Being successful in the niche (Part 1): How online niches work

Niche Market

More and more online retailers are entering the already crammed e-commerce market. In 2013, 25 percent of e-commerce transactions in this country were generated by the top ten online shops[1]. Despite their dominance in the market, a large part of the cake still remains, which is then divided among many, smaller online retailers. To gain footing in this highly competitive market, a niche presents itself to all the newly established businesses, for them to occupy and to concentrate on their specialised product area.

Within two comprehensive articles, my colleague Marc and I would like to show you if it’s worth investing in a niche shop, which challenges you may face, and the chances it offers you. Let’s start!

Online niches work differently

The term “market niche” describes a section of an entire market. In a classic sense, a market niche caters to a newly discovered or a unique area of a market. In terms of online shopping, a niche shop can, due to several reasons, be distinguished from this classic definition. Niche shops are to be viewed as specialists for a specific area within a complete market. Examples of that are: Suppliers for barefoot shoes, for golfing equipment and clothing or perhaps something for spices. The biggest difference for a classic niche, for which there is next to no competition, is that in online business there is actually a competitive situation, for example with major online retailers like Amazon.

For various reasons, there are many advantages for online retailers to focus on a niche. For newcomers into the online business world, choosing a niche is associated with very low financial demands. Through specialising in a smaller, very specific part of a segment, the online retailer can offer a better product choice within its niche. The choice is then much wider and in-depth within a niche than it is with a generalist. In this way, the niche shop sets itself apart, with its extensive range, from the competition.

With growing success, it becomes possible to expand the product range and to, for example, offer brands that are hard to find with any of the competition. By expanding the product range, your target group grows, as does your customer base. There are some prominent examples of this approach. Currently one of the biggest suppliers for the outdoor range, Bergzeit, originally started its business by only offering climbing gear. And now, you can find everything here that a sporty outdoorsman could dream of.

Bergzeit successfully expanded their product range

Another advantage of specialisation: Experts are at work here, who have the necessary range-oriented knowledge and can effectively advise and help the customers. This means that your customers will be particularly satisfied and it will increase their confidence in your shop. And of course through this, the recommendation rate of the shop rises. In addition, positive reviews on review sites such as “Trusted Shops” or “Trustpilot” can encourage potential customers in making their final decision when making a buy. This applies especially for niche shops: “quality versus quantity”. If you can convey this motto to your customers, you can successfully make it in the niche.

One step ahead

By far the biggest challenge for a niche provider is the definition and analysis of the target group and its needs. Also, the product must have a high repurchasing rate so that no rapid saturation of the market occurs.

The possibility of providing better specialised service for the specialisation also carries a risk, because staff with the required knowledge and ability need to be found or trained, and this costs money. The challenge is to make the expertise easily accessible and useful to the customer on the website, to give another reason for them to buy from your niche shop.

And yet another challenge is the price war in the market. Even niche shops are confronted with this and need to stand up against it. It has to be decided, if and how far you can or will go along with this price war, with which for every sold product you no longer earn anything, and it’s just a matter of time before you fail. One option would be to regularly offer the customer changing specials, so as to entice them to buy again. Such measures could include rebate specials, freebies included in the order, or special offers which change from week to week.

Examples of differentiation from the big players are: personally advising the customer via live-chat in real time, which would be offered directly on the site or a hotline, through which the customer can get any needed help. The big players can offer the same, that’s true, but with better specialised knowledge the niche supplier can have that cutting edge to put them a step ahead of the big players. Particularly with consultation-intensive products or newcomers in the field, this can be a huge advantage over competition.

What is most critical for the growth within a niche is the placement on the market. Nowadays there are countless online shops, all competing for the attention of the customers. With a limited budget, the advertising channels must be carefully chosen. A niche shop therefore has specific work to do in marketing, just as the big players do, to avoid unnecessary, random scattering which could ultimately cause the budgets to “burn”.

If you want to know more about how PPC will help you to become successful in the niche, you should read the second part, being published on Thursday. We’re also always happy to receive your comments in the comment section.

[1] Source: iBusiness Top Ten Online Shops Ranking


Maximilian Hainlein

I'm working for crealytics as Social Media and Marketing Manager since 2011. My motto: "It's better to be the needle than the haystack."