Horizontal-Niche Market Dynamics

Broad Market

Market with substantial or wide profit margins or spread. Opposite of thin market.

Business Dictionary

A broad market or a horizontal market is a market with high spread. Spread is defined as a difference between seller and buyer bids. There is high profit margins in a wide market but the buyer is also unwilling most of the time becuase of the spread.

Generally a broad market has a generalized product or service that it tries to cater to most of the customers i.e. it contains denominators of features that are required by most of the customers.

Niche Emerges

A broad market is already saturated with products that contain common denominator of features required by most of the customers. It does not exactly fit to the needs of most of the customers and with high spread, customers will accept any affordable product that is marginally better. Entrepreneur realize this need and if the market segment of such customers is big enough to be sustainable, a niche or a vertical market gets emerged. Niches can often emerge by the creation of completely new market segment or the combination and specialization of one or more existing niches. Any new market will always start with wide market and over time, specialize its way through niches, like a tree.

Tools of niches

Constant Struggle

The niche is a constant struggle to innovate. In a free market system, when one realizes the need for the niche, market too realizes it. The investors swamp in to create competitive service providers and companies. Competition drives innovation. A startup or company will only have the benefit of head start or can create other competitive advantages via patents, copyrights, trademarks and trade secrets. With constant competition and pressure, the niche market segment will always be specializing and acquiring domain expertise to catch up with ever changing market needs along with investors and other innovators. There is also high risk of monopoly if any company, instead of innovating, tries to hoarde resources and kill out or buy competition instead.

The risk of startups

Most of the time, a startup is a risk between a possibility of getting a goldmine and the uncertainty of being a martyr. To add problem to the pile, consumers and markets do not always know what they need. People wanted faster horses, nobody wanted a car. So there will be need of experimentations, some risks and some insanity from the entrepreneur's side. Many of them will fail and pave way to the success of other experiments. In a way, failed startups are fuel to the free market, similar to how failed experiments are the fuel to the scientific community, many of whom fail to bring any significant contribution to the society directly but indirectly, they inform the scientific community of the things that do not work under certain conditions.