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How to Choose Dropshipping Products Like an Expert

Aug 08, 2022 · 8 min read

Decisions made by great entrepreneurs are based on data.

Many business owners, however, struggle with not knowing which information they require to make the best decisions regarding their products and, perhaps more importantly, where to look for that information.

We're going to walk you through all of the data that we consider when we're validating a product idea and show you how to use it to your advantage, which is precisely why we've created this article.

I say we jump right in.

How to Validate a Product Idea

Like spinach was to Popeye, data is to an entrepreneur the essential fuel that can supercharge them.

Simply put, you can make better decisions about something when you know more about it.

Data can reassure you that you are right to concentrate your efforts on selling one type of product when it comes to finding products for your business, or it can raise a red flag and possibly save you time, energy, and money in the long run.

We always advise you to use hard, cold numbers to verify any product ideas you have.

Here's a quick breakdown of the information that you actually need to validate a product:

  1. The current size of the niche your product falls into

  2. The growth rate of said niche

  3. How competitive the dropshipping market for the niche is

  4. How profitable products within that niche are

Generally speaking, finding the sources of all of this data is difficult.

However, it is not necessary to be that way.

You can use our insights to inform your business decisions.

We'll outline exactly how you can use the data to validate your own product ideas in the section that follows.

Diving Deep Into The Data

Okay, so we've already discussed how crucial data is when determining which products to sell online.

We're going to show you our step-by-step guide to validating any dropshipping product right now, so let's get to the good stuff.

But in order to accomplish this, we must first thoroughly examine one particular product.

Today, we've chosen yoga pants as our product of choice because they combine the two lucrative markets of sports and fashion.

Understanding the Size of the Market

The market share of these products among other users needs to be first understood, of course.

We must therefore examine how many orders were placed for goods in this market over the previous 30 days.

Yoga pants fall into the highlighted category "Sports & Entertainment," which is where they are currently positioned in the graph above.

Over the past 30 days, there have been 230,000 orders, which is a fairly healthy number.

There is undoubtedly some interest in these products, and the market doesn't seem overly saturated.

But we need to look further.

We not only want insight into the member of orders, but we also need to understand the daily trends of the products so that we can clearly analyse how big the market is, is it a niche market or a challenging market. Therefore, it is vitally important for you to in virtue of a tool.

SimplyTrends is a data basic 3rd party tool which it can provide us with daily data by inputting keywords. You can surf it to search whatever you like such as the products' marketing categories, daily selling growth, times of searching, etc. That information is all helpful to us in analysing market trends and choosing the winning products.

Checking the Growth of a Market

Next, we need to look at the market's growth rates.

This will enable us to determine whether goods within this market are on the rise, falling, being sold steadily, or being seasonal goods.

Let's look at the variation in daily orders for these products over the previous year to gain a better understanding on SimplyTrends.

As you can see from our recent SimplyTrends search for 'yoga mats' there have been a lot of people looking for these products in the US over the past 12 months. We also can see that the traffic flow change in this period of time. When you looked at one of store, you may discover the secret of their successful marketing.

Added victory.

We now know that consumers all over the world are interested in these products because dropshipping shops' sales of comparable goods have increased by a factor of two in the last year.

We're not done yet, but yoga mats are so far seeming like a great product to sell.

Learning About the Competition

The level of competition in this market must then be investigated.

This is a crucial step in the product validation process because steady sales and growth for a product mean much less if there are already a lot of competitors in the market selling similar products.

The quantity of retailers selling goods in this specialized market is shown here.

We can see that over the previous 30 days, 1,500 dropshipping stores sold goods under the subcategory of "Fitness & Bodybuilding."

We really need more information.

This will enable us to comprehend how the total number of sales is distributed among those 1,500 users.

If we notice that a small number of customers place the vast majority of the orders, the market may already be monopolized, making it difficult for a new company to establish itself. It is called a niche market which is huge risks and high profits coexist

However, if we notice that there is a balanced distribution of orders among the 1,500 stores, it will suggest that these goods might be acceptable for a new company to sell.

This SimplyTrends with strong diverse functions can provide particular information about competitors.

By inputting the URLs of your competitors' websites into this tool, you can easily check the traffic on their sites. In the interface for tracking rival products, you can see some of the merchant's promotional strategies, such as advertising copy and advertising graphics that are immediately noticeable.

Okay, so at this point, we have a fairly good idea of the market for these products and we are aware of how competitive the market is.

There is only one more thing to double-check.

Understanding the Profitability of a Product

Managing an ecommerce business requires money, there is no doubt about that.

And it's crucial that you understand how much money you can make when you're selling a particular product.

The graph now includes information on the median margins for various products as a result.

The median margin for products in the "Fitness & Bodybuilding" subcategory is 66.1%, as you can see from the graph above.

That means that if you source a product for $10, you can anticipate selling it for about $30, meaning that a product makes up one-third of your price and a profit margin makes up the other two-thirds. High margin ratios are generally a good thing, although there are some factors to take into account, like marketing expenses.

The last component of the decision-making puzzle we required to sell yoga pants was the margin ratio.

Putting the Pieces Together

Let's look at what we now understand:

  1. There is clear interest for fitness products

  2. There is room for a new business to break into this market

  3. We can make money on these products.

The beauty of having access to this data is exactly that.

We don't have to make decisions based on assumptions or our gut instincts.

We're dealing with facts right now, which are crucial for business owners.

In the comments section below, please feel free to ask any questions you may have about our data analysis.

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