When in Doubt, Niche it Out

In the competitive world of e-commerce, there's no room for "wishy-washy business." You need to know who you are, what market you serve and how best to serve it.

Unfortunately, many online sellers resist focusing on a niche, afraid that if they don't "sell to everybody" they'll lose sales. Nothing could be further from the truth. When your business is too generic, it dilutes your message, your marketing and your sales.

When the Greek poet Homer wrote, "If you serve too many masters, you'll soon suffer," he certainly wasn't talking about e-commerce, yet even today the principle applies. If your online store contains name brand women's high-end shoes, funky vintage jewelry and athletic apparel, it's impossible to sell these different product lines effectively to the same target market.

Not only that, with your attention split three ways, you're unlikely to dominate the marketplace for any of these niches.

You can only source hard-to-find, in-demand products when you know your niche well enough to really dig in

Surface sourcing

Another big problem you'll have without a clearly defined niche is unprofitable "surface sourcing." Surface sourcing results in stocking only the most mainstream products—those that are also commonly stocked by your competitors.

The most successful online businesses "go vertical" in their niche. They offer consumers products that can't be found offline or on the big box Web sites. In fact, in sharing its strategy for third-party sellers, Amazon.com recently stated that it relies on third-party sellers to fill out the site's inventory and bring products to the market that Amazon doesn't stock.

But you can only go vertical in your niche and source hard-to-find, in-demand products when you know your niche market well enough to really dig in and source some great inventory.

Let's take the example of the seller who offers high-end women's shoes, funky vintage jewelry and athletic apparel. To properly source these items and go vertical with her sourcing, our merchant will need to attend industry tradeshows to gain exposure to new suppliers. She'll also need to read trade publications, keep up on trends in the niche and build supplier relationships.

She'll need to do research on the niche so she knows what new products are coming into the marketplace. She'll need to know her product line—what brands are quality, what brands sell, what brands will bring her problems, etc. She'll also need to keep her finger on the pulse of what her customers are buying.

This is a lofty proposition for a merchant focused only on selling name brand high-end women's shoes. Imagine trying to do all this for three niches: shoes, vintage jewelry and athletic wear! Now think about doing this as a solopreneur, while also running the business!

Will our merchant make more money by focusing on three niches? No! Because she isn't an expert in any one niche. She can't add the value of her expertise to what she sells, and she won't be able to know her customers well enough to understand what else they want to buy. She'll make far more money if she focuses on one market and becomes a destination site in that niche.

Define your business, step by step

Refining your business to serve a profitable niche market isn't as difficult as you may think. But it does take some thought, research, soul searching and work. If you're ready to dig in and carve out a more profitable slice of the e-commerce pie, these 10 steps will help you get there.

Defining your business to serve a profitable niche market is a step-by-step process:

1. What is your niche today? Can you name it? "I sell a little bit of everything" is not a niche. Women's plus-sized business-wear is a niche. Women's clothing is not.


2. Is your niche profitable? If your current niche is not profitable, the next item of business to determine is…


3. Are people spending money in this niche? A niche must serve a hungry target market that is willing to spend money.


4. Is the niche growing or declining? Gadgets that play digital content are on the rise. The CD player market is not.



If you don't care about what you sell, you won't be able to provide the added value of your expertise to your customers

5. Does the niche contain enough products to support your income goals? A small market is not necessarily a profitable niche. If you sell needlepoint products and your goal is a seven-figure business, you'll need to broaden your niche to carry enough related craft products to increase your sales.


6. Do you have (or want to have) an interest in your niche? Successful niche sellers know their product line. They have an interest in what they sell. They are continually educating themselves on what's happening in their market.
   
   E-commerce is too competitive these days not to have an interest in your niche. This is not "do what you love and the money will follow." Rather, find a profitable niche market that you have experience in or want to learn about.
   
   If you don't care about what you sell, you won't be motivated to learn enough about your niche in order to be the best in it. You also won't be able to provide the added value of your expertise to your customers.


7. Does your niche match your goals and your lifestyle? If your business is struggling, you really need to take a hard look at your niche market and see if it's right for you. Often, people chase a niche that is profitable, but one that's a complete mismatch for their strengths.


8. Have you explored the sub-niches and micro-niches in your niche? Here's where you need to do some digging to find out what opportunities await you. There are 17,500+ categories to sell in on eBay. There are millions of products to sell online. Don't stop with what you're familiar with. The gold in a niche market comes to those who have a bit of the detective in them, those online sellers willing to dig deeper than the next guy.


9. Be ready for change. Selling in a niche is not a static process. The niche you sell in will constantly morphs and changes. Today there are millions of dollars being made from the sales of iPad accessories. That niche opportunity didn't even exist until the iPad was first released in April 2010.


10. When in doubt, niche it out. Don't be afraid to go too narrow, too focused, too specialized. You can always expand from a profitable core to other related products. It's rare that I work with an online merchant who is too niched. It's usually the opposite; they're not niched enough!

The variety store model

No talk about "niching it out" would be complete without the No. 1 question I'm asked when speaking on the topic of niche marketing: "Can I be successful if I sell a variety of things?" The answer to that is yes. (In business there are exceptions to every rule).

But there are also caveats. If you sell in the variety store model, make that your niche. Don't do it halfway. If you're what I call a "deal scout"—someone who loves the thrill of the hunt for a good deal—then make it your business to offer amazing finds in your variety store.

Variety stores definitely have their place in marketplaces like eBay. But don't use a variety store model as a way to source mediocre inventory. Your sales will quickly reflect lackluster product sourcing.

Keep your inventory fresh and flying off the shelves. And communicate your variety store niche to your customers so they know that every time they return to your store, they'll see a great find.

Identify the core, then expand

Finally, focus first on becoming a big fish in a small pond. Once you have that on track, then you can expand.

Your goal as a niche seller is to find a highly interested market and dominate it. That's when you'll really begin to see that there are riches in niches.