For thousands of years, specialists ruled the business world. There was the blacksmith, the gun maker, the baker, the candle stick maker, the saloon keeper and the restaurateur, among others.
Then came a period in the middle of the 19th century that ushered in the era of interconnected services and products under one roof. According to the
Lower Manhattan Development Corp., Irish-born entrepreneur Alexander Turney Stewart in 1846 launched AT Stewart, the country's first department store, on Broadway's east side between Chambers and Reade streets. The store offered European retail merchandise for low markups and set prices on a variety of dry goods, helping usher in an era of all-in-one shopping.
Over the last quarter century,
gave new meaning to being all things to all people in the retail sector. In a sense, Wal-Mart became its own town everywhere it set up. Large advertising agencies that offered everything under one roof were a marketer's dream, because they could handle print, radio, television and Internet. Auto supply stores that also repaired vehicles and installed stereo systems were perfect for the hurried, non-discriminating consumer.
Business has gone full circle and we are entering the age of the "specialist" or the "niche player." This isn't to say that this group didn't exist and has now reappeared. But I believe narrowly focused players again will become a bigger part of the business universe.
Buyers of products and services are looking for the following:
- Expertise: They want to go to a car stereo store where the salesman knows everything there is to know about different brands and the types and qualities of various stereos. The salesman knows what sounds better in which cars. They understand the level of complexity various buyers can handle.
- Convenience: When I buy computer batteries, I don't slug my way through my computer company's Web site looking for the right one. I go to www.laptopbatteries.com, where all they sell are laptop batteries.
- Price: Because niche players focus on one area, they typically can get better pricing on products than companies who sell a variety of products that are somewhat related. True, Wal-Mart will have better pricing than most niche players because they buy in such volume, but they won't have the variety of a niche player.
- Depth of offering: If you go to the all-inclusive sellers, such as Target (TGT) - Get Report or K-Mart, they will be a mile wide and an inch deep. The selection is often inadequate. Today, I see food retailers who are specializing in one ethnic product area. Around the corner from my home is a pasta maker who has been doing a thriving business for almost two decades.
- Accessibility: There was story in Business Week last month about shoppers preferring to go to niche retailers, where the size of the store was smaller, the number of customers didn't represent a traffic jam and check out lines were shorter.
There are businesses small and large selling products, services and entertainment that have made a tremendous living from being specialists or focusing on a niche. Here are some examples:
- Entertainment: Sid Marks is a famous disc jockey out of Philadelphia. If you love Frank Sinatra and listen to his songs on the radio, then you know Marks' name. For 30 years, Marks has spun records, told stories and played old interviews featuring "Old Blue Eyes" through a syndicated radio show that grabs an upscale audience.
- Retail:Best Buy (BBY) - Get Report is a national retailer with a more than $20 billion market-cap that specializes in selling and servicing home electronics products. Customers like their selection, the quality of their products and they send experienced installers.
- Food: When you want a great steak, you just don't go to any restaurant that has steak among its choices. You think of Outback on the lower end and Morton's (MRT) or Ruth's Chris (RUTH) - Get Report on the upper end.
- Professional service: Companies that are laying off professionals and want to show empathy for former employees go to Right Management (RMCI) . If you are looking for a patent lawyer, you will go to a law firm that specializes in patents and trademarks, or even drill down further to the industry you are in.
- Internet search: Let's face it, when you think of Internet search, you immediately think of Google (GOOG) - Get Report. True, Google is selling a variety of other services that are built off of search, but it is search that drives their business and the corporate mission.In my own marketing practice, I focused on entrepreneurial companies who needed marketing and business planning assistance and execution. This made my elevator pitch easier to understand and forced me to focus on a specific market.
From a marketer's standpoint, it is easier to market one product or service because the target buyer is more easily identifiable and quantifiable. The cost to get your message is less. If you are thinking of starting a new business, think niche.
Marc Kramer, a serial entrepreneur, is the author of five books and is an instructor at the University of Pennsylvania's Wharton's Global Consulting Practicum, where he serves as Country Manager for Chile.