You should concentrate on what you love to do the most. (Jumping into an already saturated market is not necessarily the best way to jump start a new business.) Consider what you would be happy making over, and over, and over and over and over again, lol.
Find something you enjoy, thats inspired, unique and crafted with love. Whether its an item that others make, it will sell with the story and care youve put in. Not because other people happen to sell lots of them.
The little baby girl sweater you have as you avatar is darling, why not do it in some different colours and offer it in a selection of sizes and see how things go, good luck with your shop, and you may need thick skin in the forum, some people speak their mind, not to offend, but it's just how it goes.