Starting an Online Business: Finding the Right Niche

March 8, 2016 / Business

Got a great idea for an online business? Can’t wait to build the website and get started? Then stop for a few minutes and read this article, it could just stop you making a big mistake. Before you rush into any decisions about what kind of business you are going to launch, it’s important that you fully understand the nature of the online market. In this article, we’ll explain why you need to choose a specific niche for your business and how to find out which niche is going to offer you a viable market.

Why you need to identify a niche

The internet is a highly competitive marketplace. There are millions of businesses selling products and services of every conceivable kind. Many of these businesses are extremely well established and have a firm grip on their markets. They have the buying power to get hold of products cheaply, the logistics in place to distribute them quickly and the marketing force to make sure everyone knows about them. If you are thinking of competing against these kinds of businesses, your company is unlikely to succeed.

To be able to start a successful online business, you need to identify a niche where there is a demand for a product or service; but there are few, if any, online businesses servicing the needs of those customers.

One of the problems with identifying a viable niche market is that many of them have already been swamped by suppliers. Increasingly, those starting new online businesses are either focusing on selling brand new products and services, (frequently from the technology sector) or building their businesses around what are known as micro-niches. For example, if the market sector was insurance, niches would be insurance for home, car, life, travel, breakdown and pets. A micro-niche would focus on something very specific like wedding insurance or identity theft insurance. Companies like Rias and Saga, for example, specialise in over 50’s insurance, whilst Sheila’s Wheels focus on women drivers.

One of the best ways to succeed is to find a niche before it becomes firmly established. For example, as same-sex marriage became legal in the UK in 2014, it looks likely that very soon we’ll see a niche developing in the legal market for same-sex divorce. Getting in the market early will enable you to become a key player before other competitors jump on the bandwagon.

Advantages of finding a niche

There are many advantages to finding a small but lucrative niche. One of the main ones is that your company will be seen as a specialist. Being a specialist means that customers tend to think you are an expert in your field and, because of this, they make you their first port of call and are willing to pay more for your products and services. One excellent example of this is Clarks, the shoe retailer, which, for decades, has been seen as the expert for children’s shoes. Being perceived as a specialist and an expert is a great way for a smaller, online company to build up a loyal customer base.

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How to find out if you have a viable niche

You can find out if there is a market for your niche idea using some free online tools. The main tool you need is Google’s Keyword Planner. Using this tool (you will need to register first) you can find out how many people are searching for the products and services your business is offering and get an understanding of the competition you might face.

All you need to do is create a list of the keywords that you think people might use when searching for your products or services. Inputting these will allow Google to show you the relevant data.

Starting and Online Business: Finding the Right Niche 1

Above is the data for the term school shoes. This shows that the number of monthly searches ranges from 18,000 to 110,000 with an average of 33,100 searches a month. It also shows that the competition for people wanting to advertise for these products is high which indicates that there are a lot of other companies targeting this market.

Ideally, you need to find a niche product or service that has high average monthly searches and where the competition is low. This would indicate a niche where there is sufficient demand and room for a new business to establish itself.

The other tool you can use is Google Trends inputting your keywords into this tool will help you understand whether the products and services you are thinking of selling are becoming more or less popular over the years. As you can see below, there has been a year by year increase of people searching for school shoes online.

Starting and Online Business: Finding the Right Niche 2

Normally, you should avoid selling products or services which are in decline as it could signal the end of a product’s life-cycle or that a product or service has become obsolete. However, for some niche online businesses, this can be more of an opportunity that a threat. There are still people out there buying and selling VHS and Betamax videos and non-digital cameras. And whilst music shops like Virgin and HMV have disappeared from the high street thanks to online downloads, vinyl records seem to have made a bit of a comeback. The good news for niche record shops is that vinyl has not become popular enough for the big companies to become interested, leaving the market open to small, independent online retailers.

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From reading this article, you should be aware that that internet is a competitive environment and that launching a business that has to compete with large, established businesses is unlikely to succeed.

Instead, you need to find a unique product or service or a niche which has less competition but still has a demand that you can make a living from. To ensure you find a suitable niche, you will need to fully research your market, its trends and your competitors.

In essence, if you are looking for a good niche, think about becoming specialised; don’t be a cake maker, be a gluten free cake maker, instead of selling golf clubs, sell left handed golf clubs, if you’re setting up a cleaning service, be an eco-friendly cleaner and only use green cleaning products. There are customers out there looking for a specialist company like yours.

If you are considering launching your own online business and are looking for a web host, take a look at our easy to use site builder. Check out what our customers say about our services, too.


  • Arjun Shinde

    I'm an experienced digital marketer with expertise in planning, SEO, SEM, and social media. I'm good at creating engaging content and optimising campaigns for a strong online presence.

    View all posts

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