Definition + Ways to Find a Profitable eCommerce Niche

You must have seen the numbers: 

• Shopify Plus expects the global eCommerce sales to breach the 4.8 trillion dollars mark by 2021; 
• Nasdaq reports that the top three eCommerce platforms (Amazon, Alibaba, and Shopify) continue growing, partly fueled by the current global pandemic crisis (as of August 2020); and
• 3dcart reports that mobile commerce makes up 30% of all U.S. commerce. 
  

Do you want to take advantage of this growing market now? The solution is to use an eCommerce platform! If you are not yet familiar with these platforms, you can check out our guide. 

Now you have to decide: What products should I sell? This is the big question of eCommerce marketing! Depending on your choice, you will have to compete with upwards of hundreds of stores that sell the same thing. How can you make a good decision? 

The answer: find out by considering the eCommerce niches.

A lot of eCommerce businesses focus on a specific type of product with a small customer base that gives a relatively stable or even large volume of sales. 

This guide will help you learn what eCommerce niches are and how to make the most of them to establish a successful eCommerce business. 

Niche marketing and eCommerce

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There are two ways we can ensure our business has a steady and fairly consistent amount of sales. The first way is to offer as many products as we can: this is what Walmart does to ensure that they have customers at any given time during their business hours. The other way is to focus on a specific need of a segment of our market, and fulfill it accordingly.

‍These segments with specific needs are what we call niches in marketing. 

As an example, the gaming community serves as a profitable niche for computer manufacturers, and so they produce high-end gaming laptops for them (besides the gaming consoles they manufacture).

Most niches, however, are quite narrow; for instance, there are small businesses that focus on selling specialized paper, targeting the local artists in their area. In general, most businesses focus on either one or a few related niches to secure a small but profitable market.

Why should this concern eCommerce? Because most of the eCommerce businesses target niches in the market. As you will learn later, the advantages of niche marketing specifically benefit small businesses. 

Narrowing down your niche

Niches can be informally defined by the following categories:

• Demographics can be by age, gender, and other related identifiers (i.e. baby products).
• Geographics can be by location and climate (i.e. winter wear).
• Pricing often segments niches for their interest in affordable, premium, or luxury items (i.e. jewelry).
• Psychographics can be by existing mindsets. (i.e. stores selling religious imagery).
  

You could even narrow down your target market and combine these categories, depending on the actual need in the market. For example, if you want to focus on selling affordable winter wear for young adults who like anime culture, you have already combined all four categories to target a narrow niche in the market. 

This is the essence of niche marketing: we build our business to target a narrow but profitable market. How narrow is the niche for our example? We can show it in the diagram below:

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You’ll be facing an uphill battle if you decide to sell all sorts of apparel in your store, as you will be confronted by all sorts of competition. You compete with malls selling all types of clothes for all ages, you compete with local shops that can make clothes and suits that fit your size, and you even compete with garage sales selling old clothes. 

Instead, you can narrow down your niche a bit to focus on winter wear. This assures much less competition and effort to sell products, but the problem is that customers will flock to your store only at certain months of the year... 

At this point, let’s say you narrowed it down to selling anime-style winter wear... 

Now that’s a perfect target! 

There is a big chance some of the anime fans in your area are having a difficult time choosing the right winter clothes to complete their cosplays, and you are now catering to their needs! Since they have a different purpose behind looking for anime-style winter wear, they will visit your store even during summer months, where anime-related and cosplay events happen!

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Benefits of targeting narrow niches

The first benefit you get from targeting niches is avoiding too much competition. Because we know how intense the competition can get among businesses, we prefer to minimize it, ensuring steady and fairly consistent sales. Exploiting niches is one of the best ways to lessen the competition in the market, thus ensuring that your business stays profitable.

Targeting a niche market also makes conducting business easier in other ways:

1. You may not have to exert much effort in stirring interest in your products, as there is already an existing customer base that is interested to try your products. Even though they are widespread today, the coffee shops still serve as interesting examples: their growth is fueled by an existing “coffee culture” that gives coffee drinks a cultural value. 
2. Since you target a narrow market already interested in your products, those customers will be more likely to buy your products. In marketing terms, this is called a high customer conversion rate. To continue with our example, coffee-lovers will flock to your store on the first day of opening to taste your coffee drinks! (Just make sure your coffee tastes good.)
3. You intimately know your customer base, so a better personalization and customization of product offers are possible. Do you notice how small-town shops survive? They know their customers since they are their neighbors. When their neighbors come to their shop to buy certain items, they can make new offers that their neighbors would most likely take. Coffee shops can also do this via small perks like additional sugar and cream, a little more coffee, or a refill for the regular customers!
   

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How does this translate to eCommerce? Niche marketing helps your eCommerce business hit a better target through advertising. Some of the advantages are:

1. Easier and more targeted advertising. To effectively advertise online, you need to choose the right SEO keywords. It is easier to choose the right keywords if you are targeting a niche market. Similarly, the demographics of these niches are easier to identify since their online behavior shows it (sites accessed, posts, etc.)
2. Less expensive but more effective advertising. As ads need to reach less people online, it can become less expensive than buying ad space to reach as many people as you can. It is also more effective, as niche marketing often has a high customer conversion rate. 

Disadvantages of targeting narrow niches

Niche marketing is not always easy: 

1. You need to have an intimate understanding of the target niche, as the niches have their own language, so to speak. Do you know the difference between espresso and cappuccino? How about the taste of arabica and robusta coffee? Success in niche marketing relies on entering this community and becoming part of it. Failing to learn this language means being unable to enter this community, which leads to the business failing. 
2. You cannot target a different niche at the same time until you become successful in the first one since the appeal of niche marketing relies on you targeting a narrow market. In case you want to also target the coffee-lovers’ children as potential customers, pairing bucketfuls of chicken tenders with luxury coffee is not a good idea! ‍
3. There is an inherent risk, and you will have to start again if niche marketing fails to reach the target niche. If the coffee you sell wasn’t good enough to the taste of the coffee lovers, you either quickly change your recipe in preparing coffee or resurrect your coffee shop project under a different name in the future. Or look for a different niche. 

How to look for the perfect target niche

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What is the best way to minimize the effects of the disadvantages and maximize the advantages of niche marketing?

Target the niches you are already part of. 

Yes, it’s that simple... Think: Are you fond of beauty products, going so far as making your own vlogs about it? Do you like coffee culture and are a known fan in your area? Are you fond of pets and the people in your local community regularly ask you for (non-medical) advice in taking care of them?

Do you see the pattern? You have to like it, and be an expert on it. If you are able to think of one, well then, I guess you found your perfect niche!

It’s that simple. In fact, most businesses start this way.

Further reading

Do you need more help in choosing your eCommerce niche? You're in luck! We have some other guides you can check out...

• eComDash: Niche, Please! How to Choose Your Ecommerce Niche
• Neil Patel: 10 Foolproof Strategies for Choosing an E-commerce Niche
• Hubspot: The 5-Step Process for Finding Your Business's Ideal Niche Market