Understanding the growth of niche markets and the tribes that grow with them

Understanding the growth of niche markets and the tribes that grow with them
September 8, 2016 Jason Wyatt

Understanding the growth of niche markets and the tribes that grow with them

By Jason Wyatt, Managing Director Marketplacer

Commerce rarely stands still. And online commerce is a beast in perpetual motion.

We’ve all become accustomed to the idea disruption is the new norm and change is the only constant. However, beneath the seeming chaos we can still recognise patterns which help us as entrepreneurs create value.

One of the most fascinating patterns to watch for is the growth of niche markets and the tribes that grow with them.

Along with the observable patterns in the big data being made available through analytics, as entrepreneurs, we also draw upon our own observations and insights.

At Marketplacer, we spend a lot of time looking at data and tracking the way specific segments of a market grow, looking for the seeds of growth and the tipping points that indicate scale and maturity. We also spend a lot of time looking at the underlying characteristics of the tribes which cluster around certain segments.

This is the process that led us to develop our first online marketplace: BikeExchange.

We could observe for ourselves the growing number of cyclists on the roads. We could also see these particular cyclists were spending serious money on their two-wheeled habit. That money was going on bikes that cost thousands of dollars and, increasingly, on associated equipment and gear.

Interestingly, the broad figures for cycling participation in Australia somewhat contradict what we had observed and perceived as a boom in cycling.

In their study on Australian cycling participation rates, Professor Chris Rissel and journalist Chris Gillham compared data for participation rates between 1985-86 and 2011 and found while there was an increase in the total number of people riding bikes, the per capita rate had actually declined.

The study was released five years after we had started BikeExchange, but in a way it vindicated our thinking: Our tribe wasn’t kids riding bikes to school (though you can buy that kind of bike on the marketplace); our tribe was the growing number of middle aged people with disposable income who were serious about cycling as a sport and recreation activity.

As the study noted, total per capita riding figures had stagnated, but there had been substantial growth in the demographics that mattered to us as a business. The tribe was there for a marketplace.

By gathering data and information from a broad range of sources, including retailers, we were able to confidently surmise that the category of cycling was growing in demographic segments that would make it a strong niche market.

Our observations about this tribe were spot on. The right people were spending money on a wide range of bike-related products and services for an online marketplace to thrive – which is what BikeExchange did and continues to do.

We’ve applied the same methods to setting up other marketplaces as well, such as House of Home, TiniTrader and Outdoria. We’ve made our own observations about niche segments and then looked at a range of data to test our hypothesis: Does this tribe have the right characteristics to support a marketplace?

It’s a process we keep applying to other market segments as well and sometimes the data and information we get tells us that a niche is not strong enough yet to sustain a marketplace – the makings of a tribe are there but the momentum is not.

However, there are many segments that show immense promise and which we think provide incredible opportunities to entrepreneurs who are willing to see the patterns beneath the chaos.

It comes back to not being everything to everyone, but being something to someone. Identify your tribe, look for its strengths and qualities, and you’ll find your marketplace.