The importance of niche-ing

The importance of niche-ing cannot be emphasized in business. To clarify what niche-ing is, let’s start with a question:  How should new products/services be created?

A)  Make a novel, untested product/service, then find customers for the product/service

Or

B)  Find a group of customers, find one of that group’s unmet needs, then create a product/service to address those unmet needs

Answer:  B

Explanation:  The development process of the product/service will take time regardless of choice A or B.  However, with choice B, the likelihood of having to rework the product/service to make it more closely meet the needs of the target market is lower.  Also, with choice B, you have a better idea of the size of the target market.  Having a market large enough to grow your business is very important.  More on that is below.

A great example of choice B is Girls Auto Clinic.  Girls Auto Clinic is a brilliant combination of a female-focused auto repair shop and salon.

Importance of niche-ing - Girls Auto Clinic - Your Startup Guru

Founder Patrice Banks felt what many of us feel when car issues come up:

“I felt like an auto-airhead. I hated all my experiences going in for an oil change, being upsold all the time for an air filter,’ she said. “Any time a dashboard light came on, I panicked.” – Patrice Banks, Girls Auto Clinic Founder

Many people come up with business ideas like how Patrice did:  through personal experience.  However, what most people fail to consider is that their own experience might be too niche.  In other words, the market might be too small.  How do you know if your market is too niche?  Market research.  Market research is a process of analyzing factors such as demographics, purchasing habits, direct and indirect competitors, macro and microeconomics, and other elements.  As much art as science, thorough market research is a critical step before moving forward with any concept.

Launch and Grow Your Business

Finding your niche through market research is one of the many services Your Startup Guru offers at the most competitive prices in the industry.  Contact us, and let’s find your niche for your new business.

Market Adjustment in the Retail Space

According to a new Credit Suisse report, up to 25% of U.S. shopping malls may close in the next five years signaling a retail space market adjustment.

Market adjustment in the retail space leading to the closure of the New South China Mall

What are the reasons for the market adjustments in the retail space?  Of course, Amazon and online shopping are the most glaring causes.  However, another factor is mall overexpansion.  Currently, there are around 1,200 malls in the US.  Between 1970 and 2015, the number of malls grew more than twice as fast as the population.  That number is predicted to decline to 900 within the next ten years.

Brick-and-mortar retail stores will never completely disappear because of the needs listed above and because humans are social by nature; only the type and make-up of retail stores will change.  Pop-up stores (a strategy utilized with great effect by Halloween stores) will likely become more common.

Market adjustment in the retail space could impact iconic brands such as Macy's

Another consideration

The market adjustment may result in the closure of 300 malls over the next decade. What to do with the vacant buildings?  There is a lot of space that could be used for other purposes.  Maybe mall owners will lower their rental rates to continue use .  In some areas of Manhattan, retail rents have declined 10-15%.

More housing? Closures from major chains like Macy’s and J.C. Penney are pouring up to 37 million square feet of space back into the market.  That could reduce some housing costs however more expensive housing markets generally have greater discretionary spending. The discretionary funds are often used for shopping.  Also, the time and cost to demolish existing structures, rezone, and rebuilding them into residential properties along with their infrastructural linkages are not insignificant.

Some mall owners have indicated that vacant properties will be renovated and updated to attract new tenants and raise rental rates.

Market adjustments in the retail space requires new ideas to adapt to changes

What to do?

Who knows what the future will bring but keep in mind that juggernauts like Walmart, Macy’s, and Sears are affected, so starting a service or online store that doesn’t compete with what Amazon sells is a safer option.  Branding your own product (e.g., Bonobo, Dollar Shave Club), and controlling your own distribution is another option.  B2B businesses are insulated from mall closures as no one buys industrial components at malls.

Services such as dentistry, restaurants, car mechanics, and large difficult-to-ship products such as mattresses, etc. will remain (so far) an insulated industry.

Analyses such as what is shown above are a small and cursory part of the industry/market analysis and strategy consulting services provided to clients.

How to sell something that is almost free

water-in-the-desert

An amazing article from the Guardian Liquid assets: how the business of bottled water went mad covers almost every aspect of marketing.

When selling something as ubiquitous as water, differentiation from your competitors is key.  How do you differentiate?  One way is through the right marketing mix.  The marketing mix is comprised of:  Product, Promotion, Price, and Placement.  Also known as the 4 P’s of Marketing.

Product:  Of course it’s not just water.  There is value added features, such as electrolytes, flavors, caffeine, anti-oxidising manganese, etc. that companies are emphasizing to differentiate their product from the competition.

There was Life, Volvic, Ugly, Sibberi (birch or maple), Plenish, What A Melon watermelon water, Vita Coco, Coco Pro, Coco Zumi, Chi 100% Pure Coconut Water, Rebel Kitchen Coconut Water and coconut water straight from the nut (“you have to make the hole yourself”, explained a shop assistant). Also: an electrolyte-enhanced water pledging to hydrate you with 40% less fluid than ordinary water (Overly Fitness), a birch water offering “a natural source of anti-oxidising manganese” (Tapped) and an alternative birch water promising to “eliminate cellulite” (Buddha). There was also a “water bar” – a tap in the corner of the shop – that, according to the large sign hanging from the ceiling, offered, for free, the “cleanest drinking water on the planet”, thanks to a four-stage process conducted by a “reverse osmosis deionising water filter”.

You can read more about the concept of “product” from a marketing standpoint in my post about the failed McPizza.

Price:  Another way to differentiate yourself from the crowd is by pricing your product/service at a rate that is considerably higher than your competition.  How about a $100,000 bottle of water?

This self-proclaimed “champagne of waters” quickly won FoodBev Media’s Beverage Innovation award for the “World’s Best Still or Sparkling Water”. A case of 24 500ml bottles is $72, while a bottle from the “Luxury Collection, Diamond Edition” will cost you $100,000. It has a white gold cap set with more than 850 white and black diamonds and holds the profoundly questionable honour of being the world’s most expensive bottle of water. If you buy it, Riese will present the bottle to you in person at a private water tasting anywhere in the world.

Promotion:  Promotion goes beyond just advertising.  What do you communicate?  Once you’ve exhausted the typical “it’s delicious!” “it’s cool!” “it’s a great value!” You can go into educating the market about the process, the people, the ingredients, etc. that goes into your product/service.  It might be the same things as your competitors, but if you say you “add double the standard amount of X” while your competitors just say “they’re delicious!” then your market might assume your competitor does not add double the amount of X.

Fiji water, for example, contains 210mg TDS, including 18mg sodium, 13mg magnesium and 18mg calcium. (Fiji appears to have pulled off some fairly heavy-duty trademarking, including “Untouched by man™” and “Earth’s finest water™”.) Compare those numbers to San Pellegrino, which contains quadruple the TDS, at 925mg, including 33.6mg sodium, 53.8mg magnesium and 178mg calcium. Fiji, with far fewer solids, tastes smoother, while the San Pellegrino is bolder, saltier and naturally fizzy.

Melted iceberg essentially has no taste, having the lowest TDS (9mg) of any water on earth. It is like the ur-water, the water that pre-dates all other waters. “This is your starting point,” said Leonard, gravely. “Your baseline.”

Surprising right?  Now tell me you’re not at least a little curious as to how the various waters taste.  If the marketers did their jobs right, you might at least be open to trying the product once.

Your can read more about promotion in my posts about Coachella, and Quiksilver.

Placement:  Placement mainly deals with distribution.  Which is, where does your customer purchase your product/service.  You’re not going to sell a $10 bottle of water at a gas station.  You have to sell your product/service at where your market is.  They are upper-middle class, baby boomers living in Massachusetts?  Distributing through Whole Foods or Wegmans is a start, if you can meet their supply chain management requirements.

The dress code of the clientele in Planet Organic, Notting Hill is gym chic. On a hot day in mid-August, the men wore mid-thigh shorts, pectoral-enhancing vests, neon Nikes; the women were in black leggings and intricate ensembles of sports bras and cross-strapped Lycra. They had all either just worked out, were about to work out, or wanted to look as if working out was a constant possibility.

They examined the shelves. As well as the usual selection of kale crackers and paleo egg protein boosters, there were promises of wizardry, such as a packet of Alchemy Organic Super Blend Energy Elixir (£40 for 300g of powder). But never mind the food. Life, in 2016, is liquid. Opposite a display of untouched pastries and assorted bread products (who, in Planet Organic in Notting Hill, still eats bread?), were the waters.

The marketing of bottled water is pretty amazing amazing.  Some is ridiculous snake-oil shilling.  Some may have benefits, depending on the needs of the individual, that regular water cannot meet.  Nonetheless, it is a $5 billion dollar industry in the US that is projected to grow 5-6% over the next five years.

Adjusting to market demand

zara_-_london_uk_27

This is what allowed Zara founder, Amancio Ortega to become the richest man in the world (for at least a couple days).

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Fast fashion:  Customers wanted the latest fashion, yesterday.  Zara’s competitors were taking too long bringing the latest designs to market.  Other retailers try to decide what to make, then produce it.  A push-model of product development.  For example, GAP and H&M will take 5 months to make, design, and distribute new products.  Zara listens to what their customers are asking and buying.  A pull-model of product development that takes Zara 3 weeks.

Of course it’s not as easy as just asking what each customer wants.  Lots of times, people don’t know what they want until it’s shown them.  Henry Ford once said if he asked what his customers want, they would’ve responded with, “a faster horse.”  Also, changing from a push-model to a pull-model requires overhauling a company’s supply-chain.  Raw materials purchases buy 6 months out or more.  Trying to get a refund on 100 gallons of dye is not as easy as it sounds.

Although Zara is not considered inexpensive, lower-market competitor Forever 21 has taken it to the next level.

Cheap:  In addition to fully embracing fast fashion, Forever 21 offers their products at very low prices.  This has allowed Forever 21 to have revenues of $4.4 billion in 2015.

 

Take away

So how do you incorporate market feedback in your business?  Generally, smaller companies have an easier time making adjustments because it is a more agile company with more one-on-one contact with vendors and customers.  In business school I asked billionaire Leonard Lavin, founder of Alberto-Culver (maker of Alberto VO5 hair products) about his education background.  He said he had an MBWA.  Master By Walking Around.  This meant, he walked around his business and talked to his employees, his customers, his vendors.  He conducted market and industry research everyday.  If you don’t take the time to talk to your customers, it might be detrimental to your company’s success further on down the road.

Sport Chalet is closing

Vestis Retail Group, the parent company of sports equipment and apparel stores Sport Chalet, Eastern Mountain Sports, and  Bob’s Stores has filed for Chapter 11 bankruptcy protection today.

I don’t have the financials for Bob’s Stores or Eastern Mountain Sports, but if the numbers for them looks like that of Sport Chalet, it looks like it’s another victim of passing trends and Amazon.  I wrote about the bankruptcy of Quiksilver and how it can save itself, and about Amazon‘s effect on Walmart.

sport chalet

Mountain sports presents another challenge above its sea-level cousin, surfing.  It costs a LOT more money to go skiing.  Skis, jacket, goggles, beanies, gas, food, etc.  The list goes on and on.  With the slow economic recovery putting Vestis’s holdings on a slower expansion pace, downsizing and keeping only strategic stores in wealthier markets would have slowed the cash flow hemorrhage.  Another factor unique to snow sports is the abnormally warm winters with little snowfall.  This climate factor greatly hurt sales.

Who knows what the boardroom meetings were like when CEO Mark Walsh, CFO Susan Riley, and others were meeting; nonetheless they should’ve listened to the decision-maker that had a closer eye on industry, market, and environmental trends.

In every business plan, I include industry and market analysis that covers the trends, threats, and emerging opportunities for every business.

What is Strategy Consulting?

Strategy

One of the services we offer is strategy consulting.  However, the name is quite vague so what is strategy consulting?  It is a lot of things.  It varies by the needs of the client.  Some clients need help developing an overall strategy for the business.

Say they have a product but not much else.  So they need everything from naming of their product, research on where to sell their product, team building, etc.  Naming might require a psychographic analysis of branding.

If they are a little farther along, it can be an audit of what they’re already doing, or analysis of where to go next.  A business might be looking at weighing the pros and cons of expanding to a new market, introducing a new product, do a product overhaul, etc.  Product overhaul might require a net present value calculation of multiple alternatives.

Every situation is unique so contact us and let’s figure out what you need.

12 businesses you can start now

dog_walker_-_buenos_aires

Here’s an interesting article from Inc. Magazine about businesses that almost anyone can start.  The reason why many people can do these is that they can have low barriers to entry (e.g. startup costs, regulatory hurdles, etc.), moderate competition, and decent industry growth potential.  The list is:

1. Meditation studio

2. Consulting

3. QA testing

4. Online research

5. Virtual assistant

6. Corporate cleaning service

7. Dog walking

8. Lawn care and snow removal

9. Homemade gourmet foods

10. Green consulting

11. Assembling Ikea furniture

12. Personal organizer

The article misses the most important thing:  Passion.  That is why entrepreneurship is NOT for everyone.  If you’re going to start a business you have to be willing to work very very hard at it.  So if dog walking is a calling for you, go  out there and make some money!

Why _______ fails

FAILURE

When thinking about your business, it is paramount to think of the downside risk: bankruptcy.

Everyone knows the basics: not enough customers, expenses are too high.  However, the devil is in the details.  That’s why a simple Google search of why businesses in your industry fail.  The “unknown unknowns” are critical.  Considerations you haven’t even thought of considering.  Whether it be, having a little extra cash on hand, or a different advertising strategy; this little bit of research will help you learn from the mistakes of others, and hopefully not repeat yourself.

 

Black Friday

Black_Friday_ definition

According to the National Retail Federation’s November consumer survey, 135.8 million American plan to shop this Thanksgiving weekend.

Last year, Americans spent $50.9 billion dollars on Black Friday.  This amount is down from $57.4 in 2013 and $59.1 in 2012.

You can find other interesting Black Friday statistics here.

Business of Holidays

Last weekend was Halloween and business was good.

jack o lantern $

According to the National Retail Federation, American consumers will have spent $6.9 Billion USD on Halloween costumes, decorations and related items this year.  This includes haunted houses, and candy.

top-2015-halloween-trends-2-1024

So, wow did it go from a niche holiday to the 2nd most lucrative holiday behind Christmas?

Halloween used to be only popular among school aged children because they get candy.  Now, the holiday is not just for kids.  Adults are embracing it full-on.  Some 13% of Americans ages 18-44 say Halloween is their favorite holiday, reports DDB Worldwide.  There are just as many adults costumes are here are children’s costumes in the stores.  Including “Sexy Pizza Rat“.

It probably started like most trends: Organically.  A small bunch of young adults in relatively isolated enclaves throughout the nation that wanted to partake in costuming.  Then other people saw how fun it was and then the number of participants grew into a measurable amount.

Slate has a pretty interesting article theorizing about its beginnings at the Halloween parade in New York City’s Greenwich Village.  This parade for all-ages, first started in the early-70’s, began as a neighborhood event organized by a local puppeteer and mask-maker.  Its fun and popularity then spread to San Francisco and Los Angeles.

The appeal to adults is not a difficult concept to grasp.  “There are several reasons [for its adult popularity],” says Denise Delahorne of DDB Worldwide, a global marketing communications network in a recent 2012 Forbes article, “There’s no stress to it. You don’t have to travel or deal with relatives. There’s not the holiday pressure to find a date if you are single. You can wear whatever you want and not be judged. There’s the fantasy, role-play element.”

Businesses saw this trend (the power of market research!!) and seized this market opportunity.  Voila! Halloween as we currently know it came to being.

Not Just Halloween

Because of these reasons, ancillary (niche) markets have begun reaping the benefits of costuming.  Now, dressing-up has gone from beyond Oct. 31 to dates throughout the year at comic book conventions, anime expos, etc. and throughout across the United States and beyond.

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anime character at 2012 Anime Expo

The commercialization of Halloween isn’t unique though.  In fact, Christmas wasn’t always about retail.  An event that might have happened in the Spring over two millennia ago eventually became linked to a 4th-century Greek bishop known for gift giving.  This act of gifting, over centuries, became more commercialized.  In even in the 1800’s letters were written lamenting that “Christmas wasn’t the same as it used to be.”

We also did it with Valentine’s Day.  For better or for worse, the next step might be commercializing Thanksgiving.  Then we can have 5 uninterrupted months of “holiday” spending.  If I were commissioned to do a marketing/PR campaign to commercialize Thanksgiving, I would investigate the underlying psychology that differentiates Thanksgiving from the other holidays (see the Denise Delahorne quote above).  Maybe a little DIY, a little up-cycling/repurposing, gluttonous eating, etc.  Then craft an activity/event that addresses these elements.  Next craft the marketing communications that implies the psychological elements in the advertising of the product/service I’m selling.

Black_Friday_ definition

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