How Do You Choose Just the Right Niche for Your Ecommerce Business? A Checklist

The first question to ask yourself? What are your personal interests? And are you game to do a whole lot of market research?

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By Bob Ellis

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You can sell just about anything. That is what many business owners who have successfully maneuvered the challenging waters of ecommerce will tell you. With the right strategy and execution, you'll find that almost any idea can be turned into a profitable business.

Related: The Small Business Owner's Guide to Choosing the Right Ecommerce Platform

Unlike brick-and-mortar stores, an ecommerce business doesn't rely on local market conditions. There's no need to choose the right location for your store; your products can be sold anywhere to anyone with an internet connection.

When I started out as an entrepreneur 25 years ago, business was done in person. Back then, brick-and-mortar operations reigned supreme. Getting foot traffic into your store, using the right color designs and promotions and hiring capable floor staff were key to success.

As I transitioned to ecommerce later in my career, however, consumer behavior changed. The focus shifted from in-store to online.

Shoppers today are buying items online more than they ever have before, with online shopping at an all-time high in the United States. According to an annual study by UPS and ComScore, 51 percent of shoppers surveyed said they now do their shopping online. There's never been a better time to start an ecommerce business. Yet, if you do, along with the surge in customer interest you'll enjoy, you'll also face more online competition, which is why it's critical to strategically choose a niche.

Finding your niche in a large industry is important to long-term success. It takes an ample amount of listening -- listening to your audience to find out what items are in demand, and listening to yourself to objectively decide where your strengths and interests lie.

The checklist below will put you on track to discover the right niche for your online store.

Commit to an ecommerce model

This may sound obvious, but the first step is committing to launching an ecommerce store. If you're accustomed to running a retail shop, you will need to make adjustments. Ecommerce businesses face a whole different set of challenges and questions.

Related: 5 Steps You Can Use to Find Your Niche

They include:

  • Which ecommerce platform will you use to host your store?
  • Do you foresee hiring employees immediately, or will you wait until you have the revenue to pay salaries?
  • Are you going to manufacture your products?
  • Will you use a fulfillment center?
  • How will you differentiate your store from the competition?
  • Will you manage customer service in-house or outsource?
  • Considering these factors will help you evaluate how many hours you'll need to put in, which costs you can anticipate and even which challenges may arise.

"After owning a brick-and-mortar nursery for several years, I made the switch to ecommerce. While certain aspects were intuitive, such as product manufacturing and customer service, I found there was a new set of rules when dealing with online competition. Online marketing is completely different from anything I've ever done, so I took care to research and learn how to compete in this new landscape." -- Ronna Moore, Fairy Homes and Gardens

What are your interests?

The beauty of an ecommerce business is, you can select a niche based on your personal interests.

My first step was to look at the competitive landscape of several niches I had an interest in. I wanted to find a market I could compete in without having to invest a lot of up-front capital. Could I rise to the top of the search rankings? Would I be able to garner the traffic necessary to support my business? This step is crucial for ecommerce companies because online marketing is imperative for customer acquisition. If shoppers don't know your store exists, how will they buy your product?

Prior to starting Bavarian Clockworks, I found that there weren't many online stores selling authentic Black Forest cuckoo clocks. I've always had a passion for craftsmanship and antiques, and a lifelong interest in cuckoo clocks. Based on my research, I chose authentic cuckoo clocks as my niche.

"As fourth-generation peanut farmers, the transition from B2B to the B2C gourmet market was a natural one: we invested in elaborate market research, understood the demand from gourmets for high-quality Virginia peanuts, and held the power to be one of the rare gourmet peanut e-tailers who actually harvested their own product. Pairing an honest product and sustainable land practices with our agricultural expertise was the perfect recipe for leveraging our interests to carve a niche and thrive; a practice every business should implement when considering expansion." -- Stephanie Pope, Hope and Harmony Farms

Where can you carve your niche?

This step is about deciding how your business will position itself within the wider industry.

When deciding on a smaller niche within a larger industry, you'll want to find the right balance between competition and opportunity. The niche should be less competitive and require minimal resources to get started but should still be large enough to support a budding business. If a market is too small, you may face growth challenges down the road.

How can you deduce whether a niche is worth pursuing? Initial market research will give you a better understanding of the field, including which search terms are common, which websites hold the most market share and how popular businesses within the niche market themselves.

"Carving a niche is imperative to your business' success, and it's increasingly more important for ecommerce businesses to do so. Market research should always be the first step. You want to watch the market and get to know it before you dive into a niche. Who are the major players? How do they carve out space? Use the data you gather to inform your decisions and spot places where you can thrive." -- Harrison Doan, Saatva Mattress

Who are your customers?

Who is going to buy your product? Who will it benefit the most? These are important questions to consider when deciding upon a niche.

You need to define your audience members. Study their interests and shopping patterns. Maybe your target customers are young and have a strong entrepreneurial spirit, but are careful with their money. Or maybe your audience members are middle-aged, spend more time on Facebook than other social media outlets and have shown that they spend big on online purchases they value. Understanding your target audience and how you will cater to their preferences is key to long-term success.

"When we initially embarked in the concrete staining market, the concept was so new there wasn't an existing industry. We had to help create our niche from scratch. We set up our website, secured a toll-free number and began publishing informational blog articles and online tutorial videos. Through this process, we developed a deep understanding of our audience and their needs. It's easier to find a product-market fit when you know your customers' pain points." -- Earl Choate, Concrete Camouflage

Related: How To Find Your Ecommerce Business Niche

Before choosing a market niche for your own ecommerce company, look at different criteria. Where do your strengths and interests intersect with a business opportunity? Do you have the financial resources? And who are your target customers? Market research is an opportunity to strategize and form a plan for how you will make your online venture a success.

Bob Ellis

Founder of Bavarian Clockworks

Bob Ellis is an ecommerce entrepreneur and founder of Bavarian Clockworks, an online store that sells authentic German Black Forest cuckoo clocks. He has been a small business entrepreneur for more than 20 years.

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