends. 

This tool offers you information that Google’s Keyword Planner just doesn’t provide, including:

Search interest over time. Ideally, you want the niche you’re entering to be growing, and Trends can let you know if this is the case. For any given search query, you can see the growth or decline in search volume over time.

Top and rising terms. You’ll also be able to get a snapshot of the most popular related searches and of which queries have been growing in popularity the fastest. Focusing on these terms can be helpful when planning your marketing and SEO efforts.

Geographical concentration. Another useful feature is the ability to see where people are searching for a term geographically. This can help you identify where your customer base for a specific niche is most heavily concentrated. For example, if you’re selling canoes, you’ll want to determine where the majority of your customers will come from.

Seasonality. Understanding the seasonality of a market—that is, if the demand for a product changes dramatically at different points in the year—is crucial. Because the keyword tool provides data on a monthly basis, you can draw some misleading conclusions if you measure search volumes during the wrong time of year.

We can bet that “canoes” are a very seasonal search term with demand peaking in the summer months. If you measured demand in the summer expecting that it would be constant throughout the year, you’d grossly overestimate the size of demand.

For any product you’re seriously considering, you’ll want to spend time understanding the intricacies of the niche’s search volume. Using the Google Trends tool to understand search volumes, geographic concentration, high-level search trends, and seasonality will offer insights that can help you avoid costly mistakes and optimize your marketing efforts.

The most profitable dropshipping niches for 2021

If you want to start a profitable ecommerce business with the best chance of success, you can’t go wrong by entering a dropshipping niche that’s already proven to be popular. 

Our research on the best dropshipping products identified some of the best niches for 2021:

• Health and personal care
• Wardrobe and accessories
• Kitchen and grocery
• Home and bedroom
• Office products
• Tools and home improvement
• Camera and cellphone accessories
• Gaming
• Car accessories

If you’re not interested in the popular niches above, you can always research other niche markets. Here are some dropshipping tips to help you find the best ones: 

1. Look for accessory-heavy niches. Merchants rarely make much on high-ticket dropshipping niches and will only earn about 5% to 10% on products like laptops and TVs. Where they really make their money is on the accessories.

Accessories enjoy significant markups and customers are much less price sensitive about them. A buyer might shop for weeks to get the best deal on a TV but wouldn’t think twice about dropping $30 on an HDMI cable from the same place. Yet there’s a good chance the business made nearly as much profit on the cable as it did on the flatscreen.

When you choose a niche with lots of accessories, you’ll enjoy significantly higher profit margins and fewer price-sensitive shoppers.

2. Find customers with passion. It’s amazing how much money passionate hobbyists will spend. Mountain bikers will drop hundreds on lightweight accessories to shave a few pounds off a frame, and avid fishermen will invest tens of thousands of dollars in boats and related accessories.

If you can offer a product-based solution to a painful problem, you’ll find a captive audience eager to buy.

3. Look for trendy products you can’t find locally. If you needed garden equipment, you’d likely head down to your local Home Depot or Lowe’s. But where would you go to buy surveillance equipment or magicians’ accessories? Probably online. Pick niche products that are hard to find locally and you’ll be able to get in front of the vast majority of your customers as they search online.

While you ideally want something difficult to source locally, you also need to ensure there’s ample demand for the product! This can be a fine line to walk, and we’ll return to the issue in the competition section below.

4. Aim for niches with low product turnover. If your product line is constantly changing year to year, you’ll end up spending valuable time on resources that will soon be outdated. Selling a product line with limited turnover ensures you can invest in an information-rich website that will be viable for years.

5. Consider selling consumable or disposable products. Repeat customers are essential to any business, and it’s significantly easier to sell to existing customers who trust you than to new prospects. If your product needs to be re-ordered on a regular basis—and you’re able to keep your customers happy—you’ll be on your way to building a profitable business with recurring revenue.

Finding a great product is only part of the equation. Even a dropshipping niche fitting all the above criteria would be a poor choice in the face of inadequate demand or crushing competition. Understanding a product’s demand, competition, and suppliers will be important to making an informed decision.

How to measure competition in your dropshipping niche

Conducting competitive analysis on a potential market can be tricky. Too much competition and you’ll have difficulty building traffic and competing with established players. Too little competition can indicate a tiny market that will drastically limit how big you’ll be able to grow.

Some dropshipping stores use paid advertising but most will rely heavily on free traffic from search engines to build a profitable business model. With this in mind, the best way to measure the overall competition in a market is to examine the organically listed (i.e., not advertised) sites on the first page of Google for a specific term. In order to generate a decent level of traffic, you’ll need to successfully compete with (i.e., outrank) the sites on Google’s first page. 

The world of search engine optimization (SEO) is one we can’t do justice to in this dropshipping guide. For a more detailed discussion, we highly recommend Moz’s comprehensive Beginner’s Guide to SEO or you can read our business SEO checklist. 

Number of linking domains

Google’s ranking algorithm relies heavily on links. All else being equal, the more links a site receives the higher it ranks in the search results. Knowing how many links are pointing to a site gives you an idea of how much work you’ll need to do (in terms of earning and building links to your own site) to outrank your competitor.

There are dozens of different SEO metrics that are commonly used, but one in particular is useful when evaluating the ranking strength of a site: the number of unique domains that link to it. Often called “linking root domains” or “unique linking domains,” this metric represents the number of unique domains (i.e., independent sources) that link to a site and ignores duplicate links from the same domain.

To best understand this concept it’s helpful to think of links like personal recommendations. If your best friend comes to you and recommends a restaurant, you may remember it. And if he raves about it every day for a week (a total of seven recommendations) you’ll likely be moved to eat there. But even his fanaticism wouldn’t be nearly as powerful as if seven unique, unrelated friends highly recommended the restaurant. Because they’re independent sources, their recommendations hold much more authority.

The same is true when analyzing links to a site. A domain can link to a site repeatedly, but it’s really one “unique” recommendation, and this is where common SEO metrics like “total number of links” can paint an inaccurate picture when measuring a site’s strength. Instead, looking at the number of unique linking domains will give you a much better idea of how difficult it will be to compete with a site in the search results. Google places a high emphasis on unique linking domains, so you should too.

The best way to get this figure is to use tools like Link Explorer, which provides a number of valuable SEO metrics and data including “linking root domains.”

When examining Google’s search results, you’ll want to look most carefully at the link metrics for the top few sites (#1 and #2 on Google) as well as the link metrics for the last site on the front page (#10 on Google). This will give you a rough idea of how much work is needed not only to rank #1 but also simply to make it onto the first page of search results. The vast majority of searchers end up clicking on one of the top 10 results on Google, so you want to understand how difficult it will be to get your site ranked there.

Here’s a quick cheat sheet for interpreting the number of unique linking domains (these are only rough guidelines but should help you make sense of the numbers):

• 0 to 50 linking root domains. Likely on the low end for most worthwhile markets. Most sites with quality content and some focused marketing and SEO effort should be able to get 50 linking domains within a year.
• 50 to 250 linking root domains. This is a more realistic range for top-ranked sites in decently sized niche markets. It may take a multi-year approach to build a backlink profile in this range, but it’s feasible. A competitive landscape with this profile often offers the best work-to-reward ratio, especially for individual dropshipping entrepreneurs or very small teams.
• 250+ linking root domains. Unless you’re a talented marketer or SEO ninja, building up more than 250 unique links will take some serious time and commitment. It doesn’t mean you shouldn’t go for it—just make sure you’re ready to face some entrenched competition.

Authority of competing sites

When determining a site’s rank, Google doesn’t just look at the number of links a site has. It also considers the quality of those links. So a link from Mike’s Marshmallow Blog with five readers won’t count anywhere close to as much as a link from The New York Times.

The metric Google uses to measure a page’s authority is called PageRank. It’s not the end all and be all of SEO metrics, but it’s a quick way to get an idea of how important Google thinks a page is. As with unique linking sites, you can get a sense for how competitive a market is by looking at the PageRank for the homepages of top-ranked sites.

The easiest way to check PageRank is to look at sites manually using Check PageRank.

Here’s a quick way to interpret PageRank readings for a site’s homepage:

• PageRank 1 to 2. A relatively small amount of authority. PageRank in this range for the top homepages likely indicates a relatively small market.
• PageRank 3 to 4. A much more common range for highly ranked sites in competitive niche markets. It’s not necessarily easy to reach this level of authority⁠—but not impossible, either. Markets in this range usually offer the best work-to-reward range for individual dropshippers.
• PageRank 4 to 5. A fairly high level of authority. To reach this level, you’ll need to get numerous links from respected, authoritative sites, in addition to a fair number of other links.
• PageRank 6+. You’ve got a full-time marketing and SEO department, right? Because you’ll need them to compete in a market with sites ranked this high.

Qualitative metrics to consider 

Hard statistics like unique linking domains and PageRank can be helpful in determining how hard it will be to outrank competitors, but it’s also very important to look at a few qualitative factors:

Site quality and usefulness. Visit the top-ranked sites for a market and put yourself in the shoes of a customer. Do they appear inviting and welcoming or old and outdated? Are the sites well organized and easy to navigate or is it a struggle to even find the search box? Do they provide high-quality information and detailed product listings or do you have to squint to make out the grainy product images?

In short, how likely would you be to purchase from those sites? If you’re blown away by the top sites in a market, it will be difficult to differentiate yourself and you may want to consider a different market. But if there’s a lot of room for improvement or, as we see it, opportunity to add value, then that’s a great sign.

Site reputation and customer loyalty. An online business might have a solid reputation based on years of treating customers well, despite a drab design and outdated site. Alternatively, the most beautifully designed site might have a widespread reputation for awful customer service. It can be difficult to judge a book by its cover.

Check with the Better Business Bureau to see if a company has a history of customer complaints. You’ll also want to do a web search to see what people are saying on social media and in online forums and communities. If the top competitors are slacking in the service and satisfaction department, there might be an opening for a store with superior service.

An important note on search results

When you perform a search, it’s important to realize that Google personalizes the results you see based on your geographic location, your browsing history, and other factors. When we’re analyzing a market, we need to see unbiased results so we can understand the real competitive landscape. Also, if you’re living outside the United States but plan on selling to US customers, you need access to the search results those customers will see, as those ranked pages are the sites you’ll be competing with.

There are two ways to get around these issues:

Incognito search. If you use Chrome as a browser, you can browse the web “incognito.” In this mode, any personalized settings or browsing history will be discarded so you can get an unbiased idea of how sites actually rank. You can start an incognito browsing session by going to “File → New Incognito Window” or by clicking on the icon in the upper right hand corner of your browser and selecting “New Incognito Window.” Other web browsers have similar hidden search modes that will clear your browsing history.

Forcing region-specific results. If you’d like to see the results that appear for a region other than your own, you can add a small amount of text to the end of the URL on a Google results page to get country-specific results.

For example, if you were in the UK but wanted to see the search results being returned for searches in the US, you’d add the “&gl=us” parameter to the end of the URL on the search results page and press Enter. Similarly, if you were in the US and wanted to get UK results, you’d add “&gl=uk” to the end of the URL.

For a more detailed explanation of how to implement this, please see this guide to tweaking geo-targeting with Google and this list of country codes used by the site.

How to be successful with your niche dropshipping business

Of course, selecting an in-demand, low competition dropshipping product is just one part of the equation. To build a successful dropship business, you’ll need to do at least one of the following:

Understand your ideal customers

If you’re having trouble coming up with the right idea for a niche business, think about it this way: Sometimes you need to find a customer first, not a product.

Once you’ve figured out who you want to sell to (and their pain points), narrowing down what you want to sell to them and how you want to sell it to them will come naturally.

To help you determine who you should be selling to and uncover your unique selling proposition, you’ll need to first create buyer personas for your audience to narrow down who should be considered an “ideal customer.” The more specific and detailed your buyer personas are, the better you’ll be able to understand and target your audience.

One of the easiest ways to find a customer is by looking at your own life and interests. Choose one of your passions and run with it. Whether it’s an extracurricular activity you love or a skill that you’ve mastered, anything is fair game.

Manufacture your own product

In this case, you control distribution and are the sole source for the item. This limits competition and allows you to charge a premium price. If you intend to dropship products, you’ll be selling existing products manufactured by someone else, so this isn’t an option.

Have access to exclusive pricing or distribution

If you can arrange an exclusive agreement to carry a product⁠—or if you have access to exclusive pricing from a manufacturer⁠ or dropshipping supplier—you can profitably sell online without creating your own product. These arrangements can be difficult to arrange, however, and hundreds of other dropship merchants will have access to similar goods and wholesale prices.

Sell at the lowest price

If you can offer the lowest price, you’ll likely steal business from a large chunk of the market. The only problem? It’s a business model doomed to failure. If the only thing of value you have to offer is a low price, you’ll be caught in a pricing war that will strip virtually all your profits. Trying to compete against Amazon and other established online giants on price is generally a poor strategy.

Add value in non-pricing terms

Offering valuable information that complements your products is the best way to differentiate yourself and charge a premium price. Entrepreneurs set out to solve people’s problems and that’s no different in the world of ecommerce and dropshipping. Offering expert advice and guidance within your niche is the best way to start a dropshipping business.

Add value in ecommerce

Just add value! Simple enough, right? Well, that’s easier said than done. Some products and niches lend themselves to this strategy more than others. You should look for a few key characteristics that make adding value with educational content much easier.

Have many components

The more components a product needs to function properly, the more likely customers are to turn to the internet for answers. Which purchase is more confusing: buying a new pet product or buying a home security camera system that requires multiple cameras, complex wiring, and a recorder? The more components a product needs⁠—and the more variety among those components⁠—the greater your opportunity to add value by advising customers on which products are compatible.

Are customizable/confusing

Along the same vein, confusing and customizable products are perfect for adding value through content. Would you inherently know how to select the best hot water solar panel configuration for your climate or which type of wireless dog collar system is right for your yard? Being able to offer specific guidance on what types of products are best suited for specific environments and customers is a great way to add value.

Require technical setup or installation

It’s easy to offer expert guidance for new products that are difficult to set up, install, or assemble. Take the security camera system from before. Let’s say the camera site had a detailed 50-page installation guide that also covered the most common mistakes people make installing their own systems. If you thought the guide could save you time and hassle, there’s a good chance you’d buy it from that website even if it was available for a few dollars less elsewhere. For store owners, guides add tremendous value for customers and don’t cost anything to provide once they’re created.

You can add value to complex and confusing niches in a number of ways, including:

• Creating comprehensive buyers’ guides
• Investing in detailed product descriptions and listings 
• Creating installation and setup guides (as discussed above)
• Creating in-depth videos showing how the product works
• Establishing an easy-to-follow system for understanding component compatibility

Work with good dropshipping companies

When running a dropshipping ecommerce store, you want to be on the lookout for good dropshipping suppliers or wholesalers. They can help you figure out shipping costs, decide markup for your products, automate dropshipping fulfillment, and even help with product research. 

For example, AliExpress, the leading business-to-business buying portal for online retailers, is home to millions of top-selling products you can sift through to find the perfect items for your store. You can order directly from AliExpress or use a dropshipping product research tool like Oberlo to find, upload, manage, and sell products in your Shopify store.

Build your dropshipping store today with Shopify

You’ve probably heard the mantra “Just follow your passion!” But I have to strongly disagree: I think it’s dangerous advice that can lead new entrepreneurs astray.

This is especially true when it comes to choosing in-demand or winning products to sell. Your life-long love of Star Wars figurines doesn’t mean it’s a great niche to build your new ecommerce store around. If a thriving startup is your goal, you should follow a methodical approach and pick a niche with attributes conducive to online success.

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