So you’ve been seeing us talking about the importance of doing market analysis for your business through our helpful tips. It makes sense to you, and you understand why it is important.
But maybe there is some confusion on HOW to do it. Well, I can help with this. See, a market analysis is one of the first things you should be doing once you have decided to become a dropshipper. In fact, this should be done BEFORE you even create a store with Shop1. It is that crucial. After all, this is a business.
It is how you decide what niche you want to go into and gives you an idea of the challenges involved in this niche as well. It is also how you plan your advertising. This not only gives you a plan of attack ahead of time so you can hit the ground running, it also helps you calculate the business costs and determines what price point you should sell your products at.
Here are the big points and how to research them:
1. Where to find unbiased and accurate information
Wikipedia does NOT, I repeat, NOT count as an accurate source of information. Information on Wikipedia is edited and filled in by anyone with an account. This means the data cannot be considered accurate.
Many news stations are biased as well, so if you choose to use news media you should look for some of the more unbiased news media stations. Any industry trade or research articles are prime sources of information. Behavioral studies are great to read as well. They are dry reads for sure, but full of great information. Federal and state governments also have great resources concerning the demographics and economics of the country, state, and counties.
2. Pick an industry and analyze it
- Size of market – You want to avoid extremely large markets. These markets are usually saturated with competitors and already have some established big-time players.
- Playing the long-term game in terms of making profit
- Establishing yourself early and position yourself as one of the big players
- Projected growth – If this is going to be a low-growth industry, don’t do it.
- Trends – This allows you to select products that are popular and people will buy
- Sustainability – This is a personal choice.
- If you like doing new things often, industries that have big flashes and fade out are good if you get in early enough to make money off of it.
- If you want to play the long game and make money over more time, find an industry that is not affected with sudden ups and downs on a regular basis
3. Identify and analyze your target demographic
To be blunt, you can’t advertise to people if you don’t know who you are advertising to.
There are key factors into determining your target demographic Marital status, Family status, Gender, Education level, Income, Geographical Location, Age, Occupation, Behaviors that are influenced by the previous factors.
Each of these factors heavily influence what products people buy and where they would see the advertisements for said products. This allows you to be more efficient with your money because you are able to directly target the most effective platforms to advertise on.
You also will be advertising the correct products for your target demographic. We all know what Facebook does with its data. The reason Facebook is so successful with that data is that they’ve used it to analyze the behaviors of people against these categories and are able match advertisements to this behavior.
4. Research your competition
I think the phrase “Keep your friends close and your enemies closer” can apply. You want to know everything you can about your competitors. You need to do an analysis on a competitor’s strengths and weaknesses, why they are making the decisions that they are making, and how their decisions have impacted them previously. You can avoid making their mistakes while playing off of their successes. Being able to predict your competitor’s future moves will also be a key factor in success for your business.
Last step: apply what you have learned to a marketing strategy and use the confidence you get from all of this knowledge to succeed in your industry.
This is a business. This will take work. But you can do it.
