Online retail market today in India was about Rs. 4000 crores which estimated grow at a scorching pace of 57%(CAGR). However most of the E-Commerce companies like Flipkart are finding it difficult to break even, even at this scale. The industry is in price war mode which does not look to be ending soon. That said companies like footsy.in, blugape.com, the boxerstore.co.in and many such are looking to concentrate on a niche market and make money. Let us look at some criterias on which one should enter a niche market in e-commerce (not exhaustive):
The Most Important One: Pick a niche that has a substantial market size
Let’s take for example Myntra.com. It started as online demand personalization for products such as T-Shirts, mugs, greeting card etc. However it hit a ceiling in 2010. It had to pivot to being online retailer of fashion and casual lifestyle products as the market size was small for the earlier segment. So, the most important thing to look for when deciding a niche is the market size. It should be substantial to let you scale and earn. The niche needs to be big enough to be a standalone market!
Criteria #2: Look for the current competition
One should do a competitive landscape of the niche and see if there are established player. For example getting into baby products market is a bad idea due to presence of companies like Firstcry, Hushbabies, and Babyoye which have a substantial market share.
Criteria #3: Don’t sell something that is easily available locally/people have don’t problem buying locally
The idea is to have products which are not easily available/people have problem buying locally which in turn channelizes the demand to you website. An example would be Zivame.com which sells Lingerie. There is a lot of social discomfort in India with buying it and it becomes a hurried buy. Also, women in Tier-II and III cities don’t get enough choice. So, the site becomes a perfect destination for them.
Criteria #4: Do not get into a market where one needs to manage lot of inventory
This creates issue with inventory management. One does not want to have dead stock lying, locking down capital. Also, it allows investing time in making great product listings on the website that will be useful for long time. A good example would be a site like Pyramid Air which sells Air Guns in US. They have a detailed listing of each product with test videos, features etc. They are able to do that as their products don’t have a high turnover. It helps substantially in SEO also.
E-Commerce is growing rapidly and many companies are jumping on to this bandwagon. One has to be doubly sure that there is a market for their product before launching. Getting the basics right is the key. Results will gradually unfold, one has to keep the patience
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