The Changing eCommerce Landscape: Winning and Losing Niches (and what to do if you’re in one)

Remember when pet products were the best-kept secret in eCommerce?

Nor do we.

“Which niche should I go into?” is the million-dollar question if you’re an eCommerce seller.

If only it were that simple.

It’s often said that the only constant is change itself. In few places is that more applicable than in the world of Amazon. And in few years has it been more applicable than in 2020.

Winning and losing sub-categories are an ever-changing kaleidoscope of different options. And when conditions change – economically, socially, politically, technologically – so do the winning niches.

So, which of those conditions have been most pivotal in driving the changes we currently see around us?

The changing face of eCommerce

Any discussion of the economic climate has to begin with the obvious.

Ignoring the impact of COVID-19 on retail would be like walking into a lion’s den and ignoring the lions. We’re witnessing history in the making, with the most disruptive pandemic since the Spanish Flu and the most precipitous economic downturn since the Wall Street Crash.

The consumer response to the crisis is Abraham Maslow’s hierarchy writ large.

While technically true, the oft-parroted maxim that “consumer spending has increased” fails to address the nuances of where this increase came from, and whether the average business is actually better off for it.

It’s news to no-one that the overarching trend has been towards “essentials.”

The question of precisely what constitutes “essentials” is less well-defined. The majority of eCommerce sellers have been hit hard by the crisis. And of course, the less said about the fates of most brick-and-mortar stores, the better.

Climbing the pyramid

First, we had the stockpiling of essentials like disinfectant and toilet paper. Once the craze plateaued (and it had to plateau eventually – who has a storage cupboard big enough for all that toilet paper?) the trend that took its place was altogether more positive: that of embracing the lockdown.

Gardening, board games and even home brewing experienced a resurgence. Isolated consumers took to trying to make some order out of the chaos, ushering in what just might be – perversely – one of the most wholesome waves of self-improvement we’ve seen this side of the millennium.

It should be pointed out that sales of beer rose by more than tenfold in the same period, so these newly enlightened quarantine-ees obviously had their limits.

Maslow was vindicated once more here. The venerated psychologist famously theorised that interpersonal needs – love and a sense of belonging – are an important part of the human experience but can only take centre stage once a foundation of physiological and financial security is firmly established.

Finally, in a trend more reflective of higher-order “self-actualisation” needs, the subsequent weeks saw an explosion in workout equipment and grooming products, among them home manicure sets. Apparently, this new breed of consumer had indeed embraced the trying times.

A new normal

As we’ve seen, “essentials” comprise not just those products necessary for survival, but also products necessary for emotional well-being. Consumers’ reactions to the crisis reflect a belief that staying active – both physically and mentally – is every bit as much of a necessity as staying safe.

Not bad news for sellers. As disruptive as the pandemic has been to those currently marooned in an unworkable category, those prepared to pivot have a number of playgrounds in which to forge new success – and plenty of time to do it.

Winner: Office equipment

Pimp my… office?

Apparently so.

Desk chairs, headsets and printers have all seen an uptick as employees adjust to working from home. The office-improvement craze also encompasses some more outlandish items like bed desks and massage chairs.

This enthusiasm for home offices stems from more than just the need to work from home. Let’s not forget the swathes of university students relegated to studying online, or the uphill struggle that parents face to create a productive environment for their kids.

These are all important angles to consider in formulating your brand identity.

After all, while the knee-jerk reaction might be to target the businessperson working remotely, or the furloughed employee using the time to start an online business, it’s worth remembering that that same consumer probably has a whole family who need an office environment every bit as much.

Loser: Clothes

This one doesn’t take a huge leap of reasoning. People are rediscovering a more Spartan way of living and paring back the amount that they spend on perceived luxuries. After all, there’s only so much effort you’re going to make for a Zoom call.

Usually a mainstay of the Amazon economy, the summer rush of clothing purchases can no longer be counted on to deliver.

Things don’t look set to change in a hurry. The majority of consumers expressed scepticism that the crisis will be over within six months. Furthermore, 39% expected to spend less on apparel in the coming 6-12 months – and that’s as of April 2020, with consumer spend on clothes already at anaemic levels.

For the time being though, with pyjamas proving to be the most popular work uniform of 2020, your efforts are best directed elsewhere.

Winner: “Outdoor oasis”

You are not alone if your summer trip to Tenerife didn’t work out.

Highlighting once again that lockdown seems to have brought out our creativity, a growing slew of enterprising homeowners are bringing that tropical holiday destination to their back gardens.

And make no mistake – it’s a privilege that they’re prepared to pay for. Inflatable pools, water slides and patio furniture are all among the categories that are on the up.

Some homeowners have also reported installing in-ground pools to the tune of £50,000 upwards. While you might not be able to capitalise on this particular niche directly (unless you have a very creative shipping plan), it’s further evidence that people are prioritising their quality of life more than ever, and that they’re happy to pay if you can help them to fulfil that need.

Loser: High-end furniture

“Keeping up with the Joneses” is unlikely to be a consumption driver for much of anything this year. As previously materialistic consumers direct their attention towards functionality and personal fulfilment, upmarket furniture is no exception.

You’d be forgiven for viewing this as a paradox. Amidst the current drive towards home improvement, you might surmise that people would be driven to invest in their interior decor as well.

Apparently not.

This is explained by a couple of distinctions. For one, “vanity” products are firmly out of vogue. Widely adopted though they’ve been, home improvement measures have generally been limited to those with functional utility for the homeowners themselves. “It’ll look good on Zoom” continues to be a pretty flimsy justification.

Secondly, there just aren’t that many people with the cash right now. And as we enter a recession the likes of which a large chunk of the population has never seen before, you’ll probably be waiting a while for that to change.

Looking beyond COVID-19

As devastating as the impact of the virus has been, the fact remains: this too shall pass. Maybe not within the next few months. Maybe not even this year. Nevertheless, the debate is a question of when, not if.

So, when the fabled light at the end of the tunnel arrives, what is the eCommerce landscape going to look like?

Probably not as different as you might think. Overall, the net macro-effects of COVID-19 on eCommerce trends has been to accelerate them, rather than to disrupt them.

Pre-crisis, analysts had predicted that eCommerce’s share of global retail sales, which stood at 14.1% in 2019, would expand to 16.1% in 2020. So far, we’ve seen it surpass that.

By all accounts, this trend is only going to continue as online shopping skyrockets (particularly noteworthy are the tech-averse populations forced to become first-time shoppers, who are likely to stay “converted”).

Besides, as hard as it might be to visualise a world without it, not all of the relevant trends are products of the pandemic.

Lest sellers become blinded by “COVID goggles” and fail to consider anything else, it’s important to remember that we have a whole economy to factor into our decision-making – with all of the usual complexities that that entails.

Below are some niches whose trajectories are due to factors entirely separate from the pandemic, and remain firmly unaltered…

Winner: Baby products

The king (or queen) of the evergreen niches still reigns supreme. Pandemic or no pandemic, you’re not going to run out of customers here any time soon.

Few niches boast more opportunities for consumables (i.e. repeat business) and by extension, for building ongoing relationships with customers. And for businesses in 2020, strong customer relationships are everything.

As mentioned, this is one of the niches that carries a certain degree of immunity to COVID-related woes, catering as it does to functional necessities.

Some commentators have drawn a historical parallel with the infamous (if possibly apocryphal) New York blackout baby boom. For those not in the loop, the suggestion is that 9 months after a much-publicised power outage in 1977 New York, city hospitals witnessed an explosion in the number of births.

Speculation is mounting that we’re going to see the same thing happening in the wake of the coronavirus lockdown. Hilariously, one wry observer has already given this prophesied new generation of boomers a name: the Coronials.

Lockdown-induced crack-pottery or a visionary stroke of insight? You be the judge, but it’s unlikely to work against you if you’re a baby brand.

Loser: Sports supplements

Once a fertile niche; now the quintessence of excessive competition, the sports supplements sub-category was, and remains, a dead end. Gold rushes rarely happen in old mines, and you are unlikely to find an exception peddling protein powder.

Competition in this category is so intense that a six-figure launch budget is a virtual prerequisite to being in the game. Never mind competing for the top rankings. By the same token, running a profitable Pay Per Click (PPC) campaign is a near-impossibility.

There are three kinds of sellers who preponderate in this battleground: those who cemented their positions in the early days, corporate behemoths whose presence on Amazon is only one channel among many, and beleaguered start-up wantrepreneurs five years behind the times.

Winner: Hygiene products

Remember, we are talking about the winners and losers in the post-COVID-19 world. So why hygiene? Won’t the era of sanitation mania be over by then?

Yes and no.

While price gouging on hand sanitiser listings is likely to be a thing of the past, the aforementioned April study suggests that a heightened concern for cleanliness, health and safety will remain a firmly entrenched part of the global psyche for years to come.

A weighty 77% of consumers expressed exactly that sentiment, with 62% being sufficiently opinionated that they plan to switch to brands that demonstrate greater levels of product safety.

This will show up in a number of guises. The Renaissance of antibacterial products is likely to enjoy a good run. So, too, is an increased awareness of infection risks, meaning that we probably haven’t seen the last of personal protective equipment. Note the emphasis on health and safety; not just on cleanliness.

The takeaway is not necessarily to place an order for thousands of gloves and masks. Rather, the real lesson to be learned here is the need to imbue your brand identity with a sense of responsibility, transparency and quality, whatever your category.

Post-COVID-19 consumers will share a preoccupation with the manufacturing quality of their purchases, as well as the integrity of the company itself. In a game that’s increasingly about branding, none of this should come as a surprise.

Loser: Luxury goods

By now you should have a clear idea of the ethos of eCommerce in the post-COVID-19 era.

Few product categories are less congruent with that ethos than expensive jewellery, handbags, shoes and the like.

For reasons that probably don’t need elaborating upon, the widespread consumer reticence to splash out on luxuries is not going to disappear overnight.

The nail in the coffin is that luxury goods exhibit a high degree of seasonality. Put simply, people care more about looking good in the summer. Most of us have come to grimly accept that we’re not going to be out of the woods by the end of beach season this year. That being the case, we’re unlikely to see this category in full bloom again until summer of 2021 – at the earliest.

In practice though, the lasting economic ramifications of the crisis are likely to prolong that timeline. Significantly.

What to do if you’re in a losing niche

First and foremost, don’t panic.

If you’re prepared to view it as a period of work, and if you’re prepared to pivot where necessary, the lockdown still presents more opportunities than it does disadvantages.

Play the long game

Key to formulating your long-term strategy will be determining whether your “losing” products are going to stop losing once the crisis is over.

You might have a clothing brand which is currently being strangled by social distancing measures. The main consideration should be whether people are going to need your product all over again as social gatherings are phased back in. Whatever the financial impact of the pandemic, people are still going to need clothes besides pyjamas once we’re back in a semi-normal place.

In cases like this, the best approach could be to view it as a time to get ahead while your competition is asleep at the wheel. Optimise, and then optimise some more.

Read up on good listing practices and spruce up any products you’ve neglected. Add A+ Content to drive organic traffic and increase on-page conversions for your Amazon listings. Build a multi-page Amazon Store and get your head around Sponsored Brand ads. This will be a valuable tool to lower your Advertising Cost of Sales (ACoS) and maximise cross-selling opportunities in future.

You might not reap the fruits of your labour immediately, but you’ll enter the post-lockdown era with a bang. And you’ll do it when your competition is only just waking up from the corona coma.

Diversify, diversify

Perhaps the multi-year aftermath of the situation isn’t likely to bode well for your products.

If that’s the case, you still have the most valuable asset in the world on your side: time.

You’ve probably wished you had the free time to experiment with niches you’ve never tried your hand in. So experiment. You don’t have your regular product base taking up all of your time, so put it into researching new categories and launching more SKUs (stock keeping unit).

In an economy where Netflix has taken precedence over work for the majority of the population, treating this period as a time to knuckle down will put you at a serious advantage. And in the long run, the amount you’ll learn will put you in good stead when the time comes to resurrect your usual product range again.

What happens now?

Difficulty and opportunity go hand-in-hand. Trite as it might sound, there is a silver lining here.

More people have been forced online, and when the dust settles, most of them will still be online. This is a rising tide that will lift all boats.

We’ve focused on the distribution of particular niches in this article. On the flip-side though, remember that the access to consumers is increasing across all categories. And many of those new consumers are older people with money.

This is evidenced starkly in the difficulties faced by different age brackets. 47% of people aged 18-34 have worried about being able to pay for basic needs in the crisis. Meanwhile, only 25% of those aged 65+ said the same.

Crucially, this shift in online spending habits is likely to persist long after we’ve seen the back of lockdown.

In the meantime, what qualities can you build into your brand to facilitate a smooth transition into our new normal?

You can be sure that a sense of purpose, a commitment to sustainability, and a genuine interest in your customers’ well-being will all help to recession-proof your brand.

Safety and paranoia will be at the forefronts of your customers’ minds.

So be part of the solution and say hello to the post-pandemic world. It’s waiting for you.

Co-author: Armine Ansari
Armine is an eCommerce Payments Specialist at WorldFirst. He started selling online five years ago and is on a mission to optimise eCommerce payments processes for fellow merchants across global marketplaces.

Co-author: Arabella Redford
Arabella is founder and CEO of Brand Dot. With a cutting-edge approach to content optimisation and conversion-driven marketing, she is passionate about driving brand success through voice assistants and voice-first consumer experiences.

 Other blogs in this series:

• Amazon’s EFN And Pan-European FBA Programmes to End for UK Sellers: Everything You Need to Know
• Limited shipments, unlimited opportunity: How to handle Amazon’s FBA restrictions
• Amazon Sponsored Advertising – How to Optimise Your Way to a Profitable Q4
• WATCH our recent webinar: Amazon and PPC top tips – preparing for Q4!

Whilst every effort is made to ensure the information published here is accurate, you should confirm the latest information with the sources outlined above and consider your business needs prior to making a decision. The information published is general in nature only and does not consider your personal objectives, financial situation or particular needs.