November 30, 2015 by Andrew Minalto - 3 Comments

Does SIZE Really Matter?

niche-sizeForgive me for the slightly controversial title of this post, but I really wanted to draw attention to this topic as this is a question I’m receiving more and more from people who are new to eBay and are trying to find that perfect niche to sell in.

Yes I know, what product to sell is the million dollar question and there’s certainly no easy answer – but what I want to talk about today is the size of the market/niche specifically and how that effects the potential of your business. It’s not actually that easy a topic to answer, as you can have both niches that are too small as well as ones that are too big!

But let’s head back a few steps – the first thing you need to do is get a number to work with for the particular niche that you’re interested in. The best way to do this is by looking at the TOTAL SALES number for that niche on Terapeak, for the last 30 days (one month):

total-salesAnd by Total Sales, I mean the combined total for all the products in that niche – this is a mistake I see very often when people are doing market research, they think that product means niche, which is not the case!

Of course there can be single products that are a niche unto themselves, but that is very rare, and a niche will be made up of a variety of products the vast majority of the time, which means that you need to get the total sales number for each product and then add them all up to get your final figure.

Another important note – when I say “all” the products, that of course doesn’t mean literally every single product within that niche. Products that have a minuscule amount of sales can be ignored as:

a) they won’t add much to the overall figure anyway

b) you’re unlikely to ever sell them (purely because there isn’t enough demand).

Just so that there’s no confusion, here are some step by step instructions for how to get the Total Sales number for a niche that you’re researching:

  • Put together a list of all the top selling/most popular products in your niche.
  • Search for a product using Terapeak’s In Depth Research tool, filtering for UK (replace this with whichever country you sell in) and New only (so that listings for used items don’t skew our results) and looking at the last 30 days of data.

ebay-product-researchYou will now have the Total Sales number for that product for the last month.

  • Repeat step 2 for every product on the list you made in step 1.
  • Add up the Total Sales number for all of the products you researched.

And there you go! You now have the Total Sales number for the entire niche that you’re interested in – and it’s this number that I’ll be referring to when I say a niche is too small or too big in this article.

BUT, there’s still one other extremely important number we need to consider when assessing the viability of different niches, but shockingly it’s something that most people completely ignore when looking for a niche to sell in. What am I talking about? Well…

BUYING POWER! Of course the most common occurrence for newbies is that their buying power is too small for the niche they want to work in, but it can also work the other way around – your buying power can also be too big for a niche as well.

Let’s take a closer look at both situations so you know what I mean.

When a niche is too BIG

A fairly typical situation is a new seller with a budget of around two thousand pounds or less to work with, which limits the amount of niches they can feasibly enter.

For example, if your buying power is £3,000 (and remember, this is after you have covered other expenses such as design, equipment, supplies etc.) and the niche you want to enter has total monthly sales of £500,000 then chances are that’s it’s too big for you.

You’ll simply run into cash flow problems, with too much of your overall budget tied up in individual products, which will mean that you can’t grow your business as you’d like.

But that doesn’t mean you’re out of options and have to look for a whole new niche! One tactic that I’ve used very successfully with my 60 Day Blueprint customers is to narrow down the niche into a smaller sub-niche, which might consist of just a few products (sometimes even one by itself!), and then base your entire brand and strategy around that specific sub-niche.

However this is slightly more complicated and restrictive than working in an entire niche, so I’d only really recommend it if the margins and numbers look really good.

Another option, if you’re only planning to sell on eBay and not your own online store, is to simply create a brand around the overall niche and just build your product line over time.

This could be a good option for people who aren’t relying on their income from eBay and can therefore reinvest it back into the business, or better yet people who can inject a little extra funds every month from their main salary!

But in general, if your buying power doesn’t match up with the size of the niche, I’d suggest pursuing something more in line with your budget.

When a niche is too SMALL

On the other end of the spectrum, we have cases where the niche is too small!

As a general rule, I don’t like niches that have less than £5-£10k in monthly sales, UNLESS it’s one of the very rare cases where there’s little to no competition (i.e. 1-5 sellers only). But if there are more than 5 sellers, coupled with total sales of less than £5-£10k a month, then the potential of the niche is far too limited to make it worthwhile.

And to be honest, it’s extremely unlikely that you’ll find a niche with such a small amount of other sellers (maybe years ago, but not now that eBay is fairly saturated). And even if you do uncover such a niche, it’s not quite as simple as coming in and doing a better job that the current sellers – be that on price, service, branding etc.

As in small niches like these, a new seller can often disrupt the status quo and cause a lot of changes. For example if you enter the market, the current sellers will notice a drop in sales and will then react. This could be by dropping their prices (you’re now in an eBay price war, which is never a good thing!) or potentially even by using some unethical tactics, such as buying from you and leaving negative feedback.

These are both par for the course in these smaller niches, and things I’ve seen many times. Of course the reaction is different when you enter a bigger niche as your impact is diluted across many more sellers, so you don’t have such an effect on any one person’s livelihood.

On top of when the potential just isn’t there, another time when I would say a niche is too small is when your buying power could get you much further!

Let’s say you have a £20k budget for stock and the niche you’re looking at has total sales of £3k a month, then it just doesn’t make sense for you to start a business in such a comparatively small market as you’re never going to make great use of your money.

Even if you were the only seller in that niche, it would take you about 7 months to clear your stock over once! That’s terrible and means that you’re severely underutilising your capital. Try to always think about this in terms of ROI, i.e. Return On Investment, as at the end of the day that’s the best measure for what you achieved considering your starting budget.

Conclusion

And there you have it – a niche can not only be too big, but it can also be too small. Hopefully this post has given you a good idea about how to measure this and what other options you have.

One thing I do want to also mention is that total sales is of course not the only measure we need to look at when considering a niche! You also need to look at the amount of competition, the sell through rate and other such market data.

It could be that judging purely by total sales the niche is too big for you, but if it has a 90% sell-through rate and a small amount of competition, it would be stupid not to try and start a business selling products from this niche, even if it’s only one or two to begin with.

Market research is in itself quite a complicated procedure, with many different variables and measures we can use (if you need help with all of this, I have actually covered market research in full in this post). But today I merely wanted to cover market size and how it affects your future plans and business potential.

All the best,
Andrew

3 Comments
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  1. Hi Andrew since I couldn’t send you an email directly through your contact us tab. I would like to know how much in US dollars the spicy auction templates cost? Also are they for immediate download?

    1. Andrew Minalto

      Hi Paul,

      The SAT costs £29.95 which is approx. $45

      This is a one time fee, for a lifetime access.

      Thanks,
      Andrew

  2. […] I’m still managing to find some time for your weekly blog posts. This Monday we started with a quick post about niche size followed up by a very interesting and valuable guide on becoming your own […]

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