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The Power of Niche

  • Consumer trends

Technology is reshaping the retail landscape, says Lauren Razavi

When you walk around British towns and cities today, the high street looks rather different than it once did. The traditional shops that served communities in the Victorian era suffered a sharp decline during the 20th century, thanks in large part to shopping malls. Over the past two decades, the rapid rise of online retail has also wreaked havoc. According to an OECD report from October 2020, the Covid-19 pandemic has only increased the severity of the challenge. So where does this leave small, independent retailers?

 

A recent survey by software provider Raydiant revealed that 41% of retailers identified creating better customer experiences as a priority going forward. The research also showed that 26% of bricks-and-mortar retailers were reliant on e-commerce to survive the pandemic, even if they hadn’t experimented within it before. The distinction between online and offline activities is becoming less important. With less of an emphasis on formats, retailers are increasingly keen to deepen their customer relationships and win long-term brand loyalty. One of the ways retail businesses are pursuing these goals is by targeting niche audiences.

 

Since the turn of the millennium, the internet has made the obscure more visible. Big tech companies like eBay and Amazon discovered early on that the most obscure items sold as often, sometimes more, than a smaller pool of the most popular items. This provided the perfect incentive for such companies to develop algorithms that actively encouraged users to click on obscure items. Search engines jumped on the bandwagon too: Google, Bing and Baidu realised connecting users with unfamiliar corners of the internet would help them sell more ads.

 

As a result, obscure books, songs and ideas found a home just one click away from the bestsellers in their categories. It’s been this way since well before the internet went global and mainstream. Social media influencers harnessed the trend early and have spent the past decade supplying digital products and services to niche markets. Whether it’s a history podcast or a self-paced online course, people are building lucrative businesses by serving specialised carefully-targeted audiences, and building strong and personal relationships with their customer base. Now, traditional businesses are beginning to follow in their footsteps.

 

Retail niches can take many different forms, but most people will be familiar with a few examples. The ‘pink pound’, a phrase first coined by the Guardian newspaper in 1984, is used to describe the purchasing power of the LGBTQ+ community. This niche demographic is estimated to be worth £6 billion per year to the UK economy. The ‘Black pound’ has also been in the limelight this year alongside global social movements like Black Lives Matter. In June, DJ Swiss of London hip-hop band So Solid Crew launched ‘Black pound day’, reminding consumers to support Black-owned businesses on the first Saturday of every month.

 

The global ‘buy local’ movement is concerned with encouraging consumers to support local producers and retailers. It ties in with a wider push towards conscious consumption and a greater emphasis on commitments to sustainability, labour and supply chain ethics and good business practice.

 

Bread Source is an artisan bakery with several locations across Norwich. It stocks a variety of food and drink products from local brands, and is known as a community hub. People visit to buy sourdough bread, enjoy a coffee with friends and learn about produce from nearby. The bakery’s whole brand is built around a ‘buy local’ ethos, with milk and eggs from Norfolk farms and regional cheeses and sausages always in stock. Customers love it: The business has expanded from one location to four in the city centre over the past three years.

Retailers are increasingly keen to deepen their customer relationships and win long-term brand loyalty.

“When you take the time to create something high quality, you can really connect with your customers. Our priority is always to maintain and increase our quality, and then you can look to broaden what you’re offering, as long as it’s in ways that are well thought-through,” says Rosie Anabelle Mills-Smith, marketing manager at Bread Source. “People appreciate that we offer a combination of really premium products and traditional staples at a fair price. They realise we’re not there to make a fast buck, but to do things properly.”

 

When coronavirus hit, Bread Source shifted from bricks-and-mortar to more than 200 online orders overnight. At a time when vulnerable residents were struggling to get supermarket delivery slots, the bakery launched online and stepped up to the challenge. The goal was to serve their community, but their dedication makes good business sense too. There is now a world of opportunity for smaller retailers serving niche markets.

 

“When you’re clear about who your customer is, it’s much easier to market effectively,” says Clare Bailey, a retail industry campaigner and founder of the Retail Champion consultancy. “You stop shouting at anyone who might listen, and start to understand who your customer is and how to engage them in a compelling way. It’s like the difference between constructing a billboard and sending a personal letter.”

 

Big retailers are paying attention to niche markets too, with an emphasis on purpose-led design that puts social missions around climate change, diversity, social inclusion or health and wellbeing at the core of their brand images. Global clothing retailers like H&M and Zara, for example, have made their sustainability credentials a core part of their marketing strategy over the past few years – highlighting their commitments through in-store advertising and customer recycling services.

 

Companies like outdoor clothing brand Patagonia have built their entire business around customers’ connection with its brand ethics and worldview. But is any of it more than just smart, strategic marketing?

It’s like the difference between constructing a billboard and sending a personal letter.

“Marketing is probably the easiest way for businesses to communicate their intent, but there’s a good chance potential customers will be sceptical,” says Luke McKinney, client partner at strategic design consultancy Nile, whose clients include the NHS, banks and retailers. “It’s easy to say something. It’s much harder to do something. It’s even harder to consistently do something, and to do it right. You have to make an authentic connection and really serve people, whatever the size of your brand.”

 

There are certainly risks for businesses that get it wrong. The local skater clothing brand Supreme targeted a specialist niche market and saw tremendous success for many years. Exclusivity and scarcity, especially in the case of limited edition runs, are big factors in generating the hype and excitement needed to sustain a niche business. There are concerns now, however, that Supreme’s expansion from niche to mass market will diminish the loyalty of its core customer base and result in a more uncertain future for the brand.

 

Identifying the right niche is the most crucial step. Often, an entrepreneur will notice a gap in the market based on their personal preferences, and then try to solve the problem or problems they have experienced. This was Rachael Corson’s approach when she co-founded the haircare brand Afrocenchix in 2008. “We came up with the idea for our business as university students. Back then, beauty retailers weren’t doing a good job of serving Black women, so we set out to fill this specialist gap in the market,” she explains.

 

“Generally speaking, there was much less awareness of niche markets in Europe. Our early customers were followers of online beauty trends and YouTube influencers. When we launched, it seemed like they were just waiting for the UK retail market to catch up with the US, in particular,” she adds. “The niche factor has been so important. If you focus on marginalised people who are usually ignored or erased, you’re more likely to succeed as a business because your customers appreciate what you’re doing on an intimate level.”

 

The sentiment rings true for Corson’s customers, too. “I’ve been using Afrocenchix products since I discovered them at a black business show a few years ago,” says customer Claud Cunningham. “I loved the story, that the business is black-owned, and that the products are natural and sulphate-free. The quality is outstanding too.”

 

Niche is becoming more and more prominent across the world of retail. Shoppers today want to live out their values through their spending and consumption, and to feel like they are truly contributing to something wider. The role of retail businesses is as much about niche purpose as niche products. As Claire Bailey puts it: “As a small retail business today, you don’t need thousands of customers to be successful. Instead, you need to build strong, authentic relationships with a much smaller number – and then keep them with you.”

 

Lauren Razavi is an award-winning writer with a passion for people and ideas. She publishes a weekly newsletter about remote work and global living. Follow her on Twitter: @LaurenRazavi.

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