Operating In A Niche Online

Industry Insight

Generally speaking, most eCommerce entrepreneurs take two approaches: They go horizontal and offer a variety of products to shoppers or they go vertical and specialize in a particular niche. Think of Walmart versus Newegg – the former sells everything under the sun, from clothing to groceries, while the later sells only computer hardware and software.

At first glance, taking the vertical approach might seem more challenging – after all, the target audience is limited. The reality is that both strategies come with their own unique sets of obstacles. If merchants choose to go vertical, it’s absolutely critical that they understand from the outset what it takes to make a successful niche eCommerce store in terms of both sustainability and profitability.

Gaurav Saraf, a columnist for VCCircle, compares the situation to that of hunting, asserting: “In a vertical play, the marksman (entrepreneur) is shooting at a target (market), which is only a small fraction of the horizontal play. However, the requirement for ammunition (funding/resources) may not reduce in the same proportion because the probability of striking a smaller target is also much lower.”

His point is that niche entrepreneurs need to be more strategic in regard to every facet of business operation, including customer acquisition, inventory planning, eCommerce software usage, company modeling and logistics management. He urges retailers to consider the importance of value proposition, customer loyalty and innovation.

1. What value do you offer?

While operating in a niche, it’s crucial that companies make what value they bring to the table readily apparent. Going back the Newegg versus Walmart example, both companies sell laptops and computers. However, Newegg provides more value to consumers in the laptop market because the retailer offers a broader selection, laptop buying guides, specialized warranties and service plans, business-to-business deals and an affiliated community that can provide detailed reviews and feedback.

If you take the vertical approach, you must ask yourself whether you’re providing substantial value to get consumers on board. This value can come from inventory selection, shopping experience and a variety of other factors. That being said, it’s also critical that merchants don’t associate value with discounts and deals – this goes against planning for sustainability and profitability. Discounts get shoppers on eCommerce stores, but it trains them to only buy when sales happen. When deals stop, customers no longer visit online retailers.

2. Bringing the innovation

Innovation goes hand in hand with providing value. If retailers are innovators, they will come up with unique ways to set their brand apart from competitors and attract customers. While developing a fresh approach may seem like a daunting task, it will go a long way in peeling customers away from competitors and getting them to your niche store.

As Saraf notes, Shoedazzle has customers fill out a style profile, which it then uses to recommend relevant fashion brands and accessories to members. Newegg offers specific buying guides to take the complexity out of buying a new computer. Other merchants may opt to create unique catalogs for consumers based on purchase and web browsing history. You have a number of options at your disposal, it’s ultimately a matter of getting creative and doing something that makes sense to your audience.

3. Encouraging customer loyalty

When creating a niche, it’s critical that you know your customer. This starts by collecting information from every source imaginable and then putting it into action. If you see specific trends and patterns, capitalize on them to make your eCommerce business even more relevant to shoppers. When customers feel that retailers “get” them, they are often more likely to come back for repeat purchases, which is critical to a niche merchant.