Find your niche

The first step to building a dropshipping business is figuring out what you’re selling and who your target customers are. In other words, you need to find your niche.
There’s no shortage of advice on how to do this. Some people recommend turning to your passion and interests to figure out the right product to sell, while others say it’s best to look specifically for profitable and trendy niches to ensure that you actually make money.
My advice? Do both. Choose a niche that you’re genuinely interested in, but make sure that’s there is demand — and profit to be made — in that market.
That’s exactly what I did when I set up my dropshipping business. I did some research into merchandise demand, popularity, and profitability, but I focused my efforts on the areas that I was truly interested in.
For example, as someone who works out and does yoga, I decided to start my research in the health and fitness space to see what kinds of items I could sell. Below are the steps I took to find products and validate demand:

1. Do keyword research

Start off by making a list of product keywords in your potential markets. For example, since I was focused on the health and fitness market, I brainstormed relevant keywords that people would search for. Such keywords included terms like “athleisure,” “gym clothes,” leggings,” “workout clothes,” “yoga pants,” etc.
I entered these terms into Google’s Keyword Planner to get a better idea of how much search volume they’re getting, and I discovered that “leggings” and “yoga pants” are getting the most searches.
Do the something similar when you’re determining your niche. Kick things off by identifying possible markets (ideally using your own expertise and interests) then brainstorm keywords for those markets. Take the most popular keywords, and dig deeper to get more insights into their performance overtime.
That brings us to the next step…

2. Determine product trends

Getting keyword data is great, but you also need to combine that with trend data to figure out if an item is gaining popularity or if it’s on its way out. So, I turned to Google Trends and entered both keywords to figure out their search popularity over the last several years.
In both cases, the search trends seem to be going overtime, with leggings being particularly popular as of recent years. This gave me more confidence in the idea of dropshipping leggings.
Keep this step in mind when you’re looking for dropshipping ideas. Enter your keywords into Google trends to determine whether a product is trending up or down. If it’s the latter, then you may want to go back to the drawing board. If it’s the former, though, then you can move onto the next step, which is to determine profitability.

3. Figure out if your niche is profitable

Product popularity is certainly a good sign, but at the end of the day, you still want to make money. Before you launch your dropshipping business, run the numbers to gauge the profitability of an item.
Between the cost of doing business, shipping fees, marketing, not to mention the cut of your suppliers, running a profitable dropshipping business requires wide and healthy margins (i.e., 40% to 70% if not higher).
This means you want to look for low-cost products that you can sell at a premium.
At this stage, I did some research on the wholesale prices of leggings by running some searches on supplier websites like Oberlo and AliExpress. Based on what I saw, the prices for leggings range from around $4 to $11.
Now, I’m someone who purchases leggins several times a year, so I know that many brands sell them at much higher prices. Lululemon’s price range, for example, is from $98 to $148, while lower-end stores such as Target sold leggings at prices ranging from $10 to $21.
For my store, I decided that I could sell leggings for $25 or more, which depending on the cost would give me a gross profit of anywhere from $12.50 to $25.
This knowledge further validated my idea and solidified my decision to sell leggings on my Shopify store.

Try to follow a similar process when you’re validating your idea and determining profitability. Do your research on the costs and retail prices of your products. From there, calculate your profits using a tool like Shopify’s Gross Profit Margin Calculator.