Many want to build the next Amazon in a day. They try to sell a wide variety of products online in different categories for different types of customers, each one of them with specific requirements and shopping habits. Even though this might work in a few isolated cases, it’s almost impossible to achieve in most. High costs, low margins, difficulties with offering a specific value proposal (being too general with your offers), etc, will make the process of building any type of business that tries to be too broad from the beginning very hard. For example, Amazon wasn’t born as the Amazon we know today. Its founder, Jeff Bezos, always wanted an online store that would sell “every product in the world”. He knew it was impossible to be this type of business from the start though, he needed a niche. A starting point solving a specific problem for a clearly defined audience. Thus, he started by selling books online and the rest is history.
In this article we’ll talk about niches and their importance. We will also give some examples of online stores and companies who have used them to start and build up their business.
What is a niche?
Niche markets are groups of people or companies sharing similar characteristics. You can offer them your products or services because you know they have the exact need or problem your business solves. When managing a niche market, you offer a custom-made solution that’s hardly being taken care of by other competitors. This is due to niche markets not being as big and big competitors aiming to sell products in markets where they can make substantial growth in their businesses.
Starting to make business in a niche market can be related to the saying: “better to be a big fish in a small pond than a small fish in an ocean”. Meaning that, strategically, is better to be the dominant actor in a small market than a small competitor in a highly competitive one dominated by big companies.
Benefits of going after niche markets
If your business segment is well defined, you can charge better prices. When focusing on a well-defined user segment, they will be willing to pay more for products or services specifically designed for their needs. In the beginning, Amazon used to solve a big problem for its first users. There were many readers looking for a specific book in many different book stores. There wasn’t a centralized place to check for stock or look for a specific location to buy it. Amazon was charging the same amount or higher than traditional book stores for resolving this issue, while also charging for shipping. These first users were willing to pay more because this was a specific solution designed for them. It solved their specific problem.
Big companies are interested in segments which give them greater income. For many, the main fear of starting an online store or any other online business is related to the competition and its capacity to take them out of the market at a moment’s notice. If you focus on a specific niche and you do it well, is very unlikely that a big competitor will try to steal your business, don’t worry. This is unlikely to happen for two reasons: First, big competitor companies see these small niches as market segments outside of their area of interest due to their small size compared to the rest of the market. Changing their processes to sell to a niche that won’t improve their final results in a substantial way doesn’t make sense to them. Second, they won’t be prepared to offer custom service like yours. Even if they try to get into your niche market, your loyal customers will notice the services offered by the competition are general and not personalized like they need.
Marketing and communications are more effective. Knowing the starting niche you would be selling to perfectly will allow you to create a detailed customer profile which will guide your marketing decisions in general: Positioning, brand, communication channels and prices among other things. Today the internet allows for the creation of a variety of effective communication channels at a low cost (social networks, chat services, etc). This will allow you to establish a long lasting trustworthy relationship with your niche.
A niche allows you to create effective sale strategies. If you haven’t defined the type of customer you want to go after, you will lose a lot of time when trying to get new clients. You’ll be knocking on doors that will never open. The focus is on finding those people who can relate and are interested in the message. Investing time, money and effort in people not matching your ideal customer profile is very expensive. Too much effort for poor results. Instead of pretending to get to hundreds of thousands of potential customers, focus on a much smaller group with particular needs for whom your product/service is exactly what they need.
It’s easier to create content if you have a blog. Developing content is key in e-commerce. It’s the effective way to lure visitors in with the intention of buying at a low cost. Whether they are articles for your blog or any other medium you’re using for your niche, it will be far more effective and simple if you have a specific customer profile. One that belongs to the market niche. You must know their interests exactly and what challenges they face. This is the key for generating any kind of attractive and relevant content for your customers.
Conversion rate for sales is higher. Many online stores focus on a main metric, based on amount of daily or monthly visitors. This is one of the so-called “Vanity Metrics”. Thousands of users visiting your store might sound good, but it means nothing if none of them generate sales. Having a well-defined niche will generate visitors for your store who will have a real intention of buying. They’re not only there for the variety of products you’re offering, but also because the solution offered is designed for them.
Some examples of niches
Portuguese company selling twine. Companies or individuals that require small volumes of twine can now order online with unique packaging.
Chilean company who have been producing fruits locally for many years and are focused on the growing market of almonds for export. They have many years of experience and training in the agricultural part and since 2012 started direct marketing and online presence of their products.
According to data from DANE (Colombian Statistics Administrative Department), by the year 2016 almost 5.2 million nationals will be at least 60 years old. This segment’s characteristics and specific needs make it very important. In Colombia a great number of people in this segment have influence in the decision making process when acquiring products for their grandchildren, as they actively participate in their upbringing.
Someone willing to take the chance
Focusing on niches is one of the most effective e-commerce strategies to start an online business. It makes it possible to start with a small, well defined and distinct type of customer that will allow your company to optimize its processes and start off on the right foot. Don’t think that if you start with a niche you won’t have the opportunity of selling to others in the future. Niche market strategy is only a starting point.