Marketplaces have the power of creating a collaborative community, which is why they’ve become so popular among aspiring entrepreneurs. However, even with the right software, the budget and the best intentions, many marketplaces will unfortunately fail. To create a successful marketplace, nothing is more important than knowing how to find the right niche for your marketplace.
A unique and profitable niche won’t just magically fall onto your lap. As an entrepreneur, you already have a keen eye for recognizing market trends, potential business opportunities and noticing unmet needs. Use those analytical skills and take the time to brainstorm, research and evaluate the best niche for your marketplace.
In this article, we’ll discuss the key factors below that will guide you to find the best niche for your marketplace.
Identify your passions and interests
The first place you should focus on to narrow down your niche is with yourself! Take it back to basics and make a list of your interests and passions. How do you like to spend your free time? What topics or issues get you fired up? Are you an expert in any of your hobbies?
The time, effort and energy that you put into running your marketplace business will heavily rely on the passion you feel for it. How daunting would it be to run a business that you have no interest in? Afterall, business isn’t easy and at some point it’s going to challenge you. If you’re working in an area that you don’t really care about, your odds of quitting will significantly increase.
It also helps to pick a field in which you have some expertise in. You’ll automatically have a better understanding of your users’ needs since you’re already familiar with the industry. Your knowledge will help set you apart from the competition and help build trust between you and your users.
Find real problems that your marketplace can solve for BOTH buyers and sellers
One of the most common reasons for marketplace failure is not solving a real problem. Although passion and interest for your marketplace is important, in order for it to be valuable it must provide a solution for your users. Your niche can easily stem from identifying problems that your marketplace can solve. One example is David Zaslav who saw a problem with the limitations of the Discovery channel and so he decided to create Discovery Communications which is slightly different, but nonetheless was a successful decision.
Marketplaces are especially tricky since there are two types of users: the buyer and the seller. More than likely, you’ll need to solve a problem for both sides.
Lyft is a great example of a marketplace that started by solving a problem that created valuable solutions for both their customers and service providers. The ridesharing service provided quick transportation for people in need of a ride for a fraction of what taxis charge. It also created jobs for service providers allowing them to earn supplemental income and a flexible schedule.
Another problem to look out for are resources and assets that are underutilized or are in excess that can be shared collaboratively. This strategy is referred to as unlocking the economic value of idle assets. Take a look at AirBnb and Homeaway. Many people have an extra room or guest room, so why not profit from the excess space while providing a comfortable place for a passing visitor? Look back at your list of interests and hobbies. Do you like sports? How about a marketplace for selling sports memorabilia? Are you an artist? A marketplace for selling art supplies. There are endless opportunities!
Narrow your focus
No business, especially a new one, can be all things to all people when they’re first starting out. Marketplaces with too broad of a focus tend to fail, which is why it’s so important to choose a narrow vertical during the early versions of your site.
When entrepreneurs discuss their marketplace ideas, they tend to describe their global vision and how valuable it will be when tons of users are using it. It’s great to have goals, but when you’re just starting a marketplace site, your main goal should be to gain critical mass within your niche. It’s much easier to reach your target audience when your marketplace focuses on one product or service vertical.
Take a look at some of the biggest marketplaces and how they started. Amazon started by only selling books. Uber started by offering premium black car service in just a few metropolitan areas. They focused on gaining users first and expanding their products and services as they grew.
Narrowing your focus geographically will also help you build traction on your marketplace. Let’s say your marketplace is about sharing, trading, buying and selling automotive parts. The community exists, but you must first gain users from the automotive community to use your site. If you open up your marketplace to all over the United States right off the bat, your site will look very empty, because no one would know about it yet. It’s makes a lot more sense to focus on gaining users locally and gradually expand to other areas, cities and states as your user base grows.
Do your research
Once you’ve determined the best niche for your marketplace, it’s time to do some market research. The best place to start is looking at what your competition is doing and how they’re solving the same problems you’ve identified. Competition will always exist, so why not use them to make sure you’re on the right track?
If you’re not sure who your competition is, a simple Google search will set you off on the right track. Find out how they started and what their initial goals were. Is your story different from theirs? Learn about their team structure and how they’re being funded. How do you plan to meet your budget? Do you need additional funding or investors? If possible, it also helps to sign-up and actually use your competition’s product to truly tap into the user experience. What would make the user experience better on your marketplace?
Marketplaces cannot exist without a network of users, so it’s crucial to learn about both types of users – your buyers and sellers. If you’re building a marketplace that offers personal training where personal trainers can also sign up to sell their services, it would be wise to immerse yourself within various fitness communities. Get insights, opinions, suggestions and answers directly from your target consumers. You can ask them right then and there if they would actually use your marketplace. You can also create surveys and questionnaires for potential users to fill out to get data or feedback.
As a marketplace owner, your overall goal is to build a successful marketplace with thousands of users. In order to meet that goal, you must find the right niche that peaks your interests or that you’re already an expert in. Your niche can also be found by identifying problems that your marketplace can solve for both types of users – buyers and sellers. Starting out, it’s especially important to focus on a narrow niche to build your marketplace brand and gain users. It’s crucial to get to know your competitors and their product. Evaluate what makes your marketplace unique from the competition. Lastly, it’s imperative to learn from and listen to your potential users in order to build a valuable marketplace. Ultimately, the impact your marketplace has on its users will determine its success.