Online Niches, Toys, and Lady Luck

I've a couple of programmer friends down in Melbourne, Australia, who have mixed their technical skills with a bit of real world savvy to create a new income stream for themselves. Spending time instead of money, they've customized the open source Zen Cart, which is free shopping cart software for Internet merchants. It is nice to be a programmer.

But let's step back for a sec, and look at what comes before you open that store.

Even more so than in the real world, finding a profitable niche is key to making money. In the real world, location is the primary factor. If you're located somewhere there are lots of people, some of them will come into your shop, and some of them will buy your stuff. It's a number's game. How many people can you get into your shop? How many of these again wil buy something? What will they spend, on average? If you know these things, you can calculate how much you will make, and thence also how much you can afford to pay for the location. Calculating estimates of these numbers for several locations will give you a good idea of what location would be profitable for you, in the real world.

On the net, nobody just happens to pass buy your store, look in your window, and see something they need. People on the net are searching for information! This is why it is so important to find yourself a niche.

If you find a profitable niche, and populate your site with good, relevant information, surfers will find your site through the web engines - and love it!

If you're looking to start a whole new business, and you want it to be online, you're in a very good position. People who already have a business and need to take it online, have a big disadvantage. It is this:

They are stuck in their niche.

Now, if that niche just happens to be one with a high demand and low supplies, then that's not bad at all. They're lucky. No problem.

But you don't need to, and you should not, rely on lady luck to run your business. You don't need luck. You need knowledge and skills (which is why you're reading this blog, I presume).

If you have some ideas on what you want to do, there are some wonderful research tools to tell you, before you start putting all that effort into creating something, how well your efforts are likely to pay off.

You see, there are several factors determining whether or not your online venture will be successfull. But luck is not one of them.

You need most of your web site visitors to come from the search engines. It is okay to pay for some traffic if your site converts well - that is, if it turns a sufficient percentage of your visitors into paying customers.

To get the free visitors from the search engines, you need to be in the right niche.

Finding a niche boils down to this:

You need there to be a lot of people searching for what you'll offer. Having 100% of all customers in the world isn't worth much if there are only 2 of them.

You need there to be not too much competition. Some competition is good, it means that there is some money in this niche. But if there are hundreds or thousands of websites trying to service your niche, there is just too much competition.

So you need to find a niche where lots of people are searching for something (a solution to a problem), and where not too many websites are providing what they are searching for (the solution). If you can find a niche like this, then your chances of success are greatly enhanced.

There are several good tools out there for looking up niches. My favourite is Wordtracker, which helps you brainstorm your topic, and then shows you how profitable your keywords seem to be, using a calculation where each keyword (or search phrase) gets a score called a KEI score. A high KEI score (in the hundreds), indicate a lucrative niche.

So now you know about a niche that has a high demand and a low supply, you can start creating something for which you know there is a market! Now, that's quite a head start on most businesses!

Well, back to my friends in Melbourne, I think they were more lucky than talented when they chose their niche, but as it happens, they've found a niche that seems to work very well for them. They started out selling Transformers figurines, and with time have grown to sell other figurines and dvds and that sort of stuff as well. They're starting to get some traffic from the search engines, and the site is converting well. This is something they couldn't have done in a more competitive niche, or in a niche with fewer customers. So the store works out great, you can check it out at TransfigureToys.

But do not take a lesson from my Ozzy friends. Don't rely on luck for your own business! Do your research before you start building anything. The work you do here will pay you many, many times over in the time that comes.

Then again, all you need is love.

Love,
Sten, Oslo, Jan. 4th 2005