How to Find Your Marketplace Niche: A Step-by-Step Guide for Beginners

One of the biggest challenges new marketplace founders face is defining a niche. It’s incredibly tempting to skip niching down and offer a wide range of services and sellers. After all, Amazon sells everything, Uber offers Rides, Eats, and Scooters, and Airbnb provides Stays and Experiences. So, if it works for them, it should work for you too, right?

I get it. Over the past year, I've received countless questions from aspiring marketplace builders:

• "Is it better to start with a broad marketplace or a niche one?"
• "How do I choose the right niche for my marketplace?"
• "What if my niche is too small?"

In this post, I’ll explain why focusing on a niche is actually a smarter strategy for new marketplace businesses. Using my own experience and a few proven strategies, I'll help you identify and define your niche so you can start building a successful marketplace. You'll learn how to use frameworks like Ikigai, map out industry ecosystems, identify key players and their challenges, and more. By the end, you'll have a clear path to finding a niche that is both fulfilling and profitable.

Sound good?

Let's get into it.

Why Going Broad (Mostly) Doesn't Work

It's a mistake to assume that Amazon, Uber, and Airbnb succeeded because they went broad from the start. The fact is, they made a name for themselves by focusing on a specific niche and offering a particular service. Amazon started with books, Uber with ridesharing, and Airbnb with airbeds in living rooms. Over time, they added more services, but only after finding product-market fit. This approach doesn't apply to most first-time, early-stage marketplace founders.

Common Issues When Going Too Broad:

1. Unclear messaging: Founders often struggle to resonate with their market because they try to appeal to everyone rather than focusing on one key target buyer.
2. Hard to systematize: Managing a wide range of services and sellers is complicated. For example, on Unicorn Factory, developers charged much more than virtual assistants. This made pricing subscriptions difficult without overcomplicating things.
3. Hard to allocate time and money: It's tough to allocate resources efficiently when you need to keep everything running simultaneously. Deciding where to spend your ad budget becomes a juggling act, as you can't favor one type of seller over another without losing balance.

Why Niching Works to Get Going:

1. Easier to get traction: Your solution and messaging are built around one target buyer and their specific problems. This focus helps you create a 10x better experience for that customer.
2. More likely to build trust and authority: By excelling in a niche, you establish yourself as a trustworthy and authoritative figure. This leads to word-of-mouth growth and kicks off your flywheel effect.
3. Easier to allocate time and money: It's easier to allocate your time and resources when your customers are similar. Systematizing operations becomes straightforward, allowing you to scale more effectively.

How to Pick Your Niche

So, the question now becomes - how do I pick my niche? How do I know if I have picked a good niche? How do I know if the niche is too big or too small? Ultimately, a lot of these questions answer themselves as you start diving into the six steps I go through when defining my niche:

1. Finding a great niche
2. Mapping your industry ecosystem
3. Defining your target customers
4. Researching challenges and current solutions
5. Analyzing the competitive landscape
6. Reviewing existing market trends

Each of the steps will help you define more clearly what you do and who you do it for, let's dive into the first one.

1. How to find a great niche

Assuming you don't already know what to work on, you might want to think about what you are passionate about. A framework I have found useful is the Ikigai framework. The Ikigai framework helps you find the sweet spot between your passions, mission, vocation, and profession.

Here is how it works:

1. Identify What You Love:

‍Think about your passions and interests. What activities or topics do you get excited about? What do you enjoy doing in your free time? This is important because you are in this for the long haul, so it may as well be fun!

Here are some things I would choose:

• Running (Marathons)
• Tennis
• Traveling
• Coffee
• Premier League Football

2. Identify What You Are Good At:

‍Consider your skills and expertise. What are you good at? What do people often come to you for help with? You want to leverage your already existing skills to move this project along.

Here are some things I would choose:

• No-Code
• Teaching
• Making YouTube Videos
• Building Marketplaces

3. Identify What the World Needs:

‍Look around and see what problems or needs exist in the world that you are passionate about. Is there a gap in the market that you can fill? Identifying these needs can help you find a niche that has demand.

Here are some things I would choose:

• Need to spend more time away from the screen
• Need to make connections with real people
• Need to get fit and healthy
• Need to make real-world experiences

4. Identify What You Can Get Paid For:

‍Finally, consider the monetization aspect. Can you make a sustainable business out of this niche? Are people willing to pay for the solution you provide? Ensuring there is a market willing to pay for your services is crucial for the long-term success of your marketplace.

Here are some things I would choose:

• Building apps
• Supporting with marketing
• Coaching/Consulting
• Building directories

By using the Ikigai framework, you can find a niche that not only aligns with your passions and skills but also meets a real market need and has potential for profitability. Once you’ve identified your niche, you’re ready to move on to the next step: mapping out your ecosystem.

2. How to map your industry ecosystem

Assuming you have mapped out your Ikigai and identified what excites you most (in my example, I’ll choose helping people get into running), it is time to map out the entire industry.

We really want to get a bird’s-eye view of your industry.

Here is how I would map out the running industry:

1. Key Players:
   • Event Organizers: Companies or individuals who organize marathons, half-marathons, fun runs, etc.
   • Running Clubs: Local and online clubs that bring runners together.
   • Coaches and Trainers: Professionals offering training plans and personal coaching.
   • Gear and Apparel Brands: Companies that manufacture and sell running shoes, clothing, and accessories.
   • Health and Nutrition Experts: Dietitians and companies offering supplements or nutritional plans for runners.
2. Categories:
   • Events: Marathons, half-marathons, 10Ks, 5Ks, fun runs, trail runs, virtual races.
   • Training: Online courses, personal coaching, training plans, fitness apps.
   • Gear: Shoes, clothing, accessories, gadgets (e.g., fitness trackers, smartwatches).
   • Health and Nutrition: Supplements, dietary plans, recovery aids, physical therapy.
3. Relationships:
   • Event Organizers and Runners: Direct interaction for event participation.
   • Running Clubs and Members: Regular meetups and training sessions.
   • Coaches and Runners: Personalized training and coaching.
   • Gear Brands and Runners: Marketing and selling running products.
   • Health Experts and Runners: Providing nutritional and recovery advice.

By mapping out the industry ecosystem, you can see how everything is connected and identify potential opportunities. For example, you might notice that while there are plenty of gear brands, there’s a lack of platforms that connect runners with personalized coaching tailored to specific race types. This insight can help you narrow down your niche even further.

Next, you’ll want to define a set of target buyers and identify their current challenges. This step will help you understand who your potential customers are and what specific problems they face, making it easier to tailor your marketplace to their needs.

3. How to define your target customers

Now that you’ve mapped out the running industry ecosystem, it’s time to define a set of target buyers and identify their current challenges. This will help you understand who your potential customers are and what specific problems they face. For this example, we’ll focus on run clubs and their members.

1. Identify Target Buyers:

• Run Club Organizers: People who manage and organize local or online running clubs.
• Run Club Members: Runners who join these clubs for community, training, and events.

2. Identify Their Current Challenges:

Run Club Organizers:

• Recruiting New Members: Finding and attracting new runners to join the club.
• Engagement: Keeping current members engaged and active within the club.
• Event Organization: Planning and managing club events, training sessions, and races.
• Communication: Effectively communicating with members about schedules, events, and updates.
• Funding: Securing sponsorships or funds to support club activities and events.

Run Club Members:

• Finding the Right Club: Identifying a club that matches their skill level, location, and running goals.
• Training Plans: Accessing structured and effective training plans.
• Community Engagement: Feeling connected and building relationships with other club members.
• Event Participation: Staying informed about and participating in club events and races.
• Health and Safety: Access to health and safety resources, including injury prevention and recovery.

By defining these challenges, you can tailor your marketplace to better meet the needs of both run club organizers and members. For example, your marketplace could offer features that help organizers recruit new members more efficiently, provide tools for better communication and event management, and create resources for members to find the right club and access training plans.

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4. How to research challenges and current solutions

Now that we have narrowed down our target customers to run club organizers and run club members, it’s time to dig deeper into their challenges and understand what they are doing about them. At this stage, you want to start conversations with your target customers. This could involve showing up at events, reaching out to them on Instagram, or any other method to learn more about their challenges.

The goal is to get them to articulate in their own words what they do, what their biggest challenges are, and how they are currently dealing with them. Let's look at run club organizers who are focused on recruiting new members.

Starting Conversations:

1. Attend Events: Go to local running events and club meetings. Talk to organizers and members to get a feel for their experiences and challenges.
2. Social Media Outreach: Reach out to run club organizers on platforms like Instagram or Facebook. Ask if they’re open to a chat about their club and its challenges.
3. Online Forums and Groups: Join running forums or groups on platforms like Reddit or Facebook. Engage in discussions and ask questions about their challenges.

Key Questions to Ask:

• What do you do to recruit new members for your run club?
• What are the biggest challenges you face when trying to attract new members?
• How effective are your current methods for recruiting new members?
• What do you wish was easier or more efficient in the recruitment process?
• Are there any tools or platforms you currently use to help with recruitment?

Understanding Their Challenges:

Current Challenges for Run Club Organizers:

• Visibility: Struggling to get their club noticed by potential new members.
• Marketing: Limited knowledge or resources to effectively market their club.
• Engagement: Difficulty in keeping potential new members interested and engaged.
• Retention: Ensuring that new members stay active and don’t drop out after a few sessions.

Current Solutions:

• Social Media: Many organizers use social media platforms like Instagram and Facebook to promote their club and events.
• Word of Mouth: Relying on current members to bring in friends and family.
• Local Partnerships: Partnering with local businesses or community centers to increase visibility.
• Flyers and Posters: Using traditional methods like distributing flyers and putting up posters in local areas.

What They Like About These Solutions:

• Cost-Effective: Social media and word of mouth are low-cost or free.
• Personal Touch: Word of mouth adds a personal recommendation element, which can be powerful.

What They Dislike About These Solutions:

• Time-Consuming: Managing social media and organizing local partnerships can be very time-consuming.
• Limited Reach: Traditional methods like flyers and posters often have a limited reach.
• Inconsistent Results: The effectiveness of these methods can vary greatly and often depend on luck or timing.

By engaging in these conversations and understanding these challenges, you can identify areas where your marketplace could offer a better solution. For example, you might develop tools that streamline the recruitment process, improve visibility, or offer marketing resources tailored specifically for run clubs.

5. How to explore the competitive landscape

At this stage, the lay of the land should be getting clearer, and you might even start to think about the key problem you want to help your target buyer solve. This is where you tie in your skills that you listed in the Ikigai framework.

In my case, I would like to help run club organizers recruit new members by building a free-to-use run club directory.

However, a key thing we don’t want to overlook is that there might be better ways to solve this problem. So, next, we want to explore our competition.

Exploring Your Competition

1. Identify Direct Competitors:Direct competitors are businesses or platforms that offer a similar solution to the one you’re planning to build. For a run club directory, these might include:

• Existing run club directories
• Local community sports websites
• Social media groups dedicated to running clubs

2. Identify Indirect Competitors: Indirect competitors are those who offer an alternative solution to the same problem. For example:

• General fitness apps with community features
• Meetup platforms where running groups can organize events
• Gyms or fitness centers that offer running clubs as part of their membership

3. Research and Analyze Competitors:

• What Are They Offering? Look at the features and services your competitors provide. How are they helping run club organizers recruit new members?
• User Feedback: Check reviews and testimonials. What do users like about these solutions? What do they dislike?
• Pricing Models: Understand how competitors are monetizing their platforms. Are they offering free or paid services? What’s their pricing structure?
• Marketing Strategies: Observe how competitors are marketing themselves. What channels are they using? What messaging are they employing?

Example Analysis:

Direct Competitor: RunningClubs.com

• Features: Directory of run clubs, search filters by location and type, member reviews
• User Feedback: Positive reviews on ease of finding clubs but complaints about outdated listings
• Pricing Model: Free basic listings with paid premium features for clubs
• Marketing Strategies: Active on social media, partnerships with local running events

Indirect Competitor: Meetup.com

• Features: Event organization, group management, RSVPs, community discussions
• User Feedback: Appreciated for wide reach and community feel but noted that it's not running-specific
• Pricing Model: Subscription-based for organizers, free for members
• Marketing Strategies: Strong SEO, word-of-mouth, localized advertising

These are just two examples, but you want to map out as many as possible to see where your solution could fit in the market. For instance, you might find that the first option has a lot more run clubs, or the other option has way more features. You can stand out by focusing on a specific location, like New York City.

6. How to analyze current market trends

Next, now that we have mapped out our competition, it's time to look at market trends as a whole. We want to identify if the market is growing or shrinking.

How to Identify Market Trends:

1. Google Trends:

• Use Google Trends to see the search interest over time for keywords related to your niche. For example, you can search for terms like "run club" or "running events" to see if interest is increasing or decreasing.

2. Search Volume Data:

• Use tools like Ahrefs, SEMrush, or Google Keyword Planner to check the search volume for keywords related to your niche. High and increasing search volume indicates a growing interest in your niche.

3. Social Media and Community Engagement:

• Check the activity levels in running-related social media groups, forums, and communities. Growing membership and high engagement levels can indicate a healthy, growing interest in the niche.

5. Advertising Spend:

• Observe the amount of advertising spend in your niche. If businesses are investing heavily in Google Ads or Facebook Ads for running-related keywords, it suggests that the market is competitive and potentially lucrative.

What you want to learn

Ultimately, the purpose of doing market research like this is to get an understanding of how your business could operate. It's about identifying your blind spots and coming up with a game plan.

By the end of this process, you should be clear about:

1. Who is your ideal target buyer and seller: You should have a detailed profile of your target buyers. For our example, this would be run club organizers and run club members.‍
2. What are your target customers biggest challenges: Understand the specific problems they face. For instance, run club organizers struggle with recruiting new members and keeping them engaged.‍
3. How are your target customers currently solving these challenges: Identify the current solutions in the market, what users like and dislike about them, and where there are gaps.‍
4. How does my solution fit into the current competitive landscape: Define how your unique solution addresses these challenges more effectively than existing options. For example, a free-to-use run club directory that focuses on local clubs in specific areas.‍
5. How will your solution make money: Develop a clear monetization strategy, whether it’s through premium listings, ads, sponsorships, or other revenue streams.‍
6. What general industry trends must you be aware of: Understand whether the market is growing or shrinking, and stay informed about the latest trends and developments.

By bringing all this information together, you can create a well-informed, strategic plan for your marketplace. This approach will help ensure that your marketplace is tailored to meet the specific needs of your target audience, making it more likely to succeed.

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TLDR

Now, doing market research is a lot of work, but it really is the foundation on which you will build your business

Here's a quick recap of the steps:

1. Use the Ikigai framework to figure out your niche: Identify the intersection of your passions, skills, market needs, and potential income sources.‍
2. Research your industry and map it out using Miro: Get a birds-eye view of your industry to understand key players, categories, and relationships.‍
3. Define a target buyer: Understand who your potential customers are and the specific problems they face.‍
4. Research challenges and current solutions in the market: Analyze existing solutions and identify areas for improvement.‍
5. Learn about your competitors or alternate solutions: Study competitors to find gaps in the market and opportunities for differentiation.‍
6. Review existing market trends: Determine whether the market is growing or shrinking and identify relevant trends.

By following these steps, you'll have a clear understanding of:

• Who your customer is
• What their challenges are
• How the market is currently solving these challenges
• How your solution can solve it better
• How your site will be able to make money
• What general trends there are in the market

If you want to dive deeper and learn more about building no-code marketplaces, I recommend checking out my brand-new "How To Build A Marketplace Without Code" workshop, which is now available on my site. In this workshop, I break down everything you need to know about building marketplaces as a non-developer, guiding you step-by-step through the process. Don’t miss out on this opportunity to turn your marketplace idea into reality!

Thanks for reading!

‍

Best,
Connor