Market niches
What is a niche?
Some ideas about what a niche is:
A uniformaly addressable market segment
For me, niche usually means:
- A segment of a market, that can be addressed uniformly
Example
- There is such a thing as a niche for caravans (unless you think that the market for caravans is too big to call it a niche). You can address prospects in this group uniformly (to a certain extend), like through magazines
- Maybe there is a niche for something like off-the-road caravans. This fits the definition of a niche above a bit better: It's relatively small (compaired to the main category of caravans) and prospects in this niche can probably be even more uniformly addressed, like through enthusiasts websites and magazines
- Maybe there is a niche for something like gothic German off-the-road caravans. If so, it would definitely be a small part of a bigger market, and communication can be even more uniformly.
Counterexamples
Maybe some examples of groups that are not nichses, as they can't be uniformly addressed:
- Gothic German off-the-road caravans and luxury caravans
- A magazine for both recently graduated students and unemployed people without school diploma
- A news site for BMW & Mercedes enthusiasts
- A RedBubble shop with wildly different designs applied to all products that RedBubble offers.
A collection of search phrases leading to the same product(s)
A refreshingly different way to define what a niche is:
- A collection of search phrases that lead to a product, or collection of products
This captures the same aspects as in the definition before, but more suited for online marketing.
I also heard somewhere the addition ...A niche is a place to which 6 or 7 strong key phrases lead. That seems like a normative addition concerning the size of the niche, but I don't know the context of that statement.
Aspects of niches
Some aspects of niches that are relevant later on in this article:
- Size
- Equilibrium [1]: Is it a seller's market or buyer's market? Can you quantify this?
- Development.
Size of a market
The size of a niche or market, is the amount of revenue that is generated in that market or niche, in a given period.
In practice (for example, when compairing niches) it might be more practical to estimate market size in terms of SAM (serviceable available market): How much of that market you could service.
Competitiveness of a market
With competitiveness or development of a market, I mean the overall maturity, or how well-developed propositions are in a market. It seems that usually, the larger the market, the more developed it is.
This trade-off between size and competitiveness, is the reason why some entrepreneurs search for niches: To strike the optimal balance between size and ease of developing a superior proposition.
Examples:
- Tesla choosed the niche of electrical cars within the market of cars. This is a very large niche in a well-developed market. Risk and potential for rewards are accordingly high, requiring large amounts of ventrure capital and strategic entrepreneurship (e.g., market buying or lead losses)
- An English-speaking webshop selling distribution belts in the US: Quite a large niche and probably one with some established players with well-developed propositions
- An English-speaking webshop selling distribution belts in Estonia: That's a niche worth maybe only some tens of euro per year (very small). It's a niche that is probabaly not served at all (maybe indirectly, like through Amazon.com)
- An English-speaking webshop selling ditribution belts in Germany: Quite a niche and probably quite developed.
Equilibrium of a market
The equilibrium of a market means:
- Where the market equilibrium is on the spectrum from buyer's market to seller's market
- If there is more demand than supply, or the other way around
- Whether buyers or sellers have more leverage.