Targeting a Niche Market is a Way for Small Online Retailers to Sidestep Big Competition

Management consultant, blog writer, dreamer

The market dominance of the online retail giant Amazon.com and multi-channel retailer Walmart is a huge barrier for anyone who wants to start selling products online.  As a result, the big retailers can be found anywhere online. They offer a large variety of products at ridiculous low prices. Moreover, they promise to deliver products within a couple of days of ordering. And they take the return of products in their stride. So, how on earth can you, as an owner of a Shopify or Woo Commerce website, compete with Amazon and Walmart? The answer is to develop a niche market for your business.

What is a niche market?

A niche market is a small market segment with customers that have specific interests or needs 1. Contrast that with a mass market where retailers such as Amazon and Walmart target as many people as possible. As a result their product offerings are wide and deep and they target generic audiences all over the world. These large retailers that compete in mass markets seem to have unlimited financial resources to enjoy a sustainable competitive advantage with all aspects of the retail mix.

But, you don’t want to compete with Amazon or Walmart, do you?  Therefore it may be worthwhile to consider a niche market.

The characteristics of a niche market are as follow: 2

  1. The customers in the niche have a distinct set of needs;
  2. They will pay a premium price to the firm that best satisfies their needs;
  3. A niche is not likely to attract competitors;
  4. The niche marketer gains certain economies through specialization; and
  5. The niche has size, profit, and growth potential.

So, it’s looking good thus far! But how can you develop a niche market for your business?

How to develop a niche market for you retail business

Although niche marketing and market segmentation seems like the same thing, there is a fundamental difference. Market segmentation is a top-down approach, stating that it is “the process of breaking a large market into smaller and more manageable sub-markets.” By contrast is niche marketing a bottom-up approach, meaning that “the marketer starts from the needs of a few customers and gradually builds up a larger customer base.” 2

Five important elements of a niche market are: 2

  1. Positioning – offer a product that satisfy a unique need with the segment;
  2. Profitability – customers in the segment must be willing to pay a premium for your product or solution;
  3. Distinct competence – you should quickly be seen as an expert by the customers in the niche market;
  4. Small market segments – means that you can focus on the customers’ needs and pickup more quickly on developing trends;
  5. Adherence to the marketing concept – the philosophy that firms should analyze the needs of their customers and then make decisions to satisfy those needs, better than the competition.

Next you must communicate with customers in you market niche.

Niche marketing

Many small and new retailers choose to operate in niche markets. They deal mostly in specialized or unusual products which cannot be found easily elsewhere like departmental outlet or supermarkets. These retailers need to be found in places where it is easy for customers to seek them out.

One of the places where customers can search for special products is the internet. Astute marketers in a niche market can, by using the right digital marketing tools, get right in the faces of their target audience.

The ability of online retailers to help customers locate, evaluate, and purchase a far wider variety of products than they can via traditional brick and mortar channels is an important characteristic of the internet channel. Active search tools allow customers to easily locate products they know they are interested in. Even more, they can help them to identify products they weren’t previously aware of. 3

Customers that are seeking unusual products are more likely to join online communities on social media sites with relevant topics. As a result, retailers may not only find and learn from customers in on social media, but positive feedback about their brand may lead to more site visits.

A great idea for retailers is to create discussion groups on their own websites. Get a couple of known influencers to publish or interact with your audience. This may give your brand an ‘expert’ states in the niche market. Equally important is regular and informed communication (a newsletter via email) to keep the attention of your special group customers.

Benefits of Niche Marketing

Kirsten McCormick in TriveHive lists the following benefits of niche marketing:

  1. Enhanced Customer Relationships. A small customer base has its benefits. So, when you are engaging with fewer people, you can focus on the quality of those engagements and on nurturing your relationships.
  2. Reduced Competition. When you have a highly specific product or service, there will be less companies out there with the exact same offering.
  3. Increased Visibility. Increased visibility is a benefit of niche marketing that not only leads to more customers but can also improve your online presence.
  4. Word of Mouth Growth. Another benefit of niche marketing is that it is very word-of-mouth-friendly. Indeed, people in a niche tend to be in frequent contact with others in that niche, which means more opportunities to get the word out about your business.
  5. Honed Expertise. Niche marketing requires more concentrated practice in one area, so it can really fine tune your expertise in a shorter time period. Hence the benefit of niche marketing is that it enables you to become an expert or thought leader in your niche.
  6. Less Resources. One important part of effective digital marketing is identifying and understanding your audience, which requires an investment of time and money on data and analytics tools. The benefit of niche marketing is that because you are confined to a specific person and a specific need, less focus is required on digging into your data to understand and keep up with their needs.
  7. More Fun. Businesses don’t always pick their niche and pursue it. Oftentimes, they accidentally find their niche in the process of serving their target audience.

Disadvantage of niche marketing

Because the customer base of a niche market may be small, the potential for the retailer to grow her business can be limited. However, says Ash Ome in DigitalDevelop.net “Despite a few disadvantages, the niche marketing with drop ship has so many advantages that will surely take your small business towards success.”

Concluding

The retail industry is in the midst of disrupting events that are shaping its future. Most Brick and Mortar retailers are adding the online channel to their business. At the same time are Pure Play online retailers adding physical stores to the business.

And then there is Amazon.com. But the answer remains to get a niche market for your business. That’s especially true for the millions of Shopify and Woo Commerce drop shipping retailers trying to make money in the online channel…

Read more: Thinking About Competing With Amazon.com? Think Again…

A well researched and written Business Plan helps to get your business started the right way.

Notes

1 Choudhary, S. 2014. Rooting by niche marketing, International Journal of Advanced Research in Management and Social Sciences, 3(10):84-91.Contrast

2 Parrish, E.D., Cassill, N.L. and Oxenham, W. 2006. Niche market strategy for a mature marketplace, Marketing Intelligence & Planning, 24(7):694-707.

3 Brynjolfsson, E., Hu, Y.J. and Smith, M.D. 2006. From Niches to Riches: Anatomy of the Long Tail, MIT Sloan Management Review, 47(4):67-71.

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Published by

Douw G Steyn

Management consultant, blog writer, dreamer

9 thoughts on “Targeting a Niche Market is a Way for Small Online Retailers to Sidestep Big Competition”

  1. Hey Tanya! Your tips are on point. One of the most important tips, for me, is to be creative and become an expert in your niche. You have to invest in your education so you can help out as much as you can in your niche. You want to become very knowledgeable about the topics your niche audience wants to learn more about. This is one of the most important parts of successful blogging, I believe. Once you are at this level people will just come to you for help and they will want to learn more about you and what you have to offer. Become a smart blogger and follow all of the tips you are given! 😉 Thank you for sharing your tips here! Best regards! 😀 Freddy G. Cabrera recently posted The 3 Most Important Keys To Successful Blogging (You Will Fail Without These 3 Blogging Keys!)

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