2020 has been a wild roller coaster ride, with more downs than ups. By the way the last few months are shaping up, 2021 looks like it is going to be a turbulent year as well. The ongoing pandemic and the turmoil of Brexit have ensured that businesses are in a continuous state of uncertainty at best and crisis at worst. Competition is fiercer than ever, and although experts say that this is an excellent time for startups, most fresh companies emerge on the market in a “small fish in a big pond” type of situation.
One way for a company to avoid this fate is to cater to a niche market, rather than trying to carve out a niche for itself.
What is a Niche Market?
A niche market can be one of two things. It is either a very narrow market with a very specific set of demands and preferences or a segment of a larger market whose peculiarities set it apart from the main market substantially. Niche markets demand very specific goods or services that are significantly different from what is already widely available. Due to their particular nature, niche markets are often underserved – and companies can take advantage of that for their own benefit.
Why are Niche Markets Important?
Niche markets are created, driven, and maintained by diversity. Since diversity is literally everywhere, their importance is undeniable.
To elaborate – each person, business, city, region, geographical location, and culture is different. While most aspects of their existence may overlap, a significant portion of their circumstances varies to a considerable degree. This variation creates necessities that are not universal, and therefore can’t be met by universal products. And when, inevitably, universal or mainstream products fail to fulfill all needs, niche markets emerge, with businesses catering to the very specific set of needs that were heretofore unidentified and unattended.
In previous ages, it was vastly more difficult to cater to niche markets. The sparsity of information meant that it was harder to identify opportune niches. Furthermore, establishing a line of communication with consumers that had the need for a business’ services was especially problematic. This means that while the demand for very specific goods and services may have always been present, focusing a business on catering to that demand hasn’t always been commercially viable.
The information age that we currently live in has thoroughly eradicated most of the previously discussed communication and marketing issues. Identifying market niches that you could fill has never been easier. Getting in touch with the people that actually need a sort of very specific product is also easier than ever.
Setting up a company has always been an arduous task – not least because local procedures differ depending on where you are. The steps that need to be taken to even get started with your business can be daunting, but the silver lining is that you don’t have to do it alone. It’s always good to plan ahead with a financial advisor before launching and after. As it stands, if you are planning to start a business in the UK, you’d better use good London accountant services, who can offer invaluable assistance with more than just the paperwork involved.
Another upside is that the march of technology has made manufacturing goods for niche markets significantly easier than it has been in the past. The advent of AI technology and widespread, accessible automation is not a boon just for businesses owning huge factories and tech-giants. Many small and medium businesses that cater to very specific markets have developed the practice of taking advantage of other companies’ established manufacturing facilities for parts of their production process.
Digitalization and globalization also expand a company’s reach, allowing you to provide for a worldwide consumer base that’s eager for your specific product, rather than just a local one.
What are the Benefits of Catering to a Niche Market?
There are many reasons why you’d want to cater to a niche market. For big business, diversifying your portfolio and adding auxiliary revenue streams is always a good idea. Conversely, small and medium businesses that have identified an untapped niche market can find themselves in the situation of the proverbial big fish in a small pond – which is much more desirable than the reverse.
Online marketing is substantially easier when it comes to niche markets than larger ones. People with similar necessities or interests tend to form communities online, and it’s easy to identify those communities and their needs. Businesses can take advantage of the fact that, in most cases, niche market consumers are already actively looking for someone to provide them with a very specific product.
Niche markets are seldom as competitive as the mainstream, which is also a welcome change of pace. This can make the process of building up a business a lot easier.
What are the Drawbacks of Catering to a Niche Market?
Catering to a niche market has its downsides, however.
Managing your cash flow can also be a tricky task when dealing with niche markets, so you’d have to invest in due diligence and good counsel for your business to succeed.
Since there’s no doubt you’ll provide a very specific product, lack of flexibility may be an issue for your business. In these turbulent times, rigidity and over-specialization is the bane of business endeavors. If you plan on catering to a niche market, you’ll have to set up your company with this in mind.
Even large market niches could be rendered redundant suddenly and unexpectedly by technological advancements, societal shifts or all sorts of crises. Due diligence and setting up a contingency plan for emergencies will be essential for your business’s continued success.
The technology needed to get started on a niche market project may also be highly specialized and costly. Investing in it may be tricky, but with the right backing and advice, you could be able to create a worthwhile business endeavor.
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Chris has served as a business advisor to a big list of small and micro businesses; localized businesses and social enterprise in particular. Chris is also an avid reader and loves to stay updated about latest tech and innovation.