Anatomy of a Great Niche

This post is an excerpt from my 55-page eBook ‘Profitable eCommerce: A Guide to Market Research, Suppliers & Niche Analysis‘, which can be downloaded here for free.

Picking a niche is usually the biggest hurdle most people face when starting an online business. It’s possible to spend weeks — even months — on the issue without coming to a decision, which can be an incredibly frustrating and de-motivating experience. I know, because I’ve struggled with the process myself.

I wrote this guide to help take the confusion and stress out of the selection and research process, and to help increase the chances of picking a viable, profitable niche.  If you keep these attributes in mind, you’ll have a significantly higher chance being successful with a new eCommerce business.  With that said, let’s dive in!

Criterion #1: Pick a Niche Where You Can Add Value

This is the MOST important criterion when selecting a niche, and you’ll be hard-pressed to succeed online without meeting this guideline. You’ll soon realize that all products, including physical goods, are really information products at heart.

If you’re selling a physical good that someone else has manufactured, you’re really selling a commodity. In terms of the product, a customer can likely buy it at hundreds — if not thousands — of other locations. So if I’m able to order Product X from Amazon at an incredibly low price, you’d better have a compelling reason I should order it from you instead — or you’ll lose most sales. And if you try to compete with Amazon (or anyone!) on price, I’d recommend you quit right now. You will almost certainly be doomed to failure.

So how can we profitably sell a commodity online? The best way is to solve our customer’s pre-purchase problems by educating them with outstanding content. That’s a bit of a mouthful, so let me give an example.

A few years ago, I wanted to install an in-wall stereo system in the new home my wife and I were building. I wasn’t one of those kids in high school with an ear-deafening, earth-shaking sub in my car, so I know next to nothing about stereo equipment.

I started searching online but was really struggling to understand what I should get. Despite being someone who prides himself on being able to bootstrap and self-learn most topics, figuring out what equipment I needed was a pretty large challenge.

It’s crucial to note that my problem WAS NOT:

  • “I need some stereo equipment at a decent price”

Instead, my problem was:

  • “I need stereo components that I know will work together AND that I can install myself.”

The vast majority of online retailers only addressed my first problem. They had equipment, many with guaranteed low prices, but most had terrible descriptions, poor pictures and no guides or information on what worked together.

Then I came across Crutchfield, a well-respected audio/visual retailer with one of the most educational websites online. They have an entire research section of their website dedicated to educating customers on new equipment, DIY installs and more. As you can guess, their product listings feature in-depth descriptions, pictures and loads of review.

After going through numerous videos, guides and a few live chats, I had a much better idea about what I needed. And while I didn’t end up buying from them at that point in time (they didn’t have all the items I wanted), they made a huge impression on me. As a novice stereo guy, I’ll return there if I ever need anything in the future and will recommend their site to friends. Heck, I’m raving about them right now in this eBook!

So here’s the point to the story: By really understanding the problems their customers face — and by providing great resources to help solve these problems — Crutchfield is able to charge a premium. They’re currently selling a receiver for $494 that’s listed on Amazon for $405 — a $90 difference! Despite charging $90 more than Amazon, they’ll still be able to sell tons of these receivers.

Will there be people that utilize all of Crutchfield’s great online resources and then go order the product on Amazon for $90 less? Absolutely. But several people, many of whom may even know the product is cheaper elsewhere, will still order from Crutchfield.

By providing value to your customers and solving their problems, you’ll bank up a lot of goodwill. People WANT to repay those who helped them with an issue or problem. Apart from that, by offering tons of informative content, you establish yourself as an expert in the field — and people like buying from experts. Why? Because if something goes wrong, customers can get expert help from someone who knows the product. (Good luck getting Amazon to answer any questions when installing a new receiver you purchased from them!)

To be able to charge a premium for your product, you need to offer SOMETHING of value to your customers. Because everyone is often selling the same product, that something needs to be the expertise, clarity and product information you provide to your customers to help them make an informed decision.

Applying This to Picking a Niche

Since the ability to add value is so crucial to finding a profitable niche, it’s important to consider how easily we can do this. It will, for example, be much easier to add value selling stereo receivers than socks, although it’s possible to do so with both. To maximize the value we can add, we want to look for niches that:

Are Confusing: The more complicated a product is, the more room there is to educate your customers and answer any questions they have. When you remove the mystery from a product — and educate customers so they know your product will work exactly for their needs — they are MUCH more likely to buy, especially at a premium price. Examples of confusing niches might be home security equipment, commercial water purifier systems or home stereo equipment.

Require Multiple Components: Anytime a product requires the purchase of various components, customers (especially those new to the field) will have no idea if the components will be compatible with each other. If you can clearly let customers know which components work together and which don’t, you’ll be able to add a lot of value.

This works even for industries with universal compatibility, sometimes even more effectively if your competition doesn’t realize this is a confusion point. For example, unless a customer for underground sprinkler equipment researches the subject extensively, he likely doesn’t know that all sprinkler heads are universal and will fit all piping on the market. Telling him this up front and guaranteeing all equipment ordered from you is compatible will make him more likely to buy.

Require Complex Installations: Complex products that are usually installed by the purchaser are RIPE for adding value. Unless your customer base is full of DIY Tim Allen- style handymen, they’ll likely be intimidated by complicated installations. Offering an exclusive step-by-step illustrated installation guide (available only with purchase, of course) is an incredible way to add value and justify charging a premium.

We spent a lot of time on this one criterion, because it’s the most crucial one to get right. If you’re selling an existing product online, you can’t compete on price. You may get tons of orders, but you almost certainly won’t make much in profit. To charge a premium — and to get customers to pay it — you MUST offer something else of value to your customer. Premium pricing, a topic we’ll cover in the profitability section, is crucial to success and is rooted in providing value.

Criterion #2: Targeting the Right Type of Customers

All customers are NOT created equal. Being deliberate with the audience you’re selling to can make a huge difference. A few things you’ll want to think about when considering your target customers:

Passionate Hobbyists: It’s incredible how much people will do and/or spend on things they’re passionate about. Off- roaders can easily spend more than $50,000 customizing their vehicles. Fishermen will drop tens of thousands of dollars outfitting a new bass boat. As a seller, you’ll quickly learn that enthusiasts will invest an impressive amount of time and money in their hobbies.

If you can find a customer base that’s passionate about a hobby, and then offer products and value to those enthusiasts, you’ve got a great chance for success. You’ll likely have an upper hand marketing your business, as it’s easy to target hobbyists’ online hangouts and forums.

Those With a Problem: One of the first things I ever bought online was an eBook called “Desperate Buyers Only,” a guide on how to sell information products to “desperate” customers. While I decided not to follow that model, the premise is solid: If you can target customers who have a serious, pressing problem and offer a solution, you’ll be able to make money.

Disclosure: Selling to those with a “passion or problem” is a tactic I’ve heard mentioned by Sterling & Jay. This is a lesson drawn from my own experience, but wanted to credit them as well.

Business or Government Clients: Business and government customers can be some of the BEST customers you can find. They often order in larger quantities and, depending on the nature of your product, are much more likely to reorder on an ongoing basis.

Government and business clients are also IDEAL customers when it comes to a strong value/premium price model. Often, the individuals making the purchasing decisions aren’t paying for the items out of their own pockets, so they aren’t as price- sensitive. If you’re able to offer value in a way that makes it EASIEST for them to configure/purchase/install your product, they’ll be very likely to choose you over your cheaper competition.

Demographics (Sex, Age & Location): All three of these are important to consider and can have a dramatic impact on your business.

Sex: Men and women have very different online shopping habits, detailed by this great Infograph. Women make the majority of online transactions, but men are more comfortable making larger purchases online, spending 32% more on average per transaction. So, if you’re thinking of selling high-ticket items to a female market, you may want to reconsider.

Personally, I think eCommerce stores geared toward women are a huge opportunity right now. The majority of entrepreneurs are men, even more so online, and I believe they often overlook women-focused niche sites.

Age: Age is important to consider in terms of dollars spent and customer support issues. If you’re planning on selling jewelry to young adults, I have some bad news for you: The 18 to 24 age bracket spends the LEAST of any demographic online.

Alternatively, you don’t want a clientele that’s too old if you’re planning on running an efficient eCommerce business. One of the benefits of eCommerce is that it’s scalable; online ordering and well-designed automated systems can minimize the personal attention required for many common tasks. However, if you’re selling a product to an elderly customer who isn’t comfortable using his credit card online and will ONLY order via phone, it’s going to be much more expensive to provide support and to scale.

Location: This is a topic we’ll cover more in the “Demand” section, but it’s worth noting here. As we’ll need to ship our products to customers, it’s important that the majority of our customers are domestic. Though international shipping has become somewhat easier in recent years, it’s still MUCH more expensive and involved than domestic shipments, especially for larger items. Make sure there’s ample demand for your product within your own country. The best way to do this is to use Google Insights”.  

Google Insights shows you the geographic search volume for specific terms. Want to sell ‘crumpets’ online? You’d better be marketing to folks in South Africa, New Zealand and the UK.

Criterion #3: Picking the Right Types of Products

When it comes to selling products online, certain characteristics will increase your chances of success. Let’s discuss a few:

Sell Products with a $100 to $200 Price Point

Disclosure: My recommendation for a $100 to $200 price point comes from personal experience selling items at all prices. However, I want to acknowledge that Tim Ferriss recommended a similar pricing “sweet spot” in his book, “The 4-Hour Work Week” LONG before I did.  

I own eCommerce stores that sell everything from basic $5 cables to expensive $1,500 GPS-powered electronics. If I could pick my “perfect” price point for a product — all else being equal — it would be in the $100 to $200 range. There are many reasons why:

Scalability and Support: The $100 to $200 price range is large enough to make a reasonable profit per order (assuming your margins are good and you provide value) without having to provide extensive personal phone service. Most people won’t balk at placing an order for a $150 item over the internet. This helps you invest up front in high-quality content and mostly automate the ordering process online, allowing you to scale easily and without significant support and sale expenses.

When you get into higher price ranges, the number of people willing to order without speaking to a real person decreases, so you’d need to invest more in customer service.  You also need to offer significantly higher after-the-sale support for expensive items. The level of support expected for a $1,000 product will be significantly higher than what it would be for a $100 item.

Please don’t misunderstand me here; I’m not advocating providing poor post-sale support to save money. Quality customer support is CRITICAL to maintaining and growing a happy customer base, which is vital for online success. But while someone who spent $99 on an item might be satisfied with a quality online troubleshooting guide, the customer whose $800 product isn’t working properly will likely expect your company to bend over backwards to fix it — and will be disgruntled if he or she doesn’t get that level of support.

Sales Volume and Margins: In most cases, you’ll move significantly more $100 to $200 products than higher-priced items. As the price of an item goes up, the conversion rate often decreases, as people are more hesitant when it comes to large-ticket items. This isn’t always the case, but it’s what I’ve seen in my experience.

Now, this isn’t necessarily a bad thing IF you make up in profit what you lose in volume. However, as items increase in price, the profit margin on them typically decreases. While you may make 20% on a $150 coffee machine ($30 profit), the margin on a $1,000 coffee machine will likely be much lower, possibly in the 10% range ($100 profit).

This is especially true for items that can be drop shipped from wholesale warehouses. As the retailer/drop shipper doesn’t have to buy the item up front (the warehouse owns it), they simply look at the dollar value per sale, which significantly drives down the profit margin on higher-ticket items.

Also, the profit we indicated before is misleading, as it doesn’t take into account the proportionally higher expense of credit card fees on expensive items. If we assume a reasonable 2.5% credit card fee on every transaction we process, the cheaper coffee maker would incur a $3.75 fee, while the expensive item would cost $25 to process! When we factor in these fees, our profit is now $26.25 for the basic model and $75 for the expensive one, a profit difference of almost 3x. So, in order for this to make sense from a profit standpoint, we need to sell three times as many basic models as we do expensive models.

I’m not sure what type of circles you run in, but I personally don’t know many folks ready to drop $1,000 on a coffee maker! In a market like this, I would guess the base model would sell 1o times the quantity of the high-end model. So, our ACTUAL profits per items sold would look like:

10 basic units @ $26.25 profit = $262.50 profit

1 expensive unit @ $75 profit = $75.00 profit

Difference in profit: $187.50, or 150%

Now, I need to emphasize that this is NOT a real example. I didn’t do research on this market and don’t sell any coffee makers online. I also don’t factor in the increased marginal cost in processing 10 orders versus one, and I leave out the very real possibility that a coffee shop can sell both models! There are all sorts of technical holes I’m sure you can point out.

This wasn’t intended to be a 100% accurate case study. I simply wanted to use this as an example, to walk through some rough numbers on why it’s harder to sell really expensive items and make money. Again, I’ve done both and recommend sticking to items in the $100 to $200 range. It’s usually easier to make money.

As with all things in life, there are a few exceptions. There are a few instances when it MAY make sense or be viable to sell items at a higher price point. They are:

If the manufacturer maintains strict pricing: Manufacturers understand how margin erosion can affect retailers and some will maintain strict Minimum Retail Prices (MRP), effectively creating a floor on how low prices can go. If they’re effective at enforcing this pricing policy (by cutting off retailers that break it), it’s possible to sell higher-priced items with healthy margins and possibly make up for the reduction in volume with reasonable profit levels.

If you have a unique price advantage: The advantage that most readily comes to mind is not having to charge sales tax. If you’re selling big-ticket items, and most of your competition are major retailers, you may be able to use the current tax laws to your advantage.

Currently, the only time an online retailer has to charge sales tax is if your customer is in the same state as you. If most of your competitors are large brick-and-mortar stores that are also online — and have stores in many states — they will likely be required to charge sales tax on many customers.

An 8% sales tax is a nuisance when you’re paying for dinner. It becomes a major, potentially decision-making cost when you’re selling a $1,500 item, as it represents a $120 difference in cost to the customer!

Sales tax is a sticky issue, and it’s not something you want to build your business around. Laws change, and the sales tax holiday many online retailers have been enjoying is under close scrutiny by lawmakers. And if you’re depending solely on your tax-advantage status, you’re likely offering little value to your customer other than price, which we’ve discussed is a dangerous model. While I wouldn’t build a business around it, it’s something to thing to keep in mind if you venture into higher-priced goods.

Marketing & Customer Numbers: Apart from adding value, the ability to market your eCommerce site is the most crucial factor in determining success. And one of the best marketing strategies available, especially online, is a sterling reputation.

There’s no marketing tool as effective as a loyal, happy — and vocal — customer base. Word-of-mouth referrals are the most powerful form of marketing. Think about it: How much more likely are you to try a product and/or business if a trusted friend recommends it? In today’s world of hyper-connectivity and social media, a happy customer base is powerful.

But if you’re selling really expensive items, you’ll likely have few sales. Fewer sales means fewer customer interactions, which results in fewer recommendations and brand fans.

Fewer customer interactions, especially early on, mean it will take longer to REALLY get to know your market and the problems/issues your customers face, and thus longer to reposition your business and products to best serve your niche. Fewer customers and orders also dampen your motivation. Regardless of the financial impact, I GUARANTEE that 10 orders for $100 is more motivational than one order for $1,000. In the early days, staying motivated can be a huge issue, and steady order volume can be amazingly helpful.

With a lower-priced product, you’ll have more customers, which translates to more fans (if you do things right!), more repeat customers, more recommendations, more niche insights and more motivational orders.

Content Creation: Generating unique, customer-created content is also much easier with a large customer base. Generating customer product reviews is one of the pillars of creating a value-packed, information-rich website. With fewer customers, it’s much more difficult to generate a significant number of reviews.

Testimonials are also important, especially for new businesses that are trying to gain trust and build a reputation. By now, I think you know where I’m going with this: fewer customers, fewer testimonials. If you do sell high-end products, you’d better get some incredible “You changed my life!” testimonials to make up for the difficulty in getting a decent number of them.

Sell Products That Require a LOT of Accessories

It’s a common misconception that retailers make piles of money off expensive items. They don’t. If you go to Best Buy and purchase a $600 television, they’re likely making 10% (probably less) on the item, and this is before they pay 2.5% to process your Visa payment. Large-ticket items, especially electronics, tend to have much smaller margins.

Accessories, on the other hand, enjoy HUGE markups. Say you need to buy a new HDMI cable to go with that massive flatscreen you just bought, which you’d likely pay $30 for in store. You’re probably not even thinking about the cost of the cable; what’s another $30 on top of the $600 you just spent? Well, think again. That cable likely cost Best Buy $5, which translates into a 500% markup.

With just two or three cable sales, Best Buy likely makes JUST as much money as they do on a $600 big-screen sale! How crazy is that! And I guarantee they move a lot more cables than big-ticket TVs.

So, your two choices are:

  • Big-Ticket Items: 10% profit margins
  • Accessories: 100% to 1,000% profit margins

Can you see the advantage of having an accessory-heavy sales approach with your niche?

People tend to be price-sensitive the more expensive an item is but rarely focus on the markup. Let’s take the $600 TV from Best Buy. Many people in the market for a new TV, especially if they know the model the want, will spend HOURS searching for the store with the lowest price on the item. They reason,

“This is a BIG purchase, and I want to save as much money as possible! I’m going to do my research.”

They ultimately pick the retailer with the lowest price on the primary item they’re looking for. But what percentage of people do you think compare prices on accessories they’ll need for it — the HDMI cables, wall mount, etc.? Not many. Most will simply buy these items where they buy the big-ticket item. Comparison shopping for four to five accessories and determining the lowest price for the bundle is much more of a hassle than simply looking for the single price of the main item. So most consumers don’t bother.

And this is why selling products that require lots of accessories is so attractive. Customers are much less price- sensitive when it comes to a large number of lower-priced accessories, which enables you to easily charge a premium on these, especially if you’re offering value in other ways, too.  Selling accessory-rich items not only allows you to sell items with higher margins, but will likely increase the number of items you’ll be able to sell per order, too, further increasing your profit.

Accessory-rich niches are a GREAT way to make money. Combined with a high-value website, they can be a key strategic element in building a profitable eCommerce site.

Sell Products With Low Turnover

We’ve already discussed how adding value to your products is crucial for a successful eCommerce site, which involves product listings with detailed descriptions, reviews and great pictures. This all takes time, but it’s a great long-term investment … unless 50% of your products are discontinued or replaced each year. If this happens, you’ll barely have time to get a new product up on your site and marketed before it’s no longer available for sale!

When looking for a niche market, we want to pick a product line that’s fairly consistent and stable from year to year. ALL markets will have models discontinued and introduced every year, but we want this number to be fairly low, so we can invest time in creating great product listings that we know will be useful for years to come.

Sell Products From Quality Manufacturers

This can be tricky, especially when you know nothing about a market, but you want to pick a niche that has at least one (preferably more) well-known manufacturer with excellent, quality products. Well-known manufactures usually create or have:

  • Great websites with lots of product specs and pictures
  • A respected brand that will help drive sales
  • Longer product warranties and reps that can help answer questions, both for you and your customers
  • A higher likelihood of enforcing minimum retail pricing, which will preserve margins and make it easier to charge a premium
  • Proof that the market is large enough to justify a major manufacturer

If you’re seriously considering a market, do some digging on the manufacturers behind the products. Check out their websites. Chat with sales reps at other retailers and wholesalers to get an idea of what brands are most respected. Hopefully you’ll be able to identify a few major players in the space.

If you have problems finding major players, or if you come across lots of small players with really poor websites, be wary. There’s likely less of a market than you think, and it would be harder to learn about/market/add value to the products you’d be selling.

Sell Small Products

All things equal, I’d much rather sell small physical products than large ones due to all the shipping costs involved. Smaller products cost less to ship, so it’s easier to offer free shipping to your customers, and it reduces the cost for returns.

If/when you decide to move from a drop-shipping model to purchasing your own goods, it’s cheaper to do so with smaller items for two reasons: It costs less to ship items to your fulfillment house, and you pay lower storage fees.

Finally, small items allow you to offer expedited delivery much more easily. Selling watches or necklaces? Overnight delivery is a bit more, but not prohibitively expensive for your customers. But if you’re selling 8-foot rowing paddles, your customers are going to be shocked when they realize it’s $140 to get them overnighted.

Sell Something That’s Hard to Find Locally

If you needed to buy candles for a special evening with your significant other, where would you go? Serious romantics might head to Bed, Bath & Beyond or a Hallmark store. The more pragmatic and cost-minded folks (myself included) might be more inclined to simply visit Wal-Mart.

But say you wanted to buy a medieval sword replica or a home brewing kit. Your local big-box stores likely won’t stock those. And while you might be lucky and have a speciality medieval or home brew shop in your community, chances are just as good you don’t. So where would you turn next? Probably the internet.

Picking a niche product that’s difficult to find locally will increase your chances of success online, but you have to walk a fairly fine line. Ideally, we want a niche with enough demand to bring in customers and support a profitable eCommerce business, but that’s specialized enough that its products aren’t widely sold in most local communities.

Tricky, isn’t it? It can be a tough balance to find, but once you do, it’s a real sweet spot in the market. We’ll discuss how to measure demand in a future section, but for now simply keep the “Difficult to Find Locally” criterion in mind.

Sell Something That You’re Interested In

If you can find a niche that meets most of the other criteria AND you’re excited about the niche, that’s fantastic. But of all the criteria for picking a profitable niche, I think this is the least important. In fact, I almost didn’t put it in here. People often repeat the cliché:

“Just follow your passion and you’ll be successful!”

Unfortunately, there are thousands of liberal art and philosophy majors who will attest that this isn’t always the case. Is passion important? Absolutely. Is it highly correlated with success? Definitely. But in terms of picking a profitable eCommerce niche, personal “passion” is a poor way to make a decision. Mark Cuban, the colorful businessman and owner of the Dallas Mavericks, has a great post on this where he says:

“‘Follow Your Passion’ is easily the worst advice you could ever give or get … [I]f you have been able to have some success, what was the key to the success? Was it the passion or the effort you put in? …

Let me make this as clear as possible:

  1. When you work hard at something you become good at it.
  2. When you become good at doing something, you will enjoy it more.
  3. When you enjoy doing something, there is a very good chance you will become passionate or more passionate about it.”

- Mark Cuban

When I started TrollingMotors.net, I had zero interest in trolling motors. I had never used one in my life! But a funny thing happened as I grew the business, sold motors and got to know my customers. I became really interested!

Driving down the highway, I’d see a trailered boat with a trolling motor and think, “Wow! That’s a Minn Kota Fortrex!” On the phone with customers, I’d curiously ask what they thought of the new motor they purchased and how much run- time they got out of their previous motor.

Slowly, I became passionate about trolling motors and the people who used them. And the larger the business grew, the more passionate I became. Ask yourself this question: Given two options, would you rather own:

  • A business based on [insert your passion here] that only made $300 a month?

- OR -

  • A water purifier business that made enough to support you full-time and allowed you to live anywhere in the world?

When you’re successful at something, you naturally become passionate about it. It’s how life works. I don’t care if it’s water purifiers or cow manure; if it brings you success, I PROMISE you’ll learn to become passionate about it at some level.

The goal is to pick a niche with a high probability of success online and pour a ton of time and effort into that. You don’t need to be passionate about the product at the beginning, but you MUST be passionate about the process and the outcome. You DO need to be passionate about growing your business. And by the end, you’ll almost certainly be passionate about both the business and the product you’re selling.

That being said, if you can find a niche that not only meets most of the criteria we discussed AND is something you’re passionate about, by all means jump at it! It will make the early days of work easier, as you already have an interest in the niche. You will be able to add more value as you likely have a fair amount of knowledge in the field. And you’ll have a leg up with marketing because, as an enthusiast yourself, you know what problems your customers have and what’s important to them. You may even belong to their organizations or clubs.

But if you’re like most of us who can’t find a profitable niche that we’re also passionate about, fear not. You’re in good company. Don’t worry — you’ll be passionate about it before you know it!

Sell a Disposable or Consumable Product

Nothing is sweeter than repeat customers. Once a customer has ordered from you, he or she is significantly more likely to order from you again, assuming you did a great job. If you can combine happy customers with a product that’s disposable and/or consumable, you’ve got a recipe for a great recurring income stream.

I’m a fairly tall guy but have always been pretty lean. This spring I decided to make it a priority to build some muscle mass. Part of my plan was changing my diet, which included incorporating protein shakes into my daily routine.

Off I went to Amazon to sort through the dozens of protein powders available. As I searched, I noticed something interesting: Amazon offered a discount on many of the products IF I’d agree to receive them on a regular basis, say every month. They knew I’d be needing more protein powder in the future and wanted to increase the chance I’d purchase it from them. Dangling a discount to entice me to order on a regular schedule was brilliant.

Amazon recognizes the value in recurring revenue from people who buy disposable or consumable items. You should, too. Finding a product that needs replacing on a regular basis is a great way to rapidly grow a business and revenue.

An Important Disclaimer

We covered a LOT of important information in this post! Keeping these criteria in mind will significantly increase the chances that the niche you choose can help you build a viable eCommerce site. However, it’s important to keep the following in mind:

“There are no perfect niches. They don’t exist.

We discussed the various facets of a good niche, all of which are important. But let me warn you now: You’ll never find a niche that fulfills them all. If you try, you’ll spend 18 months researching ideas, go crazy with indecision and never actually start a business. Keep this in mind and you’ll be in much better shape when it comes time to filter your ideas against our criteria. We want a niche that meets as many of our criteria as possible, while understanding that we’ll never find one that fits them all.

The ‘Profitable eCommerce’ eBook

Profitable eCommerce eBookPicking a niche with the right mix of attributes is only one piece of the puzzle. To be successful, you need to have ample customer demand, great suppliers and a marketplace that’s not overly crowded. These topics are discussed in detail in my eBook, “Profitable eCommerce,” from which this post was taken. The eBook also covers:

  • A 24-step worksheet for estimating niche profitability
  • The importance of great drop shipping suppliers – and where to look for them
  • Why higher search volume in a niche isn’t always better
  • The niche “sweet spot” that offers the best work-to-profitability ratio

Interested? Request your copy of “Profitable eCommerce” using the form at the end of this post or download it here. You’ll receive it immediately via email.

What Do You Think?

Did I miss any critical niche attributes? Had a chance to read the eBook? Or simply have a question? Let me know in the comments section below!

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Create Commons Photo Credits: Accessories by Jacky W, Medieval Sword by One Lucky Guy.

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Comments

  1. Eva says:

    All I can say is that this eBook has HIGH VALUE content! :) Andrew shares everything with you! He has no secrets! The eBook provides you with a step-by-step guide and it shows you exactly what you should do and not do so you will have success in building your own eCommerce site.

    I found out about Internet Marketing in May 2009 since then I both about 50 courses on any subject you want…PPC…CPA…Facebook…Ebay….Adsense…twitter…amazon…Etc…. So I learn a LOT!!!! I wont say that I didn’t take action at all…I did! I lost money doing Facebook ads and PPC. I also spent money on “Simple push button’s” system’s! I just wonder why Andrew didn’t write this eBook back in 2009?! (just kidding!)

    This eBook has GREAT GREAT information!!!! I highly recommend that you download this eBook even if you aren’t new to the IM world (if you are new! then you are lucky you found this eBook!). I learned from it new things. What I also LIKE about this book is that he isn’t trying to sell you anything! And if he has a link in the book then he lets you know that he is affiliated to that link!

    Really! Don’t think twice and download this eBook right now!!!! Before Andrew will charge money for it. I think that this eBook is worth at least $50 if not much much more! I just wanted to thank Andrew for his time and effort writing this great eBook! Thank you for the tips and tricks! :)

    Andrew, Good Luck with your new blog!

  2. Jay says:

    I really enjoyed reading this book. There is a lot of good information, pre-starting your eCommerce site. I think the hardest part about starting a drop shipping business is picking a niche. I really liked the Mark Cuban quote. It’s refreshing knowing that you don’t have to be an expert or necessarily have a passion in order to start selling a product.

    I’m looking forward to your future books (hopefully). Maybe covering topics like eCommerce software and other methods of driving traffic to your store. I just recently started my drop shipping website and am struggling with making a sale. I’ve had sales through Amazon, but no sales direct from my website. Don’t suppose you have any insight on how to market an eCommerce website.

    • Andrew says:

      Thanks for the comment Jay! Marketing an eCommerce site can be a challenge, but it’s crucial to success. I do have a lot of experience marketing, and am planning a LOT of blog content in the future on this topic, so stay tuned.

      Best of luck with your new site!

  3. Suzanna says:

    Hi Andrew,

    Your eBook is impressive. Great quality content, packed with useful resources and techniques, professional presentation, and to top it all off you give it away for free! Thanks for all the time and effort you have taken to create it. I’ve learned a lot from it and am increasingly inspired to take the next step in my online venture plans.

    I know the subject here is focused around finding eCommerce niche, but I’m so impressed with the way you’ve put together your eBook that I have to ask… do you have any resources or references you may share around how to put together great information products?

    • Andrew says:

      Thanks Suzanna! Unfortunately, the eBook is/was my first information product so I don’t have too many secrets to share. I’d focus on creating a quality product, sharing valuable information and packaging it well. I used Apple’s eBook Author to create my eBook and recommend it if you’ll be creating an eBook / PDF.

  4. Andrew says:

    How do you deal with drop shipping to your customer in another country? The drop shipper needs to mark your price on the customs invoice and your customer ends up seeing it.

    • Andrew says:

      Often drop shipping internationally doesn’t make sense as it can get too complicated and expensive, especially for larger items. But for niches where I do drop ship internationally, my drop shipping suppliers take care of all the shipping and logistics and pass the shipping costs on to me. In terms of pricing, they can simply put the price I charged the customer on the customs documentation as they see the final receipt with my retail pricing.

      Hope this helps!

      • Andrew says:

        Thanks Andrew, that does help. My clients are k-12 schools, do you have any ideas on how to promote a webstore to these types of clients? Have you ever used direct mail to advertise a webstore? When google charges $1 a click, a postcard does not seeem too expensive.

        • McLovin says:

          Try reaching out to your local post office (USPS – assuming you’re located in the U.S.) for pricing on demographic/geographic-specific mailers. As a self-employed carpenter and sub-contractor, I use this for higher-end subdivisions in particular, where spending money on remodels is more of a bragging-rights thing. Point being: it’s cheaper than you think, and surprisingly accurate & effective, in my experience.
          Otherwise, have you cosidered joining the school board, city council, or PTA? Or any other such organization? Might expand your network or gain you access to names/addresses not available thru USPS…

  5. Dennis Sullivan says:

    Hi Andrew,
    I just finished your book and want to thank you for really getting to the brass tacks needed to build a quality ecommerce site. Your insights show you’re speaking from experience, demonstrating exactly what you talk about in the book – i.e., adding significant value. Thank you so much.

    I also really enjoyed your interview with Dave Huckaby. Well done.
    Dennis

  6. Ranganathan says:

    Hi Andrew,
    Thanks for the wonderful post which gives a very clear approach to the entire field of niche markets. I really enjoyed your approach about value addition to enhance your reputation. I totally agree with you that the best way to establish in a niche is to be able to understand the needs of that particular niche crowd. I have just glanced through your first few paragraphs and I was so impressed that I couldn’t resist rushing to the comment section to record my appreciation. Great post and I am sure that I will enjoy reading your e-book.
    Thanks and Best wishes!

  7. David says:

    Hey Andrew,

    When it comes to sizing up potential competition, does it make you wary when you see manufacturers’ sites high up in the results? Also, do you assume you’ve got pretty good chances at ranking when you see shoddy-looking info sites in the number-one spots?

    I’m asking because I’ve found a niche where there seems to be zero competition from other small resellers, and a dumpy-looking but informative site is number one or two on some of the highest-traffic, most Adwords-competitive keywords. That site has tons of info and PR 3 or 4 on most of its pages, but it’s horribly designed and apparently hasn’t been updated in over two years. I’m certain I could provide better and more organized content (it’s a niche I know and love), but I’m just nervous about trying to compete with manufacturers’ websites (and for some keywords, Amazon and Walmart). If it makes any difference, most of the manufacturer pages that appear in the top spots are not homepages, and those companies are focused on a broader niche.

    Thanks,

    David

    • Andrew says:

      Great questions, and I’m sorry about the late reply! In most cases, I wouldn’t worry about high-ranking manufacturer sites. While not impossible, it’s really difficult to outrank manufacturers for their own products so this shouldn’t discourage you. Now if the manufacturer also sell their products directly to customers, then that is a bit more concerning. But most won’t, so you likely don’t have to worry.

      In terms of the poorly designed site you mentioned, that sounds like a great opportunity to create something better and more organized. I’d make sure to check that site’s backlink profile to see how many links you’ll need to compete – but it could definitely be worthwhile.

      Good luck!

  8. devin says:

    Aloha Justin,

    Thank you for making this information so easily available. Just downloaded the book and really excited to get down and dirty with it. I have been following ecommercefuel for a couple months now since a friend sent over the link to your ama you did on reddit a while back. As you had mentioned, marketing is killer and is now our team’s number one problem.

    Hoping to implement and get some results quick. Will definitely report back to see what works and what doesnt for us. Any forums you planning on organizing for the site?

    Devin
    Honolulu, HI

    • Andrew says:

      Thanks for the comment, Devin, and I’m sorry about the late reply. And you’re very welcome about the eBook.

      I DO have some plans for forums for the community as there are a lot of smart, active people who I’ve been connecting with via the blog, as well as in the comments. I want to make sure I create a great, valuable community, so I’m taking the time to do it right. But stay tuned – you’ll be hearing more about this in the Spring of next year.

  9. ed says:

    Hi Andrew…

    Just downloaded your ebook – I am at a cross road in my life and wondering about ecommerce which I keep going back and forth with.

    What I like about ecommerce is that it can be set to be run on auto pilot and outsource alot of the work and possibly everything. I am not sure yet but I think it can be a hands free business at some point if done right … Do you agree or disagree. I am up in age and truly want time freedom and financial freedom, I do not wish to become a slave to a business since it will consume me and not allow me to go and come as I please. Hopefully a ecommerce store front will help me achieve my dream.

    Thanks for the free ebook and the information you are providing there, can’t wait to get through it and will get back to you after I read it. It seems to hit on things I was looking for thank you !

    • Andrew says:

      Ed – Glad you enjoyed the eBook!

      I think eCommerce has the potential to be a “hands-free” business for stretches that offers flexibility and freedom, but in order to get there it takes a significant amount of investment and work. It’s something you really need to pour your heart into developing – at least for a few years – before you have the possibility for it to simply be something you don’t need to work on on a daily basis. So if you’re excited about the idea of eCommerce, think you’ll enjoy building the business and like the opportunity it provides, it could work well. But it’s not an “easy” way to make money – at least not until you invested heavily into your business for a few years.

      Hope this helps!

  10. Jeffrey says:

    Excellent eBook on eCommerce even better then some of the Kindle Books I purchased. I appreciate that there is no hype around how to become rich in one day. :) Some additional resource that I would like to see in the future version of you handy eBook.

    1. Some basic guidelines or recommendations on legal aspects in doing drop shipping and how to look at this in you local country or region.

    2. Recommended or guidelines on specific eCommerce Tools to setup your online store.

  11. P. Andrews says:

    Very insightful book, Andrew! Thank you! Lot’s of real world insight shared that comes from being in the trenches. I had two (hopefully, very quick) follow-up questions:

    [1] In your trolling motors site, I noticed that searches for your PRIMARY Keyword (‘trolling motors), which gets about 6600 local monthly searches (almost within your 3000-6000 guideline) , ranks you in Page 2 of Google (Page 1, dominated by big-box retailers such as Amazon, Dicks Sports Goods, Academy….and so on.) For long tail variations, such as ‘fishing trolling motor,’ ‘transform mount trolling motor,’ and so on, your site is ranked on Page 1, but the search volumes for those keywords are kinda low – between 22 and 30 local monthly exact searches. —> Question: For a newbie, will a new niche with numbers like your site (for example, hunting rifles) , with all hope on long tail keywords that you could rank for, and a 3-4 year wait to rank for the PRIMARY keyword, make sense?

    [2] I compared a product on Amazon and on your site. On Amazon, it was about $30 cheaper with free shipping. Your site has more pictures for the product + an embedded video for the product + software to compare many products – stuff that Amazon does not provide – definitely, a better shopping experience. Amazon, however had the product variety that you had—> Question: Based on your experience with your customers, are they coming to your site solely for the shopping experience (i.e., the ‘Crutchfield’ experience) or do you have some other ‘secret sauce’ that cause customers to flock your site versus Amazon or any other.

    ….Once again, terrific ebook – I thoroughly enjoyed it!!!

    • Andrew says:

      1) I think taking a long-tail strategy from the outset with a long-term goal go rank for the primary keyword down the road is a GREAT strategy. You’ll be able to rank for the long tail keywords much more quickly and – over time – the authority you build on your site will naturally help you rank for your primary keywords assuming your homepage and internal link structure is optimized for those keywords.

      2) Primarily for the better shopping experience and expertise we can offer. We can answer questions about trolling motors that Amazon can’t, as well as help customers select the right boat for them. While some will use our site and then go and purchase from Amazon, others will appreciate dealing with experts and reward us with the purchase. You can’t win them all, but you’ll definitely get some customers by offering a high-quality shopping experience.

      Hope this helps!

  12. Anon says:

    Umm, you lifted these from shopify’s blog……

    • Andrew says:

      Umm, actually this article was written first and was used as the foundation for the Shopify blog post – which I also wrote. :-)

  13. I stumbled upon Andrew’s article on Shopify’s blog after search the term “what is drop shipping” in Google. I was immediately attracted to the topic and certainly more keen to find out more after I had read Andrew’s blog post, so I clicked on the link to eCommerceFuel.com, and arrived at this website. I read a few more articles and was then contemplating weather or not to optin for Andrew’s free eBook.

    Eventually, I just decided to optin out of pure curiosity thinking in my mind that this is just another “guru” bait strategy, and I would unsubscribe after downloading the eBook; call me cheap lol… I don’t mind, I have had my fare share of being on many Internet Marketing Gurus’ email lists and being bombarded with promotion after promotion, so I was just preparing to save myself the hassle.

    Anyways, after going through just the first two parts of Andrew’s eBook I was totally blown away to realize that I was actually reading an eBook that was extremely well documented, easy to understand and unbiased. I was totally shocked that this eBook was not just another IM “guru’s” B#S# method of getting me to buy a ton of his “get rich” techniques information products. Andrew actually provided honest, high quality information which helps give you a realistic outlook at this business, and that truly impressed me. I immediately came back to this website looking for the “Buy Now” link, honestly… only to find on his contact page that Andrew is not offering paid consulting engagements at this time; but I jumped at the opportunity to stand a chance for the free one-on-one consulting still hoping that it will be me :D haha…

    Well, if you have not yet downloaded Andrew’s eBook you’re missing some great info. Get on it right away.

    Andrew, thank you for the valuable information and resources.

    Kind regards to all.
    Riyaz

    • Andrew says:

      Wow, Riyaz, thanks for such a detailed and glowing endorsement – very much appreciated! Very glad to hear that my eBook rose above the general “guru” tactics you were expecting. I might have to put your entire comment on the opt-in / download page to help convince others it’s worth their while.

      Thanks for reading and best of luck!

      • Riyaz Rangrage says:

        Andrew, please feel free to do so, I only stated what was my honest opinion and I am sure many others would share the same sentiments after reading through your eBook and the articles you have here.

        Kind Regards
        Riyaz

  14. Adam Murtaza says:

    Just finished your ebook, excellent place to start especially for a beginner like myself. looking forward to reading your next e book & im a follower on twitter, your website & facebook. Keep up the great work !

  15. Ryan Cruz says:

    Loved the ebook Andrew! And shared it across my social networks. Though I have some few questions, as I’d like to start my own ecommerce site.

    What did you do initially when you first started out? Did you dropshipped products for Trolling motors?

    I’ve done digital sites, and blogs, but never dealt with my own ecommerce sites. I have a niche in mind, but I don’t know where I could get products to sell to US and CA market.

    Thanks!

  16. OutBooster says:

    Andrew, we could nearly credit you solely when our business goes live and succeeds! We aced the matrix in the book for a viable product and offering a needed solution.

    OutBooster is designed to help rural and remote intenet users with a stronger signal, helps users also due to weak signals and overcrowded internet pipes. We’re providing the only solution to the market that is patent pending. With just one question from your checklist outstanding, I may drop you a simple 20 word email to pick your brain!

    One last thing that would have been great to see in the book is the coverage of crowdfunding sites like Kickstarter or Indiegogo for testing product ideas. Something we are trying to decide on right now, so maybe others are too when the ecommerce product will actually be an invention.

    Thank you again! Great information!

    • Andrew says:

      Sounds like a good idea! There are few things to drive me as crazy as poor slow internet and bad online connections. (Can you tell I’ve had a rough life?)

      Good suggestion on the crowd funding addition. If I ever get any experience with the platforms, I’ll make sure to detail it in my next version of the book.

      Best of luck and thanks for reading!

  17. Ryan Bradley says:

    This is truly an unbelievable resource. The tips on here are priceless.

  18. Michael Malone says:

    A lot of this content is lifted from “start up bros”

    • Andrew says:

      Hi Michael,

      If any of this content appears on other sites then one of two things happened:

      1) It was lifted from eCommerceFuel.com. I write everything on this site, and I can guarantee it’s completely original.

      2) If the content is similar but not blatantly copied, then we’re likely just talking about similar strategies and/or tactics. I definitely don’t claim to have a monopoly on business advice online. :-)

      Care to share the page(s) in question? I’d love to see them.

  19. Jen Cooley says:

    I am new to creating my website and now due to your books I’m interested in starting an eCommerce site. These ebooks you have are very helpful for the beginner and now I finally know how to get started with finding my niche. Thank you!

    Jen

  20. Sean says:

    Hey Andrew,
    Just finished your ebook. If it was a print version it would be dog-eared, underlined, highlighted and generally well used. I got so much value from it I am surprised you are giving it away for free!
    Thank you so much for putting so much excellent info into a freebee. I am currently in the middle of a someone else’s course having discovered your website (a little too late) through your interview with Terry Lin. However, I have shared your ebook with my network and I have become a subscriber. Will definitely let you know of my progress over the coming months.
    Cheers.

  21. Ummar says:

    Thanks for the info. Glad I came across this page.

  22. Iris says:

    This ebook definitely made me consider many factors that has never crossed my mind.
    Extremely valuable especially for beginners like myself.
    Succinct and engaging, thank you for deciphering the e jungle!

  23. Eleni says:

    Hi Andrew,

    I just wanted to say thank you for sharing your knowledge and experiences – I have definitely learned a lot from you. I downloaded a copy of your ebook and finished reading it already, and I’m glad I did. :)

    I just had a question… Do you dropship in wholesale quantities or single pieces? I know you recommended WorldWideBrands as a good directory, but I’m not sure if they list wholesalers that are willing to dropship in single pieces, or only in wholesale quantities (e.g., 2-3 pcs per pack)? I’ve done some research online in Google and there are not many wholesalers who are willing to dropship single pieces… I do understand that it involves a lot of work for just 1 item.

    Please advise… Thanks so much!

    • Andrew says:

      Hey Eleni!

      We drop ship almost all single pieces to end consumers, and most wholesalers who claim to “drop ship” should do this for you as well. Otherwise, they’er really just a wholesaler and not a drop shipper.

      • Eleni says:

        Hi again Andrew,

        Thanks so much for your quick response. :) If that is the case, then World Wide Brands is definitely something worth considering. I’ll be sure to make a purchase via your affiliate link – you deserve the commission. Thank you again for giving back to the community, it’s great to know you online.

        Take care and have a good one. :)

  24. Wayne Behar says:

    The least I can do is to give a written “Thank You” to Andrew for writing the great E-Commerce Book I downloaded off of his site. It is very well written in that it breaks down the steps and strategies needed to be taken and in what order. Being an old-school student, I kept notes on a separate document as I read. However, his book is so well organized, it really isn’t necessary. It is too easy just to go back to his book and reread the information you need for whatever you are currently working on.

    Thanks again, Andrew.

    Regards,
    Wayne Behar

  25. Crystal says:

    Hello Andrew! You are indeed an inspiration to other aspiring ecomm entrepreneurs. I don’t know you personally but I love the heart you have to share your knowledge and wisdom and to remain humble above it all. Truly a blessing. Also, you’re a terrific writer. Just thought I’d throw that in.

    I’m in the process of setting up an online store and came across your blog while doing some research. Your knowledge is so valuable. Speaking of value, I wanted to know in a nut shell, what would you suggest I do to provide value to my potential customers? My niche is home decor products and I will also carry a variety of travel/tote bags. I know you mentioned good product listings, photos and reviews. Beyond that, is there anything else I can consider to provide value to consumers shopping on the site? Or am I doing well with just my quality presentation?

    Thank you and keep up the good work! God bless!

  26. Radames Torres says:

    Andrew. I want to thank you for sharing your ideas in a business model approach. I’ve had drop shipping on my mind for years and failed one time miserably because I just had no idea where to start especially since I did not want to waste my time and efforts in something that I had no clue how to do. You ebook has given me the confidence to give it another go! Thanks!

  27. Nguyen Nhu Y says:

    The eBook inspires me very much with concise and practical content. Thank you for your contribution to the world of wisdom and honesty!

  28. Casey says:

    Hey Andrew,

    Great post on slimming down the options when looking for a niche. I really appreciate the in depth look at margins before jumping into a specific niche, because I think it’s something that doesn’t get much attention until too much time has already been put in. I also appreciate the breakdown of margins, with taxes, credit card fees and whatnot in mind. I didn’t think about how living in a more populated state would cause you to having lower margins. That sort of information might make someone want to move to Montana… :P

    And as someone who graduated with a philosophy degree, I have to say that following this passion has not been a waste! I approach everything with a grander picture, including what I would like to put my energy towards. Seeing things most people take for granted and questioning it naturally has led me into a big interest in entrepreneurship, particularly e-commerce.

    Thanks for the read and the great e-book. Also, nice reference to Tim, The Toolman, Taylor. It was a damn good show.

  29. Mike says:

    You wrote “When you’re successful at something, you naturally become passionate about it.” which is HUGE in this game. I found myself selling spa covers four years ago. Pretty random, and I have never owned a hot tub. But once you get a few steady sales, start embedding yourself in the process of managing, monitoring, and improving the site, and so on it becomes a ritual. It’s important to recognize what you said because while some people look for the passionate factor as their number one reason for starting a business, they might be limiting themselves in other ways. Like money..

  30. Julie says:

    Whilst just starting out on my great new online business adventure I have been fortunate to ‘happen’ upon this little treasure of an ebook – wow – the information contained has I’m sure saved me months if not years of effort, money and most importantly time! The information is focused and the web sites mentioned are great resource bonuses. Andrew makes easy reading of information with a sense of humour. I will definetly be looking out for and following more of his blogs and books. Thank you Andrew.

  31. Danny says:

    Great ebook Andrew. I’m highly considering getting into the ecommerce business. I feel like I have a better knowledge of the process and how to execute. Thank you and congratulations on your success.

    -Danny-

  32. Rakesh Kumar says:

    Hi Andrew,
    I’m a newbie to the e-commerce business even though I have spent more than 10 years in retail. You e-book was superb in the way it has demystified e-commerce and opened completely new perspectives which were erstwhile missing in my plan. India is just at the cusp of e-tail revolution and it is there that I wish to make an impact. I plan to start using the marketplaces followed by my own website to build a brand. Still to come up with a niche but the path looks clearer, if not simpler after reading this book.
    Besides the content, I sincerely appreciate your intent to share this book and telling us everything that you know. It inspires me to pass it on to people who need this. Thanks again.
    Rakesh

  33. Suzette Arredondo says:

    All I can say is “wow” this was by far some of the best information I have read in a long time. and free no less. You cover every angle and gave great examples. Now the real test is to see if I can pull this off. I have paid for information that was less informative than this and two years later im still reading, but I think im ready now. wish me luck

  34. Tejaswi says:

    Brilliant post! I can vouch for the importance of making products which can support LOT of Accessories. We work with some amazing Shopify stores and have seen the most successful ones rely on that. It lets you build an ecosystem around a central product and your customers will stick to you to build that.

    Also, one point that is missing maybe is the importance of staying ahead of the pack and identifying a trend before it hits. Case in point ‘Juno Power’. Though at the core they are manufacturers of batteries for mobile devices, they have been successful in riding tech trends time and again.

    For example, when the Iphone 5 was launched, they manufactured and launched a sturdy and amazingly designed iphone cable which didn’t tear off like the normal ones. They sold out within days! Buyers when they landed on the site to purchase came across their batteries and bought them too. Another of their launch went viral similarly as CNET and Mashable highlighted one of their portable car jump starting gadgets.

    If interested, do read his insights and best practices for your ecommerce store in this blog: http://bit.ly/1zlCuhn

Trackbacks

  1. […] like Michael Porter and W. Chan Kim to entrepreneurs like Rob Walling and ecom gurus like Andrew Youderian and Dan and […]

  2. […] I want to explain how I chose my niche when I started my dropshipping business selling ergonomic office chairs in Germany. It wasn’t a straight forward process but the more I got educated in this topic the more I understood the anatomy of a great niche. […]

  3. […] Picking a profitable niche isn’t easy and requires you to consider numerous factors. These guidelines should give you a good idea of the types of drop shipped products that work well. For more on these attributes, please see this extended article on picking a profitable dropshipping niche. […]

  4. best Baltimore DUI lawyer

    Finding a Profitable eCommerce Niche | eCommerceFuel

  5. […] This is more advice that Shopify espouses as well via a guest post by Andrew Youderian (he also advocates for this in his ebook, Profitable eCommerce). […]

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