Conducting Quick Market Research for your Drop Shipping Business

Most people setting up a drop shipping business don’t bother doing any worthwhile market research. But, any business decision you make should be based on the facts of the situation you find yourself in. This is especially true where you are going to devote money or time to a project. In the case of drop shipping, you need to decide what kind of products you are going to sell via your website. Choosing the wrong product combination could be disasterous for your foray into online drop shipping. So, you need to invest some time in market and product research. With at least some solid figures to work with you are likely to make better decisions and be more successful in your business.

So, how can we go about doing some basic market research? The rest of this article gives some pointers for you to approach your initial market research for your new drop shipping business.

There are two basic parts to any kind of market research – data collection and data analysis.

Data Collection

Due to the nature of Internet drop shipping as a business, you will find much (perhaps too much) data on the Internet. You can begin by using the Google Keyword Tool to do analysis of kewords that people use to search for products you are considering offering through your website. This alone will give you information regarding actual keywords used, the approximate cost of using a Google Adword campaign using these keywords, search volume per month along with annual/monthly trends, and the approximate location of searchers for these products.

To get more information to work with, you can put some of these keywords into Google and see what comes up. This will give you an idea of who your competitors are. You will also get insight into what products and customer services they offer, how they approach their sales, and their prices and returns policy.

Data Analysis

Well, you now have a lot of raw data to work with. This involves organising and analysing the data to enable you to make sensible decisions about the viability of your proposed drop shippng business and products. You will also be able to get a better idea of the actual costs of running your business after doing this, as you now have shipping, advertising, web hosting and any other cost data you will need.

You begin data analysis by organising the data you have collected, for example, a competitors list, a price list of products from each competitor, the cost of buying the products from a drop shipper and any shipping costs if they are not included in the purchase price. You also have data on how many people search for each product, and the approcimate ad costs.

After going through the data, you can work out if your business is viable, or you may have identified a better product range to sell, with better margins, search volume or lower costs.

Sometimes a smaller specific ‘niche’ market can be better to work with on the Internet. For example instead of trying to compete in a market selling a specific electronic good, e.g. an XBox, you migt sell controllers or batteries or another accessory.

Caveats

All of your data can be used to help your online marketing efforts, to tout for possible investors (e.g. present your marketing data to prove viability), and to keep you focused where you’re likely to make most money!

Whatever you do, remember not to start off any business venture online (or offline) without first checking out your product, suppliers, customers and competition, otherwise you’re probably setting yourself up for failure.