Discovering Your Niche For An Online Marketplace: How To Ace It?
The online marketplace platforms have been a popular prospect for many entrepreneurs, but there is one significant factor that you need to consider before going with it- “The Niche.” There is a famous phrase- “Jack of all trades,” but being the master of all does not count when you don’t have enough firepower.
For example, Amazon had to suffer a whopping $957230 in losses for 2018-19 in the Indian market, and yet they remain strong in the market due to constant cash infusions. A small startup or business that does not have such financial backup can’t sustain such losses. So, discovering your niche becomes quintessential if you want to create the best online marketplace platform.
Apart from the financial hurdle, there are other obstacles too. For example, if you enter a niche food market, gaining a certified organic identity and building confidence among the local suppliers can take up to three years. Imagine the kind of cash crunch you can face in these three years?
So, how will you discover the right niche to build a marketplace?
If you want to create a multi-vendor marketplace platform for a specific niche, it should offer higher value to sellers and buyers. For providing higher value, you need to find a unique problem and then offer a solution.
Take the example of TaskRabbit. Leah Busque, the founder, and CEO of this multi-vendor marketplace platform, needed some dog food one night only to realize that she could not step out into the cold outside. So, she decided to build a marketplace where people can help others to run an errand.
Market research is quintessential for understanding the niche issues and problems you can solve through your business model. Here, you can use a mind mapping method. A mind mapping method can mimic your brain’s thinking process and helps generate product ideas.
Take an example of the beauty products made from elements that are sourced from animal cruelty. Now, you can build a marketplace that lists cruelty-free beauty products.
Building a niche community
Once you have the problem figures and have brainstorming over your online marketplace platform’s possible solution, the next step is to create a community. It helps in reviewing the solution and add more relevant features to build a multi-vendor marketplace platform. Here is a list of steps that you can follow to build a community.
Communicate the vision
The best way to gain customer association early on and create awareness regarding your online marketplace platform is to communicate your vision. For example, create a community-based campaign on how animal cruelty is bad for the environmental food chain and how your beauty products are attempting to limit the usage of such raw materials.
Partner with someone who shares your vision
Bring an influential and like-minded partner on board to help communities to connect with your vision effortlessly. You can partner with then niche experts or active professionals in the same market. If you are building a multi-vendor online marketplace platform, partners will be your most significant resource.
For example, if you are creating an online marketplace platform for job placements on the similar lines of LinkedIn, you can partner up with local recruiting agencies.
Allow people from the community to experience your solutions and products. Then share their stories on social media handles of your online marketplace platform. It will help you build a larger community virtually and physically.
Create multiple communication touchpoints for your online marketplace platform early on during the niche discovery. It helps your community members to communicate the issues and feedbacks regarding the solution, which you can use to build the best online marketplace platform.
Focus on the demographics
Modern business is all about going local, so focussing on a city or specific demographic can help you build the next best online marketplace platform. Focus on a particular region and related issues to establish your business.
Understand the needs of customers in a city and then find the solutions. The demographic factor also helps you with the specific target audience. For example, if you are building a multi-vendor marketplace platform for jewelry. You will first need to figure out the local audience’s purchasing power and then decide which type of product listings you can add to your online marketplace platform.
Millennials are considered among the most relevant customer section for the online marketplace platforms due to their high spending power. Let’s see some millennial data that you can use to build a marketplace to target this generation of populations.
- One quarter world population consists of millennials, which are approximately 831 million (Hubspot)
- Millennials spend around $600 billion per year in the US(HubSpot)
- An average millennial spends more than 53 hours per week online(Ipsos)
- Millennials are the ones born between the 1980s and 2000s(Goldman Sachs)
- 57% of millennials prefer to compare prices before buying a product(Goldman Sachs)
Building a vertical-specific online marketplace platform can help you achieve niche expertise. According to a study, 38% of firms with a vertical-specific value proposition had an annual contract value of about $100,000 per customer. The vertical-specific online marketplace platform can offer higher value for both buyers and sellers.
When you adopt the vertical approach for discovering the niche, you can develop the “beachhead strategy.” It is a military strategy that uses a small border to reach for and maintain the stronghold. While building a multi-vendor marketplace platform, a beachhead strategy can help you focus on a product segment or niche to keep the defense.
For example, if you are to build a marketplace for electronic items, you can focus on offering products in an economical price range. It is excellent for targeting a small cap of the market but ultimately maintaining a stronghold in a broader customer base.
One of the essential parts of any business is liquidity. The cash flow ensures that the business survives any sudden downslide like many firms experienced due to the recent pandemic. If you are trying to build an online marketplace platform, here are some factors to consider for liquidity.
- The number of buyers and sellers registered on the platform.
- Total number of listings per category of product
- Total number of sales and returns
- Demographic diversity of consumers
These factors can be subjective to the type of business model you adopt to build a marketplace. Liquidity can help sustain your business, and you can increase it through higher transactions per interaction with the customer. A niche marketplace can help improve the number of transactions per interaction as customers will get exactly the product they need.
Discovering a niche for your online marketplace platform may not seem that easy, but it can be fruitful if you strategize the whole marketplace. Especially for a multi-vendor marketplace platform, the value proposition becomes paramount. With a niche marketplace, the value proposition becomes more robust with increased engagement. So, brainstorm, strategize and discover the best niche to create an online marketplace platform.