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Building a successful business today is not easy. There are many factors that need to be considered to ensure the business is scalable. For a marketplace to be successful, merchants and customers must be constantly transacting.

Since the success of Esty, Airbnb and Uber have grabbed the world’s attention, many similar marketplaces wish to repeat the success. But how do you compete in the pool of competition?

While there is no ultimate answer to this question, here are some factors to consider choosing a hyper-niche strategy for building a marketplace.

Little to no competition

It is true that when you are focusing on a specific target market, there will be less competitors.

There are many companies with a very similar business model to Airbnb, but less if it is in a niche market such as women-only, pet-friendly or LGBT travel.

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Since there is less competition — or in some cases none at all — it will be much easier to drive traffic to the marketplace.

Ability to attract attention easily

Often times, anything that has a specific focus and a unique selling point grabs attention easily. Telling people there is a new café in town, that’s common. But if you tell them that there’s a new cat café!? Well, that grabs attention.

With the right marketing strategy, a unique platform can easily draw some buzz and get people talking about the niche marketplace.

Genuine testimonial & referrals

By focusing on a niche marketplace, entrepreneurs probably offer solutions that are needed by a specific target audience. The smaller target audience will likely show appreciation because their specific needs are met.

For example, by creating a marketplace that list wheelchair-accessible homestays, the guests will most likely be thankful that the platform exists.

At that point, it’s only luck if they will share the experience and tell others about it.

Lower marketing costs and efforts

Since the focus is smaller, it is more manageable to budgeting marketing efforts. The potential audience is more specific, resulting in lower costs

Even simple cost savings, like a lower rate for Google AdWords pay-per-click or Facebook Ads reach be significant when the company is only targeting people in need of wheelchair-friendly logdging, compared to all travellers in the country.

The execution will be easier as well because entrepreneurs can lock down and focus on a specific audience instead of reaching out to everyone.

There are risk in going hyper-local too

Obviously, there are possible downsides about going hyper-niche with a marketplace.

One is the distinct possibility a particular niche market collapse for various reasons. For example, if a Founder notices there is a large population young professionals working two jobs in the city, a good idea may be to start a marketplace that offers food delivery service from eateries in the city.

But after a period of time, the population ages and start to have families. Or, they make enough money to quit one job and free up some spare time for nice evenings out.

If the next generation of youngsters no longer need to work two jobs, then the market has dried and the company may see falling revenue.

And that is a risk that when starting a hyper-niche marketplace bound to a specific demographic or region — there may not be enough customers because the demand changes or disappears.

However, such a scenario does not happen overnight and is not applicable across every marketplace business model.

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A savvy entrepreneur could pivot the model as the business scales, or complement it with another service to adapt to the change in demographics.

Don’t let a fluid market hinder the desire to build a hyper-niche marketplace.

Like running any other business, with the right planning and strategies its possible to find success by pursuing a hyper-niche strategy.

While there is no proof that hyper-niche marketplaces can do better than those with broader focus, they definitely have potential to grow while offering much-needed solution for the targeted audience.

About: Kenneth Low is a co-founder of Arcadier, a SaaS company that powers next generation marketplace ideas. You can follow Arcadier on Twitter, Facebook, and LinkedIn for news and update.

Photo courtesy of Gratisography.