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I guess, we all agree that picking the right niche is a good idea....but does it usually pay off to focus a ton of your resources (mostly time) to find the right niche before getting started with an actual online business (of course making a test site before might be a good idea to learn the ropes already)?
Personally, from observation, I would argue that the majority people doesn't invest enough of their time into market research, though it would be worth it (not just in e-commerce). High school students graduate and then take like a 100 hours to research what field they're gonna work in over the next 40 or so YEARS (because of social pressures)
(personally I dropped out of college once, and it took me 2-3 years of thorough research - of course I was called crazy, lazy and a procrastinator - but Ive found something I love which seems to pay well, too: SEO&online marketing..my friends are 2 years ahead of me and already graduated from college but talk about how they hate their jobs or can't get one b/c of the recession...I would always put in this amount of research again!).
I've been wondering quite a bit if it's the same thing with many (online) businesses/markets as being in the right market (like a friend of mine who happens to be in it by pure accident) seems to make the game so much easier.
Does thorough research to find the right market (as in way more research than most people do) often pay off and is it something that many people who start an online business don't invest nearly enough time in?
[edited by: Makaveli2007 at 10:50 pm (utc) on April 15, 2009]
Too many times, people are fascinated with what I do and would love to do 'something like that' themselves.
But when asked exactly what they have in mind, and most importantly, how they would make money at it, they draw blanks.
But that's just basic. In order to sell your stuff, you have to have a market and a profit motive. Otherwise, stick to ebay and craigslist.
I think that you have to have a subject or product that you are interested in and then you may decide to get into ecommerce.
I think there are far too many people who think they can get into ecommerce and give up their day job or get rich.
The more this happens the less every one will make. There is only a certain amount of cash to go around !
There are also lots of people trying to get into ecommerce by advising others how to get into ecommerce !
Haha, yeah all those lovely posts on SEO forums "Hey guys, I have this great product, believe me it's great - about making money online!...How do I get traffic to my website?". They crack me up every time ;-).
What I really meant wasn't if there were too many people who arent willing to put in work out there...but if even people who DO put in large amounts of work, would often be better of doing more research to find a good market initially.
Makaveli's comment about high school students didn't apply to me. We were already channeled into specialising at age 14 and the big decision was at 16 as that decided what exams would govern your entrance into higher education.
Another thought on those lines is that the more specialized the niche, the harder you're likely to have to work to make it successful. The trick is to choose something that's narrow enough to have less competition but not so narrow there are too few customers.
So, if there is something you love but it is so small that no one is really making money on it it may be the right time to jump into it and dominate it for years so that your name = the niche.
I had pondered that thought for a long time (e.g. because the doing thorough "market research" in the "job market" seems to have been one of the best decisions of my life)
"The trick is to choose something that's narrow enough to have less competition but not so narrow there are too few customers. "
I agree with this..if the niche is too small, then there isn't any money to be made in it..and if it's too big there's often too much competiton, but I think there are different situations, too.
For example you might have a unique strength (like a combination of interests) that helps make a market easy for you, despite it being big/profitable enough. The market might not be "easy" for the average joe, but it is for you.
I remember when I was trying to find out what to do for a living...and when I started trying to make websites, there were always 2 common opinions:
1)Do something you're passionate about and everything else will work out, too. I had been told things such as "if someone loves cleaning shoes, he'll be more successful than somebody who does something they're not passionate about!". Clearly, this is an exaggeration, because if I went by this logic then I would have tried to become a professional basketball player....and I probably would have not ended up making more money (or being happier) than somebody who studied business or law.
2) "You gotta pick a hot niche". You have to choose a career that pays! You have to find that hot e-commerce niche! etc.
---> but in reality, I think it all comes down to finding the right balance between those two things: Find something that you're passionate about and that isn't overly competitive (I'd love to make websites about basketball, which Im passionate about but too much competition) and your chances will probably be better than going for one extreme (trying to go into a field youre passionate about but where you stand zero chances of making it...or going into something highly profitable that you couldnt care less about).
EDIT: I forgot saying that I had to think of this (once again), because I saw a tv show with a professional poker player who said "I'm not trying to play against the best players of the world, I'm trying to play against the WORST players in the world, because it's more profitable".
Of course, that's easier said than done, and in the end it all comes down to whether that investment of doing the research necessary to find the worst players in the world (or a niche with a relatively low-level of competition) costs less than the extra amount of money itll allow you to make (and if you can find any such niche that pays, in the first place).
[edited by: Makaveli2007 at 3:50 pm (utc) on April 16, 2009]
I would say if you already sense a great opportunity, than by all means go for it and test it (by getting the site up and getting started)...but if you dont sense one, yet then dont overinvest in a mediocre market.
I'm not saying finding the balance between the two is easy lol
Anyway, what you said VarunS made me think again...and I've come to realize there's a huge difference between my point and what you said. I think the process of market research in e-commerce works like this (in the following order):
step 1: You brainstorm and search for ideas/opportunities until you think you've found one.
step 2: You check/test the idea/opportunity to see if it's really as good as you think.
I would say take your time and do thorough research until you've found a good idea during step 1 (and if you already have a good idea/see a good opportunity - step 1 is unnecessary).
However step 2 is something that somebody who understands this online marketing/e-commerce stuff well, should get done very very quickly (within a day if he doesn't procrastinate).
[edited by: Makaveli2007 at 1:37 am (utc) on April 17, 2009]
The toughest problem I have to deal with, outside of my own psychology, is the line between being so specialized you have no competition and being so specialized you don't have enough customers. This latter has forced me to raise prices, but that has been good. Still, it is a scary line. Right now I am working on a widget that I will ask a lot of money for just to see if I can carve that out as another subniche. Since it isn't the whole egg basket, I feel better about experimenting with it. But for me, that's the toughie.
That and actually treating my business like a business, which includes finding ways to be come more efficient and all that boring managerial stuff. I am seeing more and more that that is key to making more money for me.