Discovering your niche within a crowded marketplace can give even the most seasoned entrepreneur a tension headache.

With good reason—it’s difficult. But, difficult problems can always be tackled with a combination of ingenuity, research, and good ol’ fashioned elbow grease. Here, we’ll show you the steps to discovering your niche, and how you can capitalize on it. 

Research your competitors

Propose new solutions

Whittle down

Determine profitability

Utilize analytics

Run tests

Rinse and repeat

Propose new solutions Whittle down Determine profitability Utilize analytics Run tests Rinse and repeat

1. Research your competitors

Smart marketing within your niche requires information. Being able to outmaneuver your competitors and pull in new customers relies on your ability to evaluate the field. That means competitor analysis. You don’t have to build out a complicated spreadsheet with pivot tables, graphs, and formulas, but knowing who you’re competing with is the first step to determining how you can behave differently.

Find them

Finding competitors is usually pretty easy, and your primary tools are going to be Google and Amazon. Running searches for your niche will give you a good idea of who is top ranking in both areas. If you’re starting a business selling specialized, highly technical outerwear, searching with keywords that become more and more specific will get you closer and closer to your true competition. Don’t just stick with “outerwear,” add more specific adjectives, like “technical outerwear,” “low-temperature technical outerwear,” and see what comes up.

Categorize them

Imagine your business at the center of a bunch of expanding concentric circles, and place your competitors in orbit around you. 

  • Main – These are the competitors who are selling the same thing you are, likely to a similar audience. 
  • Outside the circle – These are competitors who might be selling a similar product, but in a different price category, or to a different audience entirely. 
  • Tangential – Competitors who aren’t competitors yet, but you might be adding products later that will bring them into your competitive space. 

What’s their CX

Look at your main competitors. What is their customer experience? Pretend you’re one of their customers and walk yourself through their buyer journey. Where do you see obstacles? What works well, what doesn’t? These sorts of questions will be integral to defining your own position within the niche. Thinking about how you can differentiate can often start with CX, and it might just be as simple as adding a store to your popular blog

What’s their market position

What do your competitors sell the most of? Why do people gravitate towards their products instead of other products? If we’re talking outerwear again, people purchase from Patagonia and Mountain Hardware for entirely different reasons. This is a market position. If you don’t think you can outcompete a competitor on a particular area of market position, try to fill in a gap. 

Pricing, shipping

How do your competitors price their products? If you can position your product as a cheaper, higher quality option, that might be a way in. Going the luxury route is viable too. The key is to determine what might set you apart, and moving your business towards that. 

2. Propose new solutions

Now that you’ve done quite a bit of competitor research, you can start shaping your messaging and potentially tweaking your products to match. This is where the research you’ve done comes in. Look at your main competitors. What does your product or service do that theirs fails to?

That isn’t to say that you need to do the opposite of your competitors in every possible area, that might lead you tying yourself into knots. But, if your competitors don’t have the best customer services, or one of their products has a reported problem that hasn’t been resolved, that might be your in. Here are a few examples of businesses that saw a problem and proposed a different solution:

  • Rheos Sunglasses – Sunglasses that are designed to float, especially useful for people who fish who often drop their glasses into the water. 
  • Untuckit – Men’s dress shirts often look a bit goofy and billowy when untucked, so this company made shirts that are designed to be worn untucked. 
  • Quip – Electric toothbrushes aren’t anything new, but Quip pairs sleek form factor with an accessible subscription model.

Finding a niche and selling within it doesn’t always mean reinventing the wheel! Sometimes you’re just trying to find a way to make it a bit smoother. 

3. Whittle it down

Part of finding a good niche is specificity. It’s not enough to just say things like “we do things differently from our competitors.” What things? And how do you do them differently? 

One of the best ways to whittle down your ecommerce store and your products to suit a particular niche is to try and boil down what makes you different and interesting into a single compelling sentence. This doesn’t have to be your tagline or anything, but it can be the pillar that you build your brand presence around. 

As a silly example that demonstrates this idea, let’s say your business makes modular customizable purses. You can swap out the strap with different colors and patterns, you can add different accessories, the whole shebang. Essentially this business turns around a simple idea, and here’s the sentence: “Our company lets you build your own purse.” This is a niche idea, as purses exist in the world of designer fashion, so the audience is going to be likely small, but anyone who’s looking for a DIY or custom purse is going to find you right away. 

4. Determine profitability

Profitability is a crucial part of any store creation/product research process. If you search for products of a similar type to those sold in your ecommerce store, and you don’t find anything, that might be a bad thing–that means that nobody has yet been able to monetize the niche. You might be the first, but it could also be a warning sign that nobody’s biting. 

But, if there’s a reasonable amount of products within the niche you’re looking to compete in and it isn’t oversaturated, that’s a good sign. Take note of what people are charging for their products, and see how you can price yours competitively. 

5. Utilize analytics and algorithmic advertising

If you’ve already got an ecommerce store up and running, utilizing analytics drawn from services like Google Analytics can be invaluable for discovering and defining your niche. See where your traffic is coming from. If you have customers coming in from a particular demographic or from a specific traffic source, see what happens when you pivot towards those customers. 

You can also use data to create marketing and advertising campaigns that are targeted to your niche. Shopping, a service from Google, can create and manage machine learning-driven ad campaigns that can draw new customers toward your products. Some ecommerce services even offer this as part of a paid plan, reducing your overall costs. 

6. Run tests

Nobody’s an expert on their products, business, or niche on the first go around. Part of developing and discovering your niche is trying out new ideas and making mistakes. Fear of failure keeps many business from success, and the only true failure is not taking the things that you learn and using them to grow. 

Run tests! Try different versions of copy in product descriptions. Use different photography for product images. Anything and everything about your product can be changed, and finding and leveraging what works is an essential part of growing, especially as a small, untested business. 

7. Rinse and repeat

One of the hallmarks of a successful business is continuous iteration. You’re going to be constantly evaluating and tweaking your business and products to ensure maximum ROI and maximum customer satisfaction, because both of those directly translate to sales. Once you’ve found your niche, the journey doesn’t end. Perhaps you can refine even further? Maybe you’re ready to start competing at a larger scale. The possibilities are endless, and with enough creativity, your business endeavors will be a success. Good luck!