4 top tips for finding your e-commerce niche
It’s a crowded market out there. Amazon has some 9.5 million sellers globally, hawking their products on Bezos’ online marketplace, while Shopify boasts a more modest 2 million merchants. Meanwhile, eBay has some 18 million sellers globally, operating with low barriers to entry and a user-friendly interface.
With this kind of competition, how can e-commerce newbies find their cash-cow niche?
1. Look at high-growth segments
Don’t be a fish in a crowded pond! Instead, target high-growth segments in the ecommerce market where you can establish yourself quickly.
Some high-growth segments include the pet care market, which is expected to grow at a 6.1% compound annual growth rate (CAGR) to $350bn by 2027 – up from $232bn in 2022. The UK market alone demonstrates the love for our furry companions, with pet owners spending an average of £2136 a year, or £178 a month, on their dogs.
Within that segment, the high-quality, raw and grain-free pet food niche is growing. The following graph from Google Trends shows a fast-increasing interest in the search term “raw dog food”.
Other promising areas include the supplements and health foods market. Interest in the search term “supplements” has been steadily growing for a number of years, as consumer awareness of holistic health grows.
THG’s success with its MyProtein and MyVitamins brands is testament to this. MyProtein began with just a £500 overdraft in 2004 and now takes in an online annual revenue in excess of $300m.
2. Target cash-strapped consumers
Amidst the cost of living crisis, many retailers are feeling the effects of a penny-pinching consumer, while discount stores such as Aldi, Temu and B&M continue to come out on top. With rent payments up by 28% year on year and mortgage repayments up by 11%, Nationwide reported in February that UK discount store spend has jumped 41% compared to last year.
For this reason, new e-commerce players may wish to explore retailing discounted products.
Boop Beauty and This is Beauty have already bagged part of the discount beauty segment within this niche, saving imperfect and excess beauty products from landfill and selling them on to consumers at large discounts.
3. Look at underserved niches within crowded categories
Some categories, such as fashion, are highly saturated with massive corporations such as ASOS, Zalando and BooHoo dominating the market.
However, sub-segments within this category, such as plus-size fashion, are hugely underserved and could deliver excellent returns. Vintage and luxury fashion is also a trendy niche with good profit potential. Luxe Collective exemplifies this: after securing a £100k investment on the BBC’s Dragon’s Den, the luxury brand has skyrocketed in popularity and now turns over £7.5m.
Catering to underserved niches will also help reduce ad spend when it comes to marketing. Filling a gap in the market means less competition for customer attention. You can tailor your marketing directly to the specific needs and interests of your niche, leading to a higher conversion rate and lower cost per acquisition (CPA).
4. Conduct market research
Market research doesn’t need to be a long-winded process. Use tools like Google Trends to gauge interest in your niche. Cast a wide net with broad terms to understand the overall landscape. Then, get granular by searching for specific products.
The following graphs, for example, show interest over time in the search terms “CBD gummies” and “dog chews”. The first shows a gradual increase beginning in 2018 before spiking in April 2021 and then plateauing. The second shows a gradual increase beginning in 2008, peaking in February 2021 and then remaining consistent until the present day – a reflection of the pet care market’s enduring strength.
Google Trends also allows you to target location and browse historical data and regional trends, potentially revealing international markets ripe for your e-commerce offerings.
