Understanding Niche Markets, Past and Present
To understand modern eCommerce niche markets, it can really help to wind back the clock and find what’s worked in the past and how things have evolved over time. In this section, we cover the basics of what markets and products are, how they operated before the advent of the internet, and how market niches have evolved alongside the transition to a digital marketplace.
What Is a Niche Market?
When deciding which business to start, a key question arises: where do you even begin? Does an idea for a product come first, or a concept of a market with a need? The fact is, they are interconnected like yin and yang, you can’t have one without the other. A market, a niche, or a niche market is essentially a group of people who share certain characteristics and, most importantly, a common need. And a product is anything that provides a solution to this this need—together, they go hand-in-hand.
For instance, imagine a group of people who feel tired in the mornings. Their need is to feel more awake—here you have a market: a group of people with a specific 'need', to feel more awake. There can be many solutions to any given problem, and each solution comes in the form of a product. In this case, the products could be a coffee, an energy drink, or even a more comfortable mattress. Of course, you can narrow down markets down further and further, from tired people to only include people who are tired and want coffee, or luxury coffee, or luxury Columbian coffee, and so on. The terms market and niche market are often interchangeable, but generally the more specific the group is, the more niche it is.
When starting a business, a common question arises: should you create the product first and then determine how it meets a market need, or should you begin by identifying a clear market demand and then develop a product to fulfil it? The truth is, both approaches are valid, and focusing on one often leads to the discovery of the other.
Take Tesla, for example, often seen as a product-first company. Their electric vehicles have transformed the automotive industry, positioning Tesla as a leader in the mass-market adoption of electric cars. However, their success was also driven by an existing demand for cars and a growing desire for more sustainable, environmentally friendly alternatives.
Now, consider Netflix, which followed more of a market-first approach. As media consumption shifted from physical formats to digital, Netflix recognized this change and developed a streaming service to meet the evolving needs of consumers, moving away from their initial DVD-by-mail business model.
You can begin with a product-first approach or a market-first approach, and as aforementioned it can be hard to split the two up. For this guide, we’re going to focus on finding a market first and go deeper into focusing on the product in part two.
Finding A Market Niche Before the Internet
Prior to the popularity of the internet, a practical market-first approach would have been starting a venture as a high-street retailer. You could take a stroll down your local bustling high street, where high-street shopping accounted for over 95% of retail activity at the time. The shops and their products were a direct reflection of current consumer needs. This allowed you to observe the market landscape and demand first-hand. You’d see people with various needs and products to meet them—customers searching for new clothes to feel fashionable, grabbing a bite to eat to satisfy their hunger, or stopping by a café for a coffee to wake them up.
You’d pay attention to the shops in the area, noting which were thriving and which were quiet, and what types of products they were selling. By assessing the environment, you could start to get a feel for the pulse of demand on the high street—what types of shops were missing, and where the potential opportunities might lie.
When brainstorming ideas, you’d steer clear of being too specific about the need you were solving, in other words, too niche, as you would miss out on too many potential customers on the high street. Instead, it would make the most sense to appeal to as many people as possible—the biggest viable market, offering a broad solution to as many people's problems as possible. Maybe the high street was missing a good suit shop, pizza joint, or electronics store—all shops with surely enough demand from the clientele.
How Have Niche Markets Changed in the Modern Marketplace?
Fast forward to today, the internet has changed things dramatically, but in some ways, things have stayed exactly the same. Let us explain:
Now, rather than a bustling high street where your shop must be broad enough to cater to a wide variety of needs, you can think of the online space like navigating a sprawling metropolis where each street is tailored to a specific niche: there's 'Gold Street' that has shops which only sell jewellery and watches, 'Fitness Avenue' for health enthusiasts only, and 'Eco Lane', where you can find all things sustainable products—but nothing else. So now, instead of a general suit shop catering to all, it would be better to offer something more niche, maybe specialising in unconventional, bright and bold suits, with innovate designs for example.
The internet has made online commerce more like a vast city than a bustling high street, where anyone in the world can virtually step onto any street there with just the click of a button. These streets are highly specific and very competitive. Instead of creating a shop that caters to everyone like you might have done on the bustling high street of the past, it’s now much more effective to create highly specific product lines for the specific needs of a small group of people.
This method wouldn’t have worked pre-internet as there wouldn’t have been enough demand on your local high street for the highly specific products, but now that people can access your online store from anywhere in the world, you can be much more specific in who you sell to, and who’s needs your solving.
This is made possible because you can connect directly with any global customer in need of your product and sell straight to them. The more specific you tailor your product line to their need, the more they want it, and the more money you make. Amazing, right? So, “what’s the catch?”, you might be wondering. Well, just as easily as any consumer can find your shop on your internet street, they can just as easily find your competitors. So yes, now you can be a lot more specific in the niche market you’re targeting, but you’re not just up against the other shops on your high street anymore, you're competing against everyone who shares your niche on the whole of internet, making it a crowded space.
How To Find and Verify Your Own Niche Market
Ok, so now we understand how important it is to be specific when starting an eCommerce business, it’s time for the exciting bit, let’s start finding and verifying your very own market niche!
How To Come Up with Profitable Ideas for Your Business
It’s always best to start by brainstorming niches that truly interest you, this way you will be more invested in your business, but most importantly there must be a solid need behind it. Remember, it’s often better to be more precise these days—think 'football boots for girls' rather than 'football equipment store'. There are loads of football retailers about making it a very competitive, but with the rise of women's football, what’s the marketplace like catering to the specific needs of female footballers? Or how about ‘keto-friendly chocolate’ over a generic 'chocolate store'. In the pre-internet days, you could have got away with opening a general store for chocolate on your local high street, and there would probably be no other shops their selling it, but on the internet, things are different.
Today, we’re competing on those metaphorical digital streets like ‘chocolate street,’ where the biggest names in the industry will be set up right next to you and be your direct competition. It’s tough to get noticed on a street like that. However, just off ‘chocolate street,’ there's a quieter side street called ‘keto-friendly chocolate lane’ with people needing a keto-friendly alternative to chocolate and looking for the right solution for them. There’s another, just round the corner called ‘vegan chocolate lane’, catering to a different need, both with much less competition than a general chocolate store.
Here, you can stake your claim on one of the streets and open shop. While the number of visitors might be lower than on the main ‘chocolate street’, the vast audience of the internet means there’ll still be a significant amount of traffic. The important thing is to find a group of people with a specific need, a niche market.
How to Conduct Market Research to Verify the Popularity of your Market Niche
Now that you’ve identified a market niche (or markets) you’re interested in, it’s time to verify the demand and assess the competition for them. You’ll want to consider two key factors: the level of demand—how many people visit your online street, and the amount of competition—the number and quality of the shops already selling on your street.
What you’re aiming for is to find a market that has a decent amount of demand, and manageable competition, the sweet spot. This way, you can carve out your unique place in the market by offering something distinct from the rest and have a big enough audience to generate demand for your product.
Verifying Search Volume to Validate Demand
A great place to start is to verify the demand of your market through search volumes. This shows the amount of people searching for a given term. Think of it this way if there’s 20,000 people a month searching on google for keto-friendly chocolate, and other keto-friendly chocolate related search terms, this is like 20,000 people all walking down keto-friendly chocolate lane, all sharing the specific need for this type of chocolate.
This is our first sign that there’s solid demand, indicating it could be a good market to get into. To view search term volume there are tools like Google Trends, Keyword Planner, Semrush, and Ahrefs, which show search engine keyword volumes. Tools like Helium10 are used for search volumes on Amazon, the biggest eCommerce marketplace globally, making it a great place to carry out research.
You can use different tools for different search engines and there are many different software options available for each one, so we suggest conducting your own research and comparisons to find out which works best for you.
How To Verify Competition Within Your Niche
Once you’ve validated the demand for your niche, it’s time to assess your competition. This is like walking down the street on your metaphorical internet street and having a look around all the shops there. At this point we have verified that there’s enough visitors to the street, but how competitive are the shops on the street? You can use the same tools you used to verify search demand to identify top-ranking websites for your keywords, these will be your main online competitors, or just carry out the search yourself and check out the top listings.
Study top companies in your market to understand their strengths, market positioning, and strategies. Map the competitive landscape to find where the gaps are and opportunities to differentiate yourself, such as addressing unmet customer needs, offering unique features, or targeting a specific market segment more directly.
There may be solid demand for girl's football boots from the search term research you did earlier, but most of the results are coming up with generic football boots shops—and the ones specifically for girls aren’t very good. Here is the gap. Could you understand the specific pain points of girls playing football? Understand how their taste may differ from a generic football equipment store? And work out how you can make your branding and website appeal to them specifically?
By combining competitor analysis with search volume data, you can determine if the niche is oversaturated or has untapped potential. Oversaturated markets are dominated by large established brands and generally have high search volume, while balanced markets show steady demand with a mix of established and newer players, indicating the chance to break into the market.
How To Carry Out Primary and Secondary Market Research
Now that you have a solid idea for a target market, conducting thorough market research is essential to proving and developing your concept. This step helps you understand your potential customers—their needs, behaviours, and pain points. Without this, you risk overlooking critical insights that drive your audience’s decisions and engagement with existing products. Effective market research allows you to refine your offering, address unmet needs, and ensure your product resonates with your target audience, setting the stage for success.
Primary research involves collecting new data directly from your audience. Budget-friendly methods like surveys or social media polls can provide quick insights, though they may lack the accuracy of more targeted approaches. More detailed methods, such as focus groups or interviews, offer deeper insights but at a higher cost.
Secondary research uses existing data from sources like industry reports, data-driven competitor analysis, and consumer reviews. This approach is typically quicker and less costly, providing a broader understanding of market trends and behaviours, though it might lack specific relevance to your niche. For example, analysing competitor product reviews—both positive and negative—can reveal valuable insights into consumer sentiment and gaps in the market.
Overall, both primary and secondary research have their place and can be tailored to fit your budget. The key is to carry out research effectively to deepen your understanding of your niche and identify where the best opportunities lie.
You’ve Found Your Market Niche, What Next?
We hope this guide has helped you understand what a niche market is, the importance of finding one and how this can set the foundation for your success. You should have learned how to identify your target market, assess demand, evaluate the competition, and use both primary and secondary research methods to gather valuable insights.
From Research to Reality
With this knowledge, you’ll find yourself well-equipped and ready with a verified market to begin refining your offering and address the needs of your audience, leading you on to the next step: building your product. Stay tuned for the second part of our series, where we’ll guide you through product development and help you bring your idea to life.
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