Niche Retailing: Uncovering New Retail Opportunities
While big box retailers and massive chain discounters stock their shelves with every conceivable item, independent merchants are better-served by taking the opposite approach. They should limit the breadth of their product inventory to items in their particular specialty. This does not imply that small shop owners should reduce the number of items they carry. In fact, limiting the breadth of your inventory can lead to an expansion of products.
In this article, I’ll describe how niche retailing can help you uncover new, profitable opportunities that can increase your sales. I’ll explain the advantage of listening to your customers, “going deep” into a niche, and how to leverage your size against the chain-store retailers. Finally, you’ll learn the secret that helped Amazon.com build an explosive sales pattern, closing the doors to most of their competitors in the process.
Catering To Customer Preferences
The first step of niche retailing is to listen to your customers. Small merchants have a tendency to stock their floors with products that cater to their own perception of what their customers need. That can be a recipe for failure. Your customers represent one of your most valuable market research tools. If asked, they’ll openly express what they want to buy.
Set aside your own preconceptions regarding the type of products your target market should purchase. Instead, survey your customers and the surrounding community. Ask them about the items they want to purchase. Then, modify your inventory to reflect their feedback. By doing so, you position your retail store as a convenient resource for the items they want. Rather than selling products, you’ll be providing solutions for existing needs.
Going Deep Instead Of Going Wide
Every retail niche contains hidden product opportunities deep beneath the surface. A lot of independent retailers make the mistake of “going wide.” In other words, they expand their inventory by including products in different categories. Often, they do this to compete with the giant discounters. For example, a specialty shoe store may start offering sunglasses; a local clothing merchant might add swimwear to her inventory; a health food store owner might add fitness equipment to his floor.
Niche retailing is about digging deeply into your chosen market. For example, if you own a specialty womens’ shoe store, you could expand your inventory to cater to customers with wide feet. You could also offer low pumps, high heels, sandals, and ankle boots. You might even consider new styles from other countries. Rather than “going wide” into different product categories, “go deep” into your particular market.
Leveraging Your Small Size
As an independent retailer, you have a significant advantage over the giant discounters: your size. Women Sunglasses Chain stores manage their inventories based upon volume purchases. For example, Target might purchase 10,000 pairs of a particular shoe in order to stock their stores. If a small manufacturer cannot produce that volume, Target will look elsewhere. That creates an opportunity for you, the local retailer. By establishing relationships with smaller manufacturers, you’ll have access to niche products that the megastores will never carry. What’s more, you can often arrange substantial discounts.
A few years ago, an author named Chris Anderson published a groundbreaking book titled, “The Long Tail.” He explained how Amazon made an important discovery that ultimately catapulted their sales. Amazon realized the value of digging deeply into their markets and offering their customers an expansive list of niche products. Rather than focusing on a few bestsellers, they could generate a far greater number of sales from a sprawling inventory of titles.
Small retailers can use this same strategy to attract customers and encourage sales. It is the essence of niche retailing. It can help independent shop owners cater to their customers’ preferences and “go deep” into their product categories while leveraging their size. As the level of competition rises in every sector, uncovering these new opportunities can make the difference between success and failure.