Niche Marketing: How to Define a Unique E-Business Niche

Standing at the base of the Wailing Wall in Jerusalem and looking up, the immense stone blocks laid one upon another seem to reach to sky. This most holy site to Jews is all that is left of Herod's Second Temple. It is a place of prayer for the nation. Herod built the Western Wall as part of a retaining wall around the temple mount formed of massive limestone blocks, some weighing over 100 tons each.

But when you look more closely at the Wall, you see the crevices between the massive blocks. In the first two tiers of stone these crevices are filled with papers inscribed with the prayers of the faithful. Above them the crevices are alive: Plants, rooted deeply in the cracks between the stones, abound far above the heads of the worshippers and add character and life to the Wall.

The Wall has a lesson for us. If your company doesn't have the mammoth clout of a Fortune 500 corporation, then you must find a niche between the immense players and adapt yourself to thrive there. The English word "niche" comes from a French word that means "to nest." And that's what small companies can learn to do very successfully, filling small voids left by the big players.

Thriving in a Tiny Niche

How can small businesses thrive if the niches seem pretty narrow indeed? You can purchase kitchen knives at Safeway and Kmart, at Macy's and a restaurant supply outlet, as well as in a gourmet cooking store. But a shop that specializes in kitchen cutlery? It would take a major metropolitan area of one or two million people to support such a store, and still it might struggle. But so long as you can deliver your goods or services across distances, on the Internet your marketplace is the nation -- and, if you have the vision for it, the world.

A kitchen cutlery shop might die in a town of 10,000 or city of 100,000. But on the Internet, the market is so huge that even a small slice of the market provides a large number of shoppers. According to the Computer Industry Almanac for 2004, Internet users in in Ireland number 2 million (53% of the population), in the United States number 186 million (64% of the population), in South Korea 30 million (71%).

Where travel time once prevented shoppers from getting to downtown Seoul's specialty shops, on the Internet the nation is like one very accessible city. With South Korea's 30 million Internet users, even a very narrowly defined specialty business can thrive because of the huge number of potential shoppers. Think of the market there as 30 cities of a million people each. That many potential shoppers can support nearly any specialty business.

After nearly 10 years of intimate involvement with the Internet, I am still awed by its vast potential. To succeed you must be able to see the Internet's hugeness as a market, and at the same time comprehend that even the narrowest kind of business can find enough customers to thrive. The wall is so big that the niches between the huge corporate blocks are quite adequate to support a lively small business marketplace.

Differentiating Niches from Blocks

The phone rang and the caller wanted to set up an online store. "I want to sell something on the Internet," he told me.

"What do you plan to sell?" I asked.

"Books," he said, "and consumer electronics."

I can see him competing head-to-head with Amazon, Barnes & Noble, Good Guys, and Best Buy. With his puny resources, he doesn't stand a chance against the big players. None. Nada. Zip.

I've been asked dozens of times, "What would it cost to build a book store just like Amazon.com?" I grind my teeth. With all the opportunities begging to be explored, why would you want to challenge the top dog? I answer that question by saying, "It would cost you the millions and millions of dollars Amazon spent to build its store." Look instead to the niches.