As A Startup Or Small Business, Don’t Sell To Everyone – Do What Whole Foods, Gatorade And Volcom Did

How often do you meet a small business owner or aspiring entrepreneur who tells you that their target market is everyone? Maybe, if they are successful in the long term. But initially, it is critical that they identify a big market ripe for disruption or it has underserved customers. Then they identify a niche set of customers who are really underserved. What is a niche set of customers? A niche market is a segment of a larger market that has its own demands and preferences.

Startups that focus on niche markets can better cater to a specific consumer than existing competitors who target the broad market. A great example? Amazon launching initially in the book industry segment and identifying high income, prolific book readers who wanted more choice and selection and were not afraid to pay for it. All to ultimately set up their original goal of becoming a broad ecommerce merchant. Barnes and Noble came late to the online ecommerce game and by the time competitors noticed, Amazon had broadened from the book segment and was now competing with Walmart. So, where do you start?

Pick a very large market that has continual sales over the past 15 years or is accelerating rapidly. Two examples of this are the pet industry (with hundreds of niche segments) and the rapidly rising mobile payments industry. Here comes the important part. The key to establishing your own niche market is research. By diligently researching niche markets, you can determine what unique segments already exist, and explore where new ones could be successfully developed based on industry or customers trends. Once you’ve found a potential niche market, it’s essential to think about whether it can become profitable via a current or new business model. A great example of this is the rapid rise of the online pet food company Chewy in the pet industry space.

There are several benefits to targeting and establishing your company in a niche market. First, you will have reduced competition initially. Second, it will focus all your business and marketing efforts. Third, you can provide product or service differentiation and expertise in your niche category. And lastly, you have the time to build your brand loyalty. The more specialized the products or services you offer, the less competition there will be, which gives you a chance to grab market share with less price competition. Targeting a narrower audience also allows you to focus your efforts on catering to specific customer needs.

This concentrated effort offers your startup or small business a chance to become known as the specialist in a particular product or service and makes a business more likely to be recommended by its customers. Solidifying a niche market position can help you confidently expand your offering into new, broader markets. Think of the brand Patagonia who started with great technical climbing gear. They established a loyal following among climbing experts then gradually expanding into climbing clothes, then outdoor clothes and today, they even sell wine.

This is not a new strategy. This is a strategy for any startup that wants to become a larger company. Listed below are brands who started in big markets by focusing on niche customers.

Whole Foods: Started in Texas, one location to focus on natural foods.

Under Armor: Started by a ex-football player who was tired of sweating through his cotton t-shirts.

Gatorade: Started on a college campus to aid football players in replenishing critical fluids.

Stone Brewing: Two founders wanted to brew traditional IPA craft beer to combat industrialized beer.

Lululemon: Started by a founder with a single yoga studio who wanted to create better yoga pants for women.

Constant Contact: The founder realized that providing a simple online email marketing tool might level the playing field for small businesses.

Weebly: Founders wanted to let anyone easily create a website with very low upfront costs.

Volcom: Founders wanted to create an action sport company that united snowboarding, skateboarding and surfing customers.

If you do your due diligence, you will find that almost every successful company, unless they raised over $200 million to gain broad awareness, started by focusing on a niche market of customers in a large or growing industry. It’s the best way to enter an industry, establish your company and gain the niche customers who will help you build your brand and potentially become a large company.