Niches: What Is It And Why Is It Important For New Businesses

By Janie Leong

Have you heard of Amazon, Shopee, Lazada, or even eBay? One of those starting in a niche selling only books. In an article by the Harvard Business Review, they state that large businesses can evolve from niche businesses.

We understand that those big names are out of reach for those of you reading, who are operating dime stores and don’t have access to angel investors or venture capitalists to fund your operation into becoming the next Shopee.

That is perfectly fine as we are just taking one page out of their playbook that can be easily accessible to all of you - Niche businesses.

The best news? There's no secret formula here - just find your perfect fit with some careful research into who will buy what and where before investing time to build out inventory levels across many different channels.

In this article, we will examine what defines a good niche and the techniques you can use to find a niche that is right for you.

What Exactly Are Niches?

All this talk about niche may get you asking what it even means.

Niche marketing is a type of sales strategy that specialises in pursuing opportunities through the development and promotion of products or services for niche audiences. This can include everything from online stores selling apparel aimed at active people, all the way down to ecommerce sites focused solely on providing gardening tools!

However, you may be wondering if you could start a niche business from just small business ideas. At the core of it, a niche business is a business where you can start small and grow at your own pace. No matter how small your business is, just start it so that your small business ideas won’t go to waste.

How Does A Niche Market Benefit Me?

Instead of working in a broader market segment, small businesses can choose to operate within a small niche for a start. Among the small business ideas, a small niche could be considered an easy way to start at. These underserved markets are just waiting for someone like you to come along and shake things up. Five major benefits come from finding your perfect niche, then targeting it with online growth!

1. More Effective Advertising & Marketing

Targeting the right audience is key to keeping your marketing costs low because the smaller your target market, the less you’ll spend on ads and therefore have leftovers for other things.

When you are running a Google Ads campaign, bidding for highly searched keywords is usually more expensive than less searched but more specific long-tail keywords.

This is because the longer and more specific long-tail keywords have less traffic going to them and that would cost less.

Further to that, long-tail keywords would also mean that your customers are more likely to already know what they are looking for.

In the grand scheme of things, this also means that you’ll have less competition because searchers may just search specific long-tail keywords that are more specific than short-tail ones(or organic keywords).

This, in turn, would mean fewer bidding wars on specific keywords due to less competition and you get a spot for customers who will more likely click on your link.

To illustrate this point, imagine that you are in the business of selling laptop bags.

Examples of the broad search will be "bags", which has around 4.4 billion results on Google with a monthly global search of about 315K, at the time of writing.

This is not a good choice as big players with deep pockets are also running their ads on these high-volume keywords which drives the costs up a lot.

When you are running a campaign on these broader keywords, it’ll be more expensive, and not everyone there will be looking to buy your laptop bags, they might even be looking for a Rugged Camping Bag instead, or a Waterproof one.

With a strategy of targeting keywords that are long-tail, for example, "leather laptop bag" you can guarantee the majority of searchers will have an interest in your product.

This makes it more likely they'll buy from you. It is also cheaper for campaigns since these types don't generate as many results or impressions on ads themselves!

In addition to that, there are fewer results to compete with at 87.7 million results on Google and a global search of about 18K, at the time of writing. Not to mention, you will have an easier time ranking for those long-tail keywords.

2. Smoother Sailing, Less Competition

You will have relatively less competition in a niche market than if you were to try selling to everyone.

Consider the following logic - There are over 315K global monthly searches for a particular item (at the time of writing this article).

That’s a potential of 315K clients for you and everyone else to share every month. If you are in a niche, you are providing a product or a service that is not easily provided by everyone else.

Now, would you have less or more competition if every customer had to get something that only you sold?

The answer is simple.

The more specialised your product the less likely customers are to find an alternative elsewhere.

This all means that you are less likely to face competition in your area or niche.

3. Brand & Customer Loyalty

Further adding on to our previous point about less competition, being in a niche therefore would help you earn customer loyalty easier.

Why is this so?

Simply because you hold what your customers need.

Imagine if two companies are providing the same product, customers would be able to buy from one or the other at any point and it then boils down to customer satisfaction, price, etc.

Additionally, if you have cornered the market on a product that customers can’t find elsewhere, you will keep them coming back to your store time and time again.

Simply put, when you appeal to a smaller segment of the market, you get to craft highly specific messaging that’s pinpointed and relevant to your audience.

This all translates into trust in you and your brand.

4. You Can Start At A Higher Selling Price

Highly specialised solutions will usually come at a higher price and since you are putting in the time, effort, and resources to come up with those solutions, you can charge more for it.

This is especially true if your product is hand-crafted.

We have all heard of limited edition products.

We see it all the time in books, watches, cars, soft drinks, etc.

Why are they so popular? Better yet, why are they expensive?

Because of scarcity.

Applying the concept to our point and extending from our previous one, since you are the only party providing this product or service, and because it is not mass-produced or, at least, it may not initially be mass-produced, that very scarcity gives you more wiggle room to charge a higher price.

Although, as we will explore later, asking too much initially may also turn customers away.

So, all other factors remain equal, when supply is low, demand would usually be increased, and so can the price you charge because people will still need to come back to you for that unique product you are selling.

5. You Can Run Your Business All By Yourself

Yes, you can run the whole show on your own or with a limited staff.

Since you are working with a smaller stock inventory, you’ll be saving on storage and operational costs and, so, won’t need stocking staff or a large marketing army, since marketing in a niche space is somewhat cost-effective and simpler.

Running an ecommerce site, creating or sourcing your product, and even buying ads can be done on your own within the span of a few months. You’ll also get results quicker because a niche segment is smaller and you’ll be competing with fewer brands.

What Are The Marks Of A Good Niche?

This is a non-exhaustive list that we’ve cobbled together into the five categories we feel makes a good starting point to consider framing your niche.

1. Selling Price Of $25 - $50

After marking up your cost, ideal pricing should be around $25 ~ $50.

Selling too low like $25 or even $10 per item, you would have to sell a lot more products to make a good profit in the long run OR if you have other products to upsell customers on later.

Selling at $50 per item would be nice as you can sell fewer products to make the same amount.

Selling over this range for an FMCG product may end up being detrimental as customers may become more reluctant since it’ll more likely be considered expensive.

You’ll have to end up spending on more aggressive/persuasive marketing or adverts to ‘convince’ them to spend.

2. Not Adversely Dependent On Nor Affected By Seasonality

If you have an additional source of income to cover the other times of the year when there is no demand for your seasonal product, go for it.

If you don’t, perhaps try to avoid banking on one product that sees demand only a few months out of a year.

3. Small & Lightweight

Your product being small and lightweight confers some benefits.

The first obvious benefit would be less inventory & storage management

You don’t have to spend on hiring warehouses and managers

Further to that, it’s less costly to deliver.

Couriers will charge less for lightweight items than heavier ones.

It’s less costly and therefore more affordable for you to absorb the cost of delivery which benefits your customers with free shipping.

Even if you are not able to offer free shipping, the delivery fee then won’t be too costly for your customers either.

After all, the number one reason for abandoned carts is exorbitant shipping fees.

4. Consumable/Disposable

You want a product that customers will always want to come back to and get more of, over and over again.

Once they consume it or once they dispose of it AND they need it, you will be the only supplier that they need to keep returning to replenish their supply.

This is good for business because then you have a constant supply of repeat customers.

5. Is It A Perishable Good?

You’d optimally want your product to last quite a while before spoiling or breaking down.

Perishables have a rather short shelf life.

Would you be able to sell and ship them all before they expire?

The closer they get to expiry, the more creative you have to get in marketing and advertising which may not be cost-effective like selling at a loss or spending more on adverts.

Unless you’ve got experience dealing with perishables in real life, maybe avoid it for your first foray into online ecommerce.

How To Find A Niche?

We now look at how you should go about exploring what niches to get into. Once more, this is a non-exhaustive list, but five strategies that we found to be particularly useful having been in this ecommerce space for over a decade now.

1. Follow Your Passion

This sounds simple, but makes all the difference in the world.

Don't just choose a niche because you might be into it right now or if it's just a fad.

It should ideally be something you can see yourself being still passionate about for the next 5 years or so.

Is this something you love to do in your free time, or something that you are very knowledgeable in?

What do people regularly tell you that you're good at or what special skills or knowledge have you developed through your work?

When you find an area in which you're knowledgeable and love, that is the sweet spot for identifying your niche.

2. Can You Solve A Problem Or Satisfy A Want?

You also want to make sure there's a need for it or your work will merely be a pastime.

For the best results try angling your passion to either fit a need or satisfy a want that people have.

One way to start figuring out the market is with some keyword research.

Google Keyword Planner is a useful tool for this job.

Input some keywords connected to this niche you want to explore and see which words or phrases get suggested. Sift through the suggestions by monthly search volumes, suggested bids, and competition levels.

For search volume, a rough gauge would be in the range of 1,000-10,000 searches per month. Any less than this and you're probably looking at a rather small market and any more than that, it may be somewhat difficult to rank in searches due to stiffer competition.

For the competition, look for low to medium levels. While this may only tell you how competitive the word or phrase is on AdWords, do not discount it because you can still get a general idea of organic competition levels.

For suggested bids, higher bids will often indicate a higher level of commercial intent. So, higher bids often mean that people will pay more because they make more when they rank for those keywords.

Another tool you can use is Google Trends which is a great tool for identifying what's trending, what's just a fad, and/or if a certain keyword is on the up or down.

You could get an even clearer picture when you search the aforementioned keyword in the range of the past 12 months or even using all results from the start of time.

Should all else fail, go out and talk to people in your community to find out what they are lacking and how this relates to your passion or business idea.

3. Scope Out The Competition

Now that you have decided on your passion and have gotten a somewhat clearer idea of what you want to do, you now have to look closely at your potential competitors.

Google some variations of your keywords that we talked about earlier and if several sites already dominate the space, it might be wise to back off and not take them on.

Conversely, if there isn’t much competition, you might want to consider the very scary truth that perhaps people have tried the same product idea before…and have failed.

However, if you think that it’s not a heavily populated space and you do decide to move forward, you’ll know what obstacles you might face in gaining market share.

Perhaps you’ve decided to focus on laptop bags. That could be a potential niche if you’re into helping people look stylish while providing adequate protection for their electronics.

Start by searching for “laptop bags” on tools like SEMrush to get some data about your search term. The results would include stats related to both organic as well as paid traffic.

Scroll down to the organic search results portion and that’ll be where you can find your biggest competitors.

With that data in hand, you can then decide whether or not you’ll be able to go toe to toe with them.

Also, don’t be afraid of combining tools like Google Trends, Adwords, Ubersuggest, and SEMrush for optimum data gathering.

4. Do The Budgeting And Figure Out Your Profits

Think now, at this point, how much would you need to be pumping into the startup? Remember that the goal for you getting into an online business is profit-making, after all.

Having something as simple as an Excel spreadsheet to sort out your costs (operating, marketing, advertising, suppliers, etc). That will give you a rough idea of just how much you need to make to break even and how much more to then start generating profits.

That said, try aiming for the cost of procuring the item to be at least 3 times if not 4 times less than the selling price.

Going back to our earlier point above, if you are selling a bottle for $25, you should be able to have that item in stock and shipped for at least $5-$7.

This will give you a pretty safe buffer to cover operating costs, and campaigns, and help you tank those rainy days.

5. What Else Is Stopping You From Starting Your Online Business In This Niche?

There are always loads of reasons or excuses why you would not want to get started. Some of the more common ones that we’ve heard are:

I know nothing about marketing
I don’t have enough money to start
My business is not good enough
I don’t have support from others at all
No one likes my business
No one likes me
I’m old

While it may not be easy to start your ecommerce journey, you know yourself best.

For every excuse, there has to be a counterpoint.

Nobody is too old to start an online business; nobody hates your business, chances are, they haven’t heard of it; everybody can do marketing, it’s just a matter of testing the right method that works for you and your business.

Of course, there are some restrictions that you will have to keep in mind as well.

Some couriers, for instance, do not ship volatile products like lithium batteries or foodstuff.

If you can keep all these obstacles in mind and find ways around them, you’re well on your way to being an online business owner.

Bonus Niche Ideas

For this portion, we have cobbled together a few examples of niche ideas that you could try your hand at. Keep in mind that we’ll be framing this in line with the five criteria mentioned above.

1. Tea

This is a nifty little product that has several health benefits like reducing stress and promoting mental alertness.

Should you go selling tea, the price of 1kg of this in its raw form(dried leaves), costs $3.62 in January 2022.

You could blend a few different types of teas, package them with your branding and sell them for a minimum of $25 per box.

You could also try making a specialty line of signature blends and charge a bit more like around $50.

The reason for this is rather simple when you do your keyword research. On Google Trends, the keyword “Tea” has been on a consistent upward trend over the past 12 months.

This one, like tea, is a lifestyle product that, while not consumable, can be considered a disposable product.

What this means is that when the wax has finished and the wick is burnt out, customers will be coming back to you for their next scented candle or whatever candle product you decide to go into.

Once more, candles, while considered somewhat small and lightweight (if your product is those small little bathtub kinds), thus inventory management and courier fees won’t be too much of a burden.

You might think that you need a costly budget to start this niche business but, trust us, this is one of the more affordable choices among small business ideas.

Mix different scents into your candle and you’ve got a specialty household candle that can fit quite well into the $25~$50 criteria.

Finally, it’s not a perishable good which means you don’t have to worry about it going bad.

To put a finer note on things, doing a keyword search of “Candles” on Google Trends, you’ll find demand for it to be somewhat consistent over the past 12 months.

It’s small and lightweight, you can mix different spice packets to cater to different cuisines, and even bring out that culinary creativity is hidden within. This is yet another fine choice among small business ideas for you to consider.

Once again, specialty mixes can go for a nice sum on the market which fits into our $25-$50 criterion.

Considering that certain spices like nutmeg were used in the preservation of meat on ships back in the day, spices can have quite a long and stable shelf life.

The best part is, it’s consumable. This ensures that if your particular blend of spices is delicious, customers are more likely to come back to you over and over again.

Start Your Niche

You may be wondering - “How should I start if I want to start my own small business in Singapore”?

Firstly, you need to register a business in Singapore, then what you need to consider is having an online platform to start your own business.

Shopcada is your all-in-one ecommerce platform for starting your small business ideas so that you can start selling your niche products.

With Shopcada, you could easily have your own small business in Singapore today! As it is a Singapore-based ecommerce platform, you will also be entitled to a Productivity Solutions Grant (PSG) under the Singapore government’s initiative to benefit start-up businesses to cover 80% of your digital ecommerce startup costs.

In addition to that, eligible employers for the SkillsFuture Enterprise Credit (SFEC) initiative will receive a one-off $10,000 credit to cover up to 90% of the out-of-pocket expenses on qualifying costs.

Conclusion

Let’s go over the cliff notes for today’s article.

We went over what a niche is and how it benefits you:

Cater to a smaller segment of the market with a specialised product or service which you can run minimally or with a small crew, starting from small business ideas.

Spend less for more targeted and effective marketing.

Able to sell at a higher asking price.

Better customer brand loyalty.

There’s less competition.

We went over the criteria of good niches:

Something small and lightweight so you don’t burden the consumer with hefty delivery fees & save yourself some funds on warehouse management too.

Able to sell within $25-$50 so that you can get a reasonable markup and not scare customers away with a hefty price tag for an FMCG.

Not affected by seasonality which means it sees demand all year round.

Not a perishable product and thus can be stored for quite some time without you having to spend more on marketing just to move them.

Consider if it’s a consumable or disposable product because this means you’ll get returning customers.

We also talked about how to look for a niche:

Your passion should drive and sustain you for the days when you don’t want to do any work.

That passion should also serve to solve a need or a want in the community otherwise nobody will want what you are offering.

Scope out the competition so that you can set yourself apart from them. This can also help you in defining your brand’s USP as well as identifying the competitor’s weaknesses.

Do your maths and work out your profit margins. Something as simple as a spreadsheet of your costs vs your selling price would help you get a rough idea of how sustainable your business will be in the long run.

Be mindful of restrictions to your business or obstacles that you may face. While psychological barriers may be relatively easy to overcome compared to things like couriers not wanting to deliver your product or if the product you are trying to sell is just plain illegal.

We hope you’ve found this article helpful and will put everything you’ve read here into practice finding your next niche!

Posted on 25 April 2022