When deciding a niche the biggest research you must do is keyword research. This is going to help decide your domain name and keywords to target within your niche for SEO purposes. When doing research there are many tools you can use. I prefer to use Google analytics and Market Samurai.
I like to look for keywords are are searched a lot but with few competitors. With this it allows me to gain traction on the front page of Google in a short time and able to get targeted traffic fast at free of charge. When I talk about a lot of traffic remember when you are getting highly target traffic it does not take a lot to convert sales. The smallest amount of searches a day is 50 and most normally is around 200-300 before it gets more competitive.
You always do keyword research before you buy a domain because you want the keyword in your domain. This helps you move up the search engine faster. People always say find smaller niches to go in d you don’t want to compete with the big boys this is part true and part false. When you find keywords you think are good see who is on the front page of Google. If they are just regular sites and not any large companies then you should be fine. Remember some of these major companies spend thousands a month to keep their site on the front page so you have to be careful.
Just to sum this up find keywords with less competition but gets enough traffic to make multiple sales a day. Look who is on page one before going after a certain keyword to avoid some of the big names.