Retailer’s Perspective: Leveraging Niche Markets For Online Success

By Wai Hong Fong | 25 May 2011

Wai Hong Fong from OzHut offers his insights on how to deliver a personalised and engaging customer experience by tapping into niche markets.

When we first stepped onto the online retail scene in 2007, the industry was flooded with copies of online departmental stores, particularly DealsDirect wannabes. The idea of leveraging eBay to acquire customers and eventually break away once you got a large enough database was a fairly common one.

We thought about venturing down this path ourselves. But a flurry of questions confronted us.

  • How will we get hold of enough stock?
  • How will we be able to cover enough categories to appeal to a generalist shopper?
  • Even if we could, how would we compete against the 10 plus other sites that were already doing this?

We eventually came to the conclusion that we were too small and it was too late to adopt this model. That was when we stumbled (quite by accident) over the idea of setting up a store dedicated to the niche market of telescopes.

Setting Up A Niche Model

We had suffered lots of frustration trying to sell expensive telescopes on eBay but failing because of the perception that the auction site was merely a place for cheap, second-hand goods. This gave birth to the niche retail model, which is a large part of our online identity today.

I don’t think we could have done it any other way. We started during the midst of the GFC and copious financial investment was not available to us to invest into our online business.

However, we found that taking the niche approach, didn’t require any major financial investment and that the site was beginning to work really well in its own right. It worked so well in fact, we’ve since build 12 different sites.

Adding weight to our case, Paul Greenberg, Co-Founder of DealsDirect, has also been quoted as saying that “if he were to start from scratch today, he would focus on a niche opportunity!”

Dedicated Expertise Increases Trust

When a customer visits a site dedicated to a particular niche or interest group, the level of trust is typically a lot higher. An example would be the different shopping experience when buying a steak from Woolworths compared to buying from your local butcher. Knowing that you’re buying meat from someone who deals with meat and only meat everyday is a very reassuring feeling – most people perceive the local butcher as a ‘meat expert’. While this may not always be true, the common tendency is to associate greater trust towards dedicated experts and specialty stores.

Promoting Expert Product Knowledge

People tend to rely on others for guidance. Unless you are an expert yourself, it’s very likely that you’d need some help choosing the best product when you go shopping. This is especially true for products like washing machines or digital cameras.

While physical retail sales spiral downwards, many retail outlets struggle to keep knowledgeable staff in store. Focusing on a niche market however, means your depth of knowledge will add tremendously to the richness of the customer experience. Imagine being able to interact with people that are not just experts on the range of products you’re looking at but also passionate about making sure you are getting something that will perfectly suit your needs. You can do this online quite easily through product selection guides, a live-chat service and passionate customer service personnel.

Allowing a  Wider Product Range

Focusing on a niche market also allows you to provide a wide range of products customers can choose from. Generalist stores prefer stocking deeper levels of a few items because that’s far easier to manage than carrying a wide range of items across every category. This gives an advantage to the niche player because people love choice. The ability to choose from a wide range means that customers don’t have to feel like they’re being forced into a corner and will also have a more personalised and engaged shopping experience.

Creating  A Loyal Community Following

The foundations of a great community are common interests and shared values. We’ve found that engaging our customers within a community, such as Facebook (which makes this amazingly easy), creates a real sense of connectedness.

The OZScopes Facebook page for example, is not just a string of posts talking about our products or even promoting sales, but is filled with interesting news on astronomy, photographs people have taken and experts helping out beginners on a day-to-day basis.

When people engage with each other, share stargazing adventures and tell stories of their childhood dreams of owning a telescope, it creates a sense of belonging. This in turn is a surefire way to generate return customers and brand evangelists; it’s customer loyalty at its best.

Online Marketing Loves Niche

Being niche also has a very big advantage from a search marketing perspective. For one, it really helps when it comes to building links from relevant and related sites. It’s a lot easier to get astronomy clubs to see the value of linking to an optics site than it is to get them to link to a category page in an online mega-mall.

Generating rapport with bloggers (typically backyard astronomers) works a lot better as well, because of the relevance that your entire range of products may have to their readers.

Pay-per-click advertising copy can emphasise your expertise in the field, allow you to more effectively target a broader range of relevant keywords and combined with a wider range of related products, help create better converting landing pages. In short, being a niche player means you already get a step forward in many respects whether it’s conversion rate optimisation, SEO or paid search.

Taking on the Big Players

Perhaps the highlight is that, with enough dedication and focus even a small player can become the dominant player within a niche market. The number of stories of businesses defining and subsequently becoming leaders in their own niche markets continue to abound – Custom shoes, wholesale wine and even telescopes!

Finally, the best thing about the niche model is that it instills a customer experience that closely resembles the kind of businesses reminiscent of the ‘good ol’ days’, built upon a foundation of serving people, cultivating trust and engaging with communities. Today, businesses have the opportunity to break down the walls and barriers of a mass market retail model and re-engage customers through a niche approach.


5 thoughts on “Retailer’s Perspective: Leveraging Niche Markets For Online Success”

  1. Michael Fox says:

    Great post, couldn’t agree more. Niche online retail provides such a better shopping experience for customers, and thus a great opportunity for entrepreneurs.

  2. Jason Potter says:

    So true, Vivaz Dance is an online dance shoes store. Fortunately there is not much competition for selling dance shoes online in Australia. This gives us an advantage with PPC advertising. We can also stay on top of trends and even start new trends in this market. It is much easier to stand out in a crowd when you are selling niche. Your site ranks higher in SERP’s & If you do something really well the results are amplified because no one else is doing it. Every time we make on-page optimizations we get improved results. We also get better opportunity’s, when TV show’s; So You Think You Can Dance & the latest Underbelly-Razor needed dance shoes we where at the top of the pile. Our biggest competitor is ourselves and we are always trying hard to better our offering. There is always room for improvement and the rewards are fantastic. Go niche!

  3. Steven P says:

    While I think there is room for everyone on the internet, I think Wai makes a strong case for Niche retailers (and of course, our own website is niche as well, so maybe its preaching to the converted) but the whole development of department stores in the “real world” came about because of the customers desire to find a large range of items in the one place to avoid travel. This really is no longer the factor in online sales, so once again, niche has a stronger offering.

  4. Nathan says:

    I agree, the model can work really well, especially when you have good solid systems and processes behind it. Once you have those systems and can manage and run multiple niches (both from a technology and process perspective) there is some great opportunity!

    We are seeing more and more niche retail sites appearing these days.

    Good job to Wai Hong and his team!

  5. Great to see so many passionate responses from fellow niche online retailers that are clearly doing well in your own unique spaces. I myself am an absolute fan of the shoesofprey(michael’s) story, but to see other businesses thriving in areas like dancing shoes(Jason) and pet products(Steven) with a vet background is truly amazing.

    My belief is that once this whole hype with ‘it’s all about price’ in the online retail space dies down, and people start to realise that they rather pay a bit more than go through horrible shopping experiences, then niche players will start to be more valued for the work that is done.

    That being said, I’d say that Nathan’s comments on good solid systems and processes is accurate in that these would be the main challenges niche players will have to face in competing with our bigger generalist counterparts.

    Go niche!

Leave a Reply

Your email address will not be published. Required fields are marked *