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Struggling to choose the right niche for your marketplace? Discover a step-by-step guide on how to find your marketplace niche, research market needs, and understand your competitors to build a successful marketplace.
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:
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.
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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:
Why Niching Works to Get Going:
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:
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.
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:
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:
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:
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:
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.
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:
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.
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:
2. Identify Their Current Challenges:
Run Club Organizers:
Run Club Members:
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.
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:
Key Questions to Ask:
Understanding Their Challenges:
Current Challenges for Run Club Organizers:
Current Solutions:
What They Like About These Solutions:
What They Dislike About These Solutions:
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.
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.
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:
2. Identify Indirect Competitors: Indirect competitors are those who offer an alternative solution to the same problem. For example:
3. Research and Analyze Competitors:
Example Analysis:
Direct Competitor: RunningClubs.com
Indirect Competitor: Meetup.com
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.
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:
2. Search Volume Data:
3. Social Media and Community Engagement:
5. Advertising Spend:
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:
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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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:
By following these steps, you'll have a clear understanding of:
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!