Key learning outcomes:

  • Identify niche market opportunities.
  • Recognise the importance of carrying out in-depth research on customer needs and the competition.
  • Learn how to make the most from your areas of knowledge and expertise
  • Identify opportunities to promote your business.


Business is becoming more and more competitive across most industries. These days you are not just competing with the store next door, but also with sellers across the globe through online stores. How then does a small business remain viable and profitable? One of the answers is to find a niche market. A niche market is a small gap in the market where there is a specific customer need, but where there is little or no competition.

Why look for a niche market?

Finding a niche market will give you greater control over your pricing and costs, and this in turn will lead to higher profit margins. Niche markets can be particularly beneficial for small businesses as they can focus on what they do best. Some businesses fall into the trap of trying to be all things to all people. A niche market is specific and defined, meaning you need to remain focused to satisfy the customers’ needs.

A case study

We will look at a case study of a local sports store to illustrate how you can identify and capitalise on a niche market.[wlm_ismember]

The store had been open for several years and had been stocking a large range of general sports shoes and equipment. Over time, sales declined as it became easier for customers to access the same products online and similar products were readily available in discount stores and large retail chains across the city. To compete, the store needed to sell products at very competitive and heavily discounted prices. Additionally, in many instances the store was not able to satisfy customers’ needs for specialised sports shoes because, due to space and funding restrictions, the store could only stock a general purpose range of shoes.

Reductions in profit margins and increases in fixed costs, such as rent, meant the store was in a precarious situation. It was obvious that they were no longer able to compete with a mass-market product. The options were to close their doors or to look for a gap in the market.

Identifying the niche

When looking for a gap in the market, you should ensure that there is going to be enough demand to make it a viable business option. A quick look on the internet at failed inventions will tell you that there are a large number of products that have been invented to fill a market gap, but that never took off because no one actually wanted them.

The first step is to think about all the potential market opportunities and to identify the current level of competition. The sports store owner started by listing every sport that was played in the local and surrounding areas to create a list of potential specialties. Next, he looked at what his and his team’s areas of expertise were and what sports they played and looked for any crossovers. It is important when you are looking to move into a niche market that you have a high level of expertise – the more specific your market, the greater your knowledge needs to be. Finally, he investigated competing sports stores in the local and surrounding areas.

Research showed that converting the store into a specialist running outlet looked to be the most viable option. The owner and two employees were runners, the store was located close to one of the city’s most popular running tracks and there were no other specialty running stores located close by. Also, running is a sport where shoes need to be fitted properly and replaced on a regular basis. The final step was to ask customers how they would feel about the change. Given the positive response, the decision was made to move forward.

Making the most of the niche

Once the gap in the market was identified, the next step was to implement a strategy to take full advantage of it. The following were identified as the most important factors to take into consideration. We also outline the actions taken:

The outcome

The sports store is now successfully operating as a specialist running outlet. It is important to understand that the decision to move into the niche was only made once thorough research had been conducted, and it was determined there was sufficient market demand to make the shift in focus viable. Additionally, a strategy was put in place to take full advantage of the opportunities offered by the niche market. Some of the key benefits that came out of the shift were:


Finding and building a niche market can seem elusive with so many products and services available today. The key to finding the right niche for you is to spend time researching your current customers to find out what other products they would like you to offer. Think also about the customers who you fail to do business with. Is it because you are not offering what they need? Look also at your areas of expertise to ensure that you are taking full advantage of them in your business.

There are a number of other learning articles in the “Research and Analysis” section of our website that you will find useful, and we also suggest that you read the article “Blue Ocean Strategy”.[/wlm_ismember]

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