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Choosing a carefully pinpointed niche market should be one of the first steps that an internet business owner has to take. A very common way of describing a niche market is ‘a targeted group of individuals with very specific and similar needs or interests.’ These people engage in similar activities and hence they would most probably demand the same goods or services to cater to their needs. Online businesses that drop ship their products to their customers would thrive by focusing on a specifically targeted niche market. In this article, I would focus on the advantages a niche market can bring to an online Drop Ship business. This article also provides you with practical steps for you to select your niche market. By focusing on a specific niche market, Drop Ship businesses gain an edge because they are like ‘monopolies’ for that particular niche. The ‘monopoly’ for that niche would be able to provide a much wider range of products and better services for that market, enabling it to dominate. Because there is a very large number of niche markets on the internet, most Drop Ship businesses are able to survive and thrive online by selecting a niche that no major competitor is targeting, and directing their marketing efforts to their respective niches. With limited resources, a small Drop Ship business just starting out cannot hope to sell ‘mainstream’ products that are also supplied by huge competitors like Wal-Mart. It is critical to first establish a market with an unfulfilled need and then develop products or services to meet these needs. Most online ventures fail by first selecting a good product, and then looking for the market for that particular product. They fail when the product’s demand is insufficient, or when the product already has a strong competitor supplying to the market. The internet is not the only medium where niche marketing dominates. In our corporate world, the majority of the successful companies also selects a niche market and develops products or services that cater to their specific niche. Microsoft develops software as operating systems and platforms for computers. Nike offers shoes and footwear targeted at the sporting population. This illustrates the importance of first selecting a niche market for your business to focus on. There are a few simple stages in the selection of a niche market: 1) Brainstorm for niche markets that are related to your area of interest or expertise. It is simply easier to succeed if you focus on an area that you are passionate about and have the most expertise in. This way, along the learning curve of starting an online business, the frustrations that you face along the way will be reduced because whatever you are doing feels more like fun instead of work. 2) Research the market in detail. This involves producing a detailed profile of your market, including the estimated demand for your products, the products in the niche likely to have the highest demand, and where these prospects normally congregate online. You can use the free Overture search term suggestion tool to gauge the market size for the products you have in mind. It is available at http://inventory.overture.com/d/searchinventory/suggestion/. Simply type in the product keywords and this tool can suggest more specific keywords, and also the number of times this word has been searched over a period of time. Chat rooms, forums and newsgroups are where your target market normally congregates online. By monitoring these discussion boards, you should be able to determine the evolving needs of your target market, and what new product is likely to be in high demand soon. Forums can also be a good source of ideas for your products. Google Groups is a good place for you to start finding newsgroups or forums for your niche market. It is available at http://groups.google.com. 3) Select a niche market that has a need not currently being adequately met instead of targeting a niche whose need a competitor can fulfill very well. From the newsgroups, discussion boards and forums, you can get valuable information about business opportunities. For example, if consumers voice out their dissatisfaction about any unfulfilled need, you can quickly find and offer any product as a new solution to their problem. This fills a ‘gap’ in the market and your business is established. 4) For the niche markets that do not have their needs adequately met, conduct research on the major businesses in that field. If there are no major competitors, you can congratulate yourself on finding a suitable niche market for your Drop Ship business. If there are several major market players, you have to either develop a Unique Selling Proposition (USP) to differentiate your products from your competitors, or you can narrow down the definition of your niche market to a more specific level. For example, if your niche market is the group of individuals passionate about oil paintings, you can narrow down your focus to abstract oil paintings by Rembrandt or Renoir. If you want to be a retailer of Rembrandt oil paintings, for example, note that your competitors are not the websites selling oil paintings from all artists, but the websites that focus only on Rembrandt oil paintings. All things being equal, an online shopper will certainly choose a website focusing only on Rembrandt oil paintings, instead of a website selling paintings from all the famous artists. This is the edge that a niche market can give to a small Drop Ship business. You can use the free Overture ‘View Bids Tool’ available at http://uv.bidtool.overture.com/d/search/tools/bidtool/ to gauge the competition for your products. Overture is a Pay-Per-Click search engine, which provides search results ranked in order of how much businesses are paying for every click-through to the business websites. This tool lists the amount that each business is paying for every click by visitors. The higher the bid for the keyword, the more popular the keyword, thus the stronger the competition you face for your products. 5) Test your market. Once you have confirmed your niche market, you must test your products for that market. Start off your business by selecting a few of the most popular products and placing them in your catalogue. Next, you announce your products to newsgroups and discussion boards and gauge their response to your products. Observe how well the individuals are reacting to the introduction of your products. If you did your research properly and fulfilled a need well, most probably you would receive a very warm response from forums and newsgroups. Finally, as the online retailer for your niche market, you should aim to be the best online resource for the market. Articles, strategies and guides should be included on your website to provide your niche market with valuable information. For example, you can write your own guides on how to properly use tools for magician tricks if that is what you are selling. However, it is not advisable to start off by selling an enormous catalogue of products. You should first establish your credibility by supplying your market with useful know-how for the products, and recommending them a few popular products. As your business stabilizes, you can slowly expand your business catalogue to include other products. Selecting a niche market is one of the most important steps for setting up a Drop Ship business. It lays the foundation for how your business will develop in future. Thus, spend some time carefully deciding on your niche market before taking the plunge into your business. You are welcome to reprint this article as long as you include the Author’s resource box with the article. About the Author: Ray Yee is the founder and president of Dropshipperscentral, a website which provides a wealth of informative articles, tips and resources on everything you’ll ever need to know about setting up a Drop Ship Business and marketing it. 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