A market niche is a sub-segment of the overall market (sub-market, market segment) whose offer is not yet provided or only insufficiently provided by current competitors. The reverse of the word is the niche market, a market with at least one market niche. The market niche presupposes that there is demand that a relevant market can either not satisfy at all or only insufficiently. In a market niche, potential buyers can be found, but only a few suppliers can be found. The market volume is rather small for market niches, so there is a narrow market breadth; however, high profit margins can be achieved for the entrepreneur.
Economic Aspects of Niche Market
A company is only interested in supplying a niche market if the market barriers can be overcome on it and if it can break even with its product or service on it. When demand arises, it may be able to act as a quantity fixer and set the market price profitably.
Recognizing a market niche and persistently pursuing to close it can be crucial to business success, as pioneer profits or a quasi-monopoly can be created. Market niches and thus the companies working from the perspective of the supply (niche competitors, niche providers) are said to be highly profitable. In contrast to generalists, niche competitors realize their competitive advantages through specialization, individualization, and concentration.
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Niche items emerge as products that fill market niches far away from the mainstream. Typical examples are: slow sellers, articles of only individual or regional interest, collectibles and consumer items that do not correspond to the current zeitgeist, technically outdated products, including refurbished articles. Numerous webshops deal with the distribution of niche products and thus enrich the market offer in a variety of ways.
Products or services do not always have to remain in one market type, but can also change it. The prerequisites are a very high market potential, which allows for a larger market volume, and a decreasing price level, which generates more buyer groups. Almost every mass market once started as a niche market, but not every niche market becomes a mass market. Thus, the personal computer began with the Apple I, which was ready for the market in April, with initially a small market volume in the niche market. The PC not only filled the gap in the market for medium-sized data technology in companies, but also conquered private households. Its rapidly increasing mass production led to price reductions that made the PC affordable even for lower-income buyers.
Conceptual Development of Niche Market
Market niches are as much a part of strategic management as the market cultivation of the market as a whole. The niche strategy appears as a strategic focus on specific customer groups, segments, or geographic markets. In contrast to the market as a whole, niches can only be found in a sub-market or in a market segment. Some authors see the market niche as a sub-market in which a certain product is not offered or in demand, even though it is present in the other sub-markets. According to buyer behavior, a distinction is made:
These are visible and easily identifiable niches for which there is no offer yet. Potential buyers therefore refrain from buying at all. The manifest niche can only be closed by a new offering. Basic niches are any resource space in which an organization could productively carry out its activities.
These appear as insufficient supply, as in supply gaps, and only reveal themselves when a new product tailored to the niche need emerges. Until then, potential buyers will switch to substitute goods. There are no areas with demanders whose needs are not being met. Market niches require a high degree of flexible product differentiation on the part of the supplier, and they also require specialization such as concentrating on specific target groups or products.
