So, I've made a handful of niche stores so far. At first I was using a free WordPress plugin but I got tired of not being able to search by category, minimum price and so on. So, I finally bit the bullet and bought Phpbay Pro. It was $79 and that's a chunk of change, but you can use it on unlimited domains and it's free upgrades for life. Besides, my time is valuable to me. So, if I can make more niche stores in less time then it's completely worth the $79.
NOTE: If you do buy Phpbay Pro (or you already have it) something that isn't really in the manual is that you can have multiple keywords by using the "|" pipe character. So, if you put in "doorknob handles hardware" in for a keyword in Phpbay Pro, you are actually looking for that exact phrase. That might not be what you want. You are probably wanting this instead "doorknob|handles|hardware".
Anyway, on my previous niche stores, I picked things that I was already into. But, these things aren't necessarily good subjects for niche stores. That is to say, I wasn't doing any research, I was just picking out of a hat, effectively. What you really need is a way to see what people are looking for on eBay. Now, there is eBay Pulse,which is pretty cool, but it seems like you can only see hot searches one category deep (unless I'm just missing it somehow). Also, I don't know how far back the data goes on eBay Pulse.
So, after a little bit of digging around, I found TeraPeak. They have over two years of eBay research data and you can use it for all sorts of purposes. That is to say, if you are an eBay seller (as well as an affiliate marketer) then you use their data to know when to sell on eBay. I recently searched 90 days worth of auctions to find the best time of day and the best day of the week to sell some of my old HP DL320 servers. You can find the best time/date for sell-through percentage or highest price, or try and find a balance of the two. It's great for this!
But, I think for something like $5 you get access to all the search data as well. So, now you can look for hot categories, hot searches, hot products, etc. And you can drill down by category. So, yesterday I used it to search something like 5-6 categories deep to find the searches that people are most often typing in a particular category. Then I can create pages using Phpbay Pro where I use those popular search keywords to display auctions related to those searches. The users dig it because now they can find what they are most likely to be searching for with just a single click.
Still not convinced? Believe me, I get. It seems like there is so much software to buy out there. But, in my opinion, TeraPeak and Phpbay Pro are worth it. Your niche stores are going to be quicker and easier to build and your niches should be more lucrative if you do the research up front. But, if you want to see it in action, check out the Terapeak eBay Demo Videos.