Niche Marketing on eBay

Many eBay sellers succeed by specializing in a narrow market segment.

by Skip McGrath
- Mar 24, 2008

Niche marketing is one of the most profitable strategies for the small to medium-sized eBay seller. It's also among the easiest ways for a new seller to get started making money on eBay.

What denotes a niche market? Basically, a niche is a narrow specialty. A category is not a niche. For example, if you sell women's clothing, then you are a clothing seller. If, however, you only sell women's plus-sized dresses, then that's a niche. It used to be if you sold only digital cameras you would be considered a niche seller, but today the digital camera market on eBay is so large that you would have to sell only one type of camera, such as single lens reflex (SLR) cameras, to be niche. You could take it one step further, by only selling Nikon SLRs.

In the early days of eBay, the site was predominantly used to sell collectibles, including sports cards, comics, toys and beanie babies. As eBay expanded, more expensive collectibles and antiques found a market on the online auction site. Within a very short time consumer goods started showing up. At first, most of these were used or overstock items and "As Seen on TV" products. But during the first two years, almost every eBay seller was essentially working in a narrow product area or a niche.

Niche marketing and sourcing

There are two primary benefits of niche marketing:

  • Sourcing
  • Selling

Let's first take a look at sourcing. As you spend more time in a market or product category, you will learn all the sources of supply for that market. The more you know about a product, the better able you will be to spot deals and reputable vendors, and work sourcing to your advantage. When I was in the antiques business, I used to sell a broad line of 18th and 19th century American antiques. However, within that category, I specialized in the niche of early American woodworking tools. After a couple of years, I developed an expertise and a "feel" for the products. I could recognize makers, spot reproductions, and I knew what tools were in high demand that would command high prices from collectors. Once I developed the expertise, my profits shot though the roof.

When you decide to specialize in a niche of any kind, the first thing you want to do is become an expert in that area.

Remember the old adage about pricing: You make money when you buy, not when you sell. Well I became a very savvy buyer—able to easily spot bargains. Also, as word spread that I specialized in old woodworking tools, people with things to sell began to seek me out. At one point, I was the largest old-tool dealer in our state, and I routinely bought tools that I could sell at markups of 200 to 300 percent.

When you decide to specialize in a niche of any kind, the first thing you want to do is become an expert in that area. Learn and read everything you can about it. Study the history of the product. Get to know the companies that manufacture the product, and their distributors. The more you know, the better deals you'll be able to find.

Selling in a niche market

The other benefit of niche marketing is selling. The very fact that you are selling in a narrow market segment means you will have less competition and can therefore command higher margins. And making yourself an expert in the area, you'll enhance your credibility as a seller within it.

I get lots of questions from eBay buyers. If you similarly receive a question, as an expert or specialist you'll be able to answer the question with authority and detail that will give the bidder instant confidence, and more than likely result in a bid.

The other selling advantage of niche marketing is the ability to accurately describe products in your auction descriptions. The added knowledge you have from being a specialist allows you to add more data and "insider" information that someone else cannot. A potential bidder looking at your auction will have more confidence—in you and your product—and perhaps place a higher bid than they would otherwise. This is especially true if you are selling expensive items.

Finding the right niche

Finding your niche is a matter of research and brainstorming. You may already have a hobby, interest or life and work experience in an area that would make a good sales niche on eBay. This is where you should start.

Work is always more fun—and usually more profitable—if you are doing something you like. If, for example, you enjoy computers, this is a great area to start your search for a niche. So many people, and even large companies, sell computers on eBay that you'd need a large amount of capital to compete in this area. But the computer field has many subcategories, and there are numerous niches within these. Monitors are a large subcategory, but flat-screen monitors could constitute a niche. It takes a lot less capital to buy and build an inventory of flat-screen monitors than entire computer systems. You can buy monitors in lots of 100 for roughly the same cost of 20 complete computers.

Another area might be all the little accessories that go with computers, such as network hubs, cables and connectors, computer speaker systems and so on.

Perhaps you enjoy travel—specifically, you like to travel off the beaten path. Selling in the broad travel category could be daunting, but perhaps you could work with a local travel agent and package adventure or specialty tours that you could sell on eBay. A friend of mine does this with fishing lodge tours to Alaska.

Movie DVDs are a very large category crowded with hundreds of sellers. Yet there are several players within this category that have found niches in which they could compete quite successfully. Classic movies, how-to videos, instructional sports and documentaries are just a few examples.

The same goes for Music CDs and DVDs. Entering the broad music category could be difficult and would also likely require large amount of capital to compete. But one could carve out a nice niche in jazz or folk music or alternative rock.

You want to look for a niche(s) that will support a minimum of $5,000 a month in sales to make it worth your while

Almost any broad category on eBay has subcategories, some of which are small enough to qualify as a niche—and others in which you can create a niche. The key is that the niche you find must be active enough to generate large sales and not be crowded by hundreds of other sellers. If you find a niche that is already dominated by one large seller, don't let that stop you if you think you have the ability to compete. A little competition is good for everyone—you, your competitor and the customer. By studying your competitor's auctions and policies, perhaps you can find a way to compete that doesn't require one of you to fail for the other to succeed.

You want to look for a niche(s) that will support a minimum of $5,000 a month in sales to make it worth your while.

Once again, start your search in areas that interest you. When you have found several areas that interest you, then you need to start your research. First use the eBay keywords report to see if people are searching the terms or keywords for the items you want to sell. Next use the eBay search engine and the research tool to determine the viability of the market.

You might find a certain niche to be very profitable, but not deep enough to sustain a large eBay business. It's no good to totally own a niche if your monthly gross merchandise sales (GMS) is only $2,000. You want to look for a niche(s) that will support a minimum of $5,000 a month in sales to make it worth your while. Sometimes you can combine related niches. Going back to the computer example, you could sell monitors and keyboards. If you go into the automotive area, you could sell both performance exhaust systems and air-intake systems. These are very different products located on different ends of the vehicle, but performance enthusiasts often buy both of these two components to improve the horsepower of their cars.

When you find a potential niche, ask yourself these questions before deciding to focus on it or before ordering inventory to sell:

  • Does the product area interest you?
  • Is this niche large enough in terms of potential GMS to sustain a business?
  • Are the margins available to you for these products large enough to sustain a business?
  • Do you have or can you obtain the knowledge and expertise to work this niche?
  • Is the competitive situation in this niche manageable?
  • Do you have a reliable and cost-effective source of supply for the goods?
  • Can the niche be expanded or are there complementary products you can cross-sell and up-sell?

Remember, you do not have to totally "own" your niche to be successful, but you will need to be one of a handful of major players in order to have consistent, predictable and long-term success.

About the Author

Skip McGrath is an eBay Gold PowerSeller who has been selling on eBay since 1999. He is the publisher of The eBay Seller's News and author of The Complete eBay Marketing System.

Opinions expressed here may not be shared by Auctiva Corp. and/or its principals.

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