What Founders and CEOs Can Learn From a Niche Marketplace

By Bill Voss, Founder and CEO of Everest.com

According to industry analysis from Digital Commerce 360, the top 100 global online marketplaces in the world had $3.23 trillion in sales in 2021, and saw gross merchandise sales increase 18 percent compared to the prior year. Giant marketplaces like Amazon, Taobao, eBay and other large players accounted for two-thirds of the total sales, which leaves approximately a trillion dollars in potential sales for other online sellers. There’s still a significant place for online marketplaces that aren’t trying to compete with Amazon. The most successful of these companies are often those with a niche focus. By committing to a specific industry vertical, a marketplace can offer an attractive option for shoppers as well as for distributors and suppliers.

Find a Niche with Repeatable Customers

Founders and CEOs looking to start or invest in a niche marketplace should consider some success stories to understand what it takes to carve out a viable base of repeat customers.

Founded in 2005, Etsy provided people in the vintage and crafts market with their own place to share ideas and sell their goods. Many of these products are handmade and custom ordered, which appeals to a large group of buyers. It enables a seller to build a brand through various tools such as access to site builders, and processing tools, and provides buyers with a streamlined and secure purchasing process. The company’s revenue comes from promoted listings fees via advertising options, processing fees such as commissions on each sale, sale of shipping labels, and other streams.

CEOs and founders can review Etsy as a niche market success story because the brand was able to produce growth by creating a positive feedback loop. Etsy used targeted advertising, social media, and organic campaigns to attract additional users, which then brought in more sellers who offered more fun products, which in turn meant more buyers. The company also proves the need for early and continual technology investments. Etsy successfully positioned itself as a technology company, which led to much of its growth. Niche marketplaces need seamless tech if they want to thrive, including personalization options, simple buying processes, and automated fast customer service.

Chewy is another example of a successful niche marketplace. The company gives pet owners access to veterinary care via text or though video chat. This value-added service helps owners receive prompt care advice and remedies, which further establishes their loyalty with the Chewy brand. It provides a pharmacy, so owners can finish a vet consult and have medications seamlessly sent through the branded pharmacy. The site also features wellness and health insurance plans. The breadth of services beyond more than 1,000 brands of toys, food, flea meds, and other items means pet owners spend more time within the Chewy “ecosystem”. Instead of shopping for dog food on a general-product retailer, traveling to an in-person vet, waiting on a prescription at a pharmacy, and buying pet insurance through a third party, they can utilize Chewy.

Entrepreneurs and founders considering a niche online marketplace should consider the Chewy example and unpack if their industry vertical opens multiple pathways for sales and customer retention. And they can review Etsy’s journey to see the importance of finding an underserved (yet massive) group of sellers as well as matching consumer demand. Etsy also remains consistent with its branding and niche; it has not tried to compete with Amazon or other sellers that offer nearly every type of product.

Build a Community

Niche marketplaces rely on community-building to establish their brand. Firms can take several tracks to develop community. They can leverage influencers for product features and engage with them to offer product refinements or to suggest new categories they would love to see on the marketplace. Brands can bring influencers onboard as consultants to help shape the company’s strategy and lend some credibility to its offerings. If the niche provider offers tennis equipment, then attract tennis influencers who can incorporate those products into their video content filmed on the court. The key is to develop stories about the brand that come from respected sources who can lend the marketplace some authenticity, through a “show don’t tell” storytelling approach.

Everest.com is a niche player that’s built a strong community of shoppers. It’s the industry’s first online marketplace for outdoor equipment that’s also a thriving community platform that’s built a large group of engaged participants. It succeeds in a niche because it provides discerning shoppers with a single trusted marketplace that brings together manufacturers, retailers, distributors, and consumers. It also offers a membership model offering free shipping, discounted pricing on gear, as well as preferred pricing with various travel partners, gas stations, and others. This membership model allows the retailer to build a community of like-minded people, which enhances brand loyalty, referrals, and repeat business. Everest.com and other brands succeed because they create communities

Niche players can also use consumer tradeshows or industry shows to highlight their competitive advantages, build awareness, and develop community-building partnerships. Another route is to find nonprofit organizations with their own engaged established communities and to offer discounts, access, or other value to this group to develop recognition.

Founders considering a niche marketplace should refine their niche focus to a point where they can differentiate their brand proposition, but not to the extent of shrinking to an unsustainably small number of potential customers. Successful online niche players operate in an ideal spot, where they can become the industry leader in a segment through solid marketing and community-building and there’s enough room within that segment for scalable growth and profits.