Simplx Blog

What is a Niche? What Has It Got to do With My Online Business?
A “niche” in economics refers to a very particular segment of the marketplace that is set apart, for one reason or another, from the mainstream. If you think of the economic marketplace as a literal marketplace or bazaar, niches are the isolated little corners, away from the main promenades where most people shop. The places where the mysterious and rare items are bought and sold, by mysterious and rare people.

What isn’t a Niche?
One useful way to define the idea of a niche is by establishing what it isn’t, rather than what it is. Niches are not the place for high-volume, “economy of scale” businesses. A niche doesn’t just sell jewelry; it sells a particular kind of jewelry. A business that is interested in a niche market doesn’t carry large inventories of dissimilar items; every product that it carries and sells is related to some very specific purpose or activity.

Why do Niches Form?
Niches are the natural side-effect of the “one-size-fits-all” trends in the mainstream marketplace. Most people, most of the time, shop for things that are similar to what other people around them are shopping for too, so big retailers compete for the attention of customers in those areas. But occasionally individuals are interested in something different from the norm, and that’s where niche markets flourish.

Take your typical supermarket as an example: despite their different names, all supermarkets sell pretty much the same stuff, for pretty much the same price, right? Occasionally a customer might want a something that is different from the norm though, and the supermarket doesn’t carry it. In those cases, the consumer heads for some sort of specialty store to get their product instead.

Niches aren’t always about the availability of products, either. They can form for all sorts of reasons:

• Price: for bargain-hunters, people who are more concerned with price than the mainstream shopper.

• Performance or Quality: for people interested in a higher grade of the same product than the mainstream shopper.

• Quantity: for people who are interested in buying larger commodities than the mainstream shopper.

• Special Needs: for people who have particular requirements that the mainstream shopper doesn’t have.

• Special Application: for people who are looking for products all based around a specific, unusual task.

• Exclusivity: for people who want something the mainstream shopper don’t have access to.

And these are only a few ideas; niches form for all sorts of reasons beyond these. Additionally, sometimes the reason for a particular niche will overlap. Costco and Sam’s Club base their business models on serving clients who have particular interests in price and quantity.

The watchword of Niche Marketing is focus. A business that is successfully focusing on niche marketing has a very specific reason for carrying the products that they do. They know the needs of their customers (more closely than most mainstream business do, in fact) and are doing their best to fulfill those particular needs.

Why Focus on a Niche?
So, why are we encouraging you, the small business entrepreneur, to study out, select, and sell to a particular niche? Why not go for the mainstream instead, where there are more customers (and thus, more money)? It has everything to do with the economics of competition.

Big retailers (like WalMart, for example) run their business in a very particular way. Their corporate model involves carrying a large amount of very popular items and selling them at very low margins but doing it as quickly as they can. It’s a pretty safe bet that anything you see on a shelf at WalMart hasn’t been there for very long, simply because the store knows that turning over inventory is the key to profitability for them.

That’s a fine way to do business, but it actually places some pretty stern limitations on what a big retailer can carry: WalMart has to carry the products and sell them at prices that will make them fly off the shelves fastest. They don’t carry the highest quality products. They don’t carry the cheapest products. They don’t carry specialty products. They don’t carry the most effective products. They don’t carry the most interesting products. They carry the fastest selling products. Period.

When you think about it that way, you’ll start to see what makes niches the more interesting parts of the marketplace. A business in a niche market isn’t a slave to turnover the way a mainstream retailer is, which makes them free to base their business strategy on something more than simple product popularity. A niche can be focused on things like product quality, or performance, or price, or rarity, or application or all sorts of other things. Choosing a niche offers an entrepreneur more freedom.

Why a Niche Online?
Online businesses have a lot more success targeting niches then big retailers in brick-and-mortar retail stores ever could. In fact, they are probably the biggest reason why e-commerce has changed the way the world does business.

Before the internet, if someone wanted to buy something they pretty much had one choice: find and go to a store that sold it. That meant the store owner could only make a living by selling a product that people near his store wanted to buy. Most brick-and-mortar stores were stuck following the mainstream model of selling what was popular because their wasn’t any choice; you weren’t going to sell exotic food if there were only three people within a twenty mile radius who want to buy it.

E-commerce changes all of that. If you have an online store, the world becomes your marketplace. You can sell something that no one in your hemisphere wants to buy, and still make a living doing it, if there are enough people on the other side of the world who want it. That means you can sell to any niche you want to when your business is online.

Conclusion
Finding and focusing your business on a Niche isn’t the only way to make money online, but it’s certainly one of the very best ones for a small business entrepreneur. It lets you be creative, focus your attention on something you are really interested in, and tailor your business to the customers you want, all while avoiding the restrictions of being a normal retailer or selling from a brick-and-mortar store. All it takes from you is knowing what niche you want to pursue, and being willing to learn that niche inside and out.

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