Sustaining a niche business

There's a gap in the market but is there a market for the gap? Here’s how niche businesses can find and maintain a corner of a market while fending off competition.

Many niche business owners start out as frustrated consumers, disappointed by the absence of a product or service in the marketplace. But, although there may be a gap in the market, potential business owners need to know about the gap between being a frustrated consumer and running a successful niche business.

A niche business is a specialised business offering products or services to consumers who seek something other than what is offered by existing businesses or who have been overlooked by existing businesses. Some niche businesses start via an invention that fulfils a market need, while others use innovation to bring existing products or services to new markets.

The primary key to success when selling to a niche is making your business market-driven, not product-driven, says John Kapeleris, deputy CEO of the Australian Institute for Commercialisation (AIC). "A lot of product-driven ideas fail because when the great idea has no identifiable market need it’s very difficult to commercialise." Be realistic about how many people would need and be willing to pay for your product because if no one wants it except you, there's no business in it.

Kapeleris suggests new niche businesses avoid this trap by conducting thorough market research to test the niche before launching the product. "You need to research market feasibility. The idea might be technically feasible, but you need market feedback very early on. Involve a couple of potential users within the market and get their feedback," he advises.

Because niche business owners often fulfil their own needs as a consumer, it's easy to become complacent about the market. Be aware that this can blinker you from expanding your market reach. "As part of your strategy, identify the fields of use. What you can do to maximise return is leverage off those fields and license your product in various markets," Kapeleris says. “Most people usually have one field of use and that’s the most obvious one and the one they focus on. We usually talk to people about more fields when they come to us.”

Points of Difference

When Karen Lavecky started her dim sum company Lotus & Ming five years ago, she knew of several players already selling similar products but she identified that traditional Chinese dim sum had flavour and dietary limitations. "I recognised that although the majority of Australians love Asian food our constitutions don’t necessarily feel the same way. Many of us react badly to the preservatives and additives found in traditional dim sum and we’re not offered the variety that the western palate needs," she explains.