Dropshipping is a business model where eCommerce entrepreneurs sell products without having to carry any inventory.
When a store owner receives an order from a customer, they simply contact the supplier, who will then ship the products directly to the customer’s door.
Dropshipping apps like Oberlo let you add products from various suppliers into your shop to fuel your product offering.
1. The science behind dropshipping
Dropshipping is the perfect business model for new entrepreneurs. It’s simple to set up and manage, and it doesn’t require a large up-front investment.
Plus, it can be a good transitionary phase towards starting your eCommerce business in Singapore!
You can also run your dropshipping business in your spare time – you don’t need to quit your job to start a successful store. Plus, there are several drop shipping niches you can choose from, so you’re sure to find a niche that suits your interests and skills.
In this article, we’ll explain how to choose the best dropshipping niches for your business, and share our top 6 picks for Singapore in 2022.
2. What to pay attention to when choosing a dropshipping niche
Below are some fundamental parameters that you can refer to when picking out a niche for yourself.
2.1. Demand
There are a few things to consider when selecting your dropshipping niche. But, arguably the most important is demand. You want to make sure there’s enough interest in the products you’re selling so you can generate consistent sales. After all, if no one is buying your products, you won’t be making any money.
There are a few ways to measure demand. One is to look at Google search volume. This will give you an idea of how many people are interested in the topic. Another is to look at social media engagement.
If people are talking about the topic on social media, that’s a good indication that there’s interest. Finally, you can also look at the competition. If there are a lot of other businesses selling products in your niche, that’s a good sign that there’s demand.
It’s every merchant’s goal to fill their store with high-demand items that sell well. But it’s also important to not let this mindset tunnel vision you into committing dropshipping’s greatest vice: Chasing short-term profit.
Seasonal items have high sales power and can net you a very fat income in a short amount of time, but they’re not a stable foundation for growth.
Demands can peak tremendously during one month and completely drop to zero the next, hence the term “seasonal”. As such, it’s always a good idea to have your product lineups be a mix of seasonal and evergreen just to be on the safe side.
2.2. Profit margin
It’s also important to consider the profit margin of the products you plan to sell.
Some niches are more profitable than others, so it’s important to find a niche that offers high margins. You don’t want to sell products that offer low margins, because you won’t be able to make a profit.
The right pricing strategy should include variables such as your advertising budget, competitor pricing, discounts, and other operating expenses.
Sit back, do some research, and list out how many of the above expenses your business has. After that, it’s time for the markup.
The current consensus points to a 2.5x-3x rate as the ideal markup rate for dropshipping, but as this is merely a referential number, feel free to work the numbers around.
Regardless of what your final pricing will be, as long as you can pay for the product costs, take care of operating expenses, and put some profit into your pocket. Then you’re doing it right.
2.3. Competition
Competition can tell you a lot about a market. It can show you how popular a niche is, what products are selling well, and how much profit potential there is.
If there’s no competition in your chosen niche, that could be a sign that it’s not worth entering. After all, why would anyone start a business if they don’t think they can make money?
But if there is competition, that’s a good sign. It means that people are making money in the niche and there’s potential for you to do the same.
Of course, you don’t want to enter a market where there’s too much competition. That could be a sign that it’s too difficult to succeed in. But if there’s healthy competition, that’s a good thing. It means that there’s room for you to make money and grow your business.
So when choosing a dropshipping niche, make sure to consider the level of competition.
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