Choosing a niche for an eCommerce business is as important for an entrepreneur as choosing what to grow in a farm is for a farmer. Just like a farmer evaluates the weather, type of soil, watering availability and demand for the produce before planting a crop, similarly you must carefully evaluate and select a niche for your eCommerce venture. But finding a niche is no child’s play, and many a times we end up making mistakes that cost us time, money and usually customers. By steering clear of these mistakes, you can set a solid foundation for your business. Let’s take a look at the most common pitfalls and how to avoid them:

1. Overlooking Supply Chain Viability

A common oversight is failing to ensure the ability to source high-quality materials at competitive prices in bulk. Supply chain issues can derail your business, regardless of how well your product performs in the market. For instance, if you decide to sell eco-friendly bamboo toothbrushes, ensure your supplier can consistently provide the quantity and quality needed. A disrupted supply chain can lead to stock outs or sudden increase in prices for consumers, damaging your brand’s reputation and sales.

2. Ignoring Profit Margins

Once you have a potential niche identified, look into its profit margins. If you’re rolling out a vastly different product, you may have to spend a lot of advertising. Or if you are selling a competitive product, check if you are able to offer competitive rates and not compromise your profit margins. Profitable products are essential for your business’s sustainability. Here’s how margins typically break down:

• <30%: Avoid these products as the margins are insufficient.
• 30%-50%: Standard for resellers, requiring high volume for profitability.
• 50%-70%: A healthy margin where you can emphasize quality.
• >70%: Ideal, but expect stiff competition.

For example, if you are selling handmade jewelry, aim for a margin above 50% to ensure you can cover costs and invest in marketing. While margin percentages are informative, actual profit dollars are what will sustain your business. A high percentage with low volume won’t pay the bills, so balance is key.

3. Skipping Market Research

Many entrepreneurs fail by not thoroughly researching their market. Utilize tools like Google Trends and competitor analysis to gauge demand and ensure you’re not entering an over-saturated market. For instance, if you want to start a subscription box service for fitness enthusiasts, research competitors like Birchbox and FabFitFun to understand their strengths and market gaps. Aim for a niche that is specific enough to target effectively but broad enough to allow for growth.

4. Failing to Validate Your Idea

Before committing, it’s crucial to test your niche idea. Use landing pages, surveys, or prototypes to measure interest and demand. Let’s say you want to sell vegan skincare products, one way to validate an idea is to make a basic website using a free theme and direct a traffic to it. Then collect emails for sign ups to gauge interest. This step is vital to avoid investing in a niche with no real market. Positive responses and pre-orders can validate your idea and reduce risk.

5. Being Inflexible with Trends and Customer Needs

E-commerce trends and customer preferences can shift rapidly. Keep an eye on industry trends and adapt your strategies accordingly. Use data from your sales, social media, and customer feedback to stay relevant and meet evolving demands. For instance, if you notice an increasing trend in sustainable packaging, consider integrating eco-friendly materials into your product line. This not only meets customer expectations but also keeps your brand competitive.

Everybody wants to build the next Facebook. But even Facebook was once a messaging channel for Harvard graduates only. So there is no harm in starting small and simple – this helps find your niche and customers and realize if the idea has the potential to stand on its own feet.