Niche Market Definition for Business

A Niche Market Can Be the Key to Small Business Success

Artisan Foods
••• Image (c) Luis Davilla / Getty Images


A niche market is a focused, targetable portion of a market.

By definition, then, a business that focuses on a niche is addressing a need for a product or service that is not being addressed by mainstream providers. Establishing a niche market give you the opportunity to provide products and services to a group that other businesses have overlooked. You can think of a niche market as a narrowly defined group of potential customers that have specific needs, a subset of a larger group.

Think of the group of consumers interested in purchasing cleaning services, for instance. Instead of offering general cleaning services, a business might establish a niche market by targeting the portion of this market interested in blind cleaning services. Another business might occupy its own niche in this market by specializing in using only environmentally friendly cleaning products. Markets of any discernible size contain multiple subsets of potential markets - although not all of the possible niche markets will be worth targeting from a business point of view.

Why Establish a Niche Market?

There are a number of benefits to targeting a niche market, including:

  • Reduced competition - other small businesses may not be aware of your particular niche market, and large businesses won't want to bother with it. (Be aware that this is usually not a long-term condition; once one business has established a profitable niche, others are normally quick to move in and if it's profitable enough bigger businesses will take notice.)
  • Focusing your efforts - targeting a narrower client base allows you to focus your efforts on fine-tuning your product and service offerings to cater to more specific needs and enhancing your customer relationships
  • Gaining expertise - becoming known as the specialist in a particular product or service makes your business more likely to be recommended to others by customers (and even other businesses). Customers are always looking for businesses that excel in their area of need.
  • Reducing resources - trying to appeal to a broader customer audience takes more time and effort in product/service development, marketing, and customer service
  • Establishing a toehold - solidifying a position in a particular market can enable a business to expand its wares into the larger market

The trick to capitalizing on a niche market is to find or develop a market niche that has customers who are accessible, that is growing fast enough, and that is not owned by one established vendor already. See How to Find and Master a Niche Market for more information.

Examples of Niche Markets

1) One of the booming niche markets is the food industry:

  • The huge demand for artisan foods is spawning many businesses to fill the niche, from specialty chocolates to cheeses, sausages, jams and jellies, to coffee roasting. Many successful artisan food businesses started out as one person cottage industries making products by hand.
  • Sales of gluten-free products grew 34% year-over-year from 2010 to 2015, and total sales are expected to reach $2.34 billion in the U.S. by 2019 (Packaged Facts report authored by Howard Waxman). Local cafes and bakeries specializing in gluten-free products are popping up everywhere.
  • Organic produce sales continue to grow as consumers become more concerned about the hormones and pesticides used in the growing of conventional food products.
  • Organic food delivery services such as Good Eggs allow customers to shop online for fresh produce, fish, meats and dairy products (sourced from local farms). Door-to-door free delivery is provided.
  • Specialty food trucks are becoming increasingly popular for consumers who wish something other than traditional fast food fare such as burgers, fries, and hot dogs. Enormously successful Clover Truck of Boston, MA runs a fleet of trucks that provide a seasonally changing menu that serves vegetarian meals made from mostly locally sourced, organic ingredients (and actually, they do serve french fries).
  • Micro brewing is a very popular niche market in North America as beer connoisseurs increasingly prefer great tasting craft beer. According to Beer Canada statistics, the number of licensed breweries in Canada grew by 70% in the 5 years leading up to 2014. In the United States, the craft beer market has grown to $20 billion annually in sales.

2) Another booming niche market is catering to seniors - 75 million Americans were born in the years between 1946 and 1964 (the so-called baby-boomer generation) and are now retiring or headed for retirement and according to research by the American Association of Retired Persons (AARP) nearly 90% of them wish to continue to live at home in their communities. This has opened up many opportunities for small businesses that cater to this niche market:

3) The pet care industry is another very popular niche market - Americans spent $60.5 billion on their pets in 2015 (American Pet Products Association (APPA)). Pet popularity has opened up a variety of opportunities for small businesses, including:

  • Pet sitting for absentee owners
  • Pet walking and training
  • Grooming (can be a mobile service)
  • Specialty pet foods such as dog treats, raw foods, etc.

Also Known As: Market niche, niche marketing, niche business.

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