What is a niche market? Definition and examples

A niche market is a very focused market with demand for a specialized product or commodity. It is typically a small subset of a larger market.

Businesses that focus on niche markets create custom-made solutions for their niche audience.

For example, within the market for cakes exist different niches. Cakes for weddings would be a niche market, as would cakes made for people on a low-carb diet.

The Cambridge Business English Dictionary defines a niche market as “a small group of people who buy a particular product that most people do not buy, especially a good quality product that makes a lot of profit.”

Niche MarketAs niche markets are highly specialized they represent an opportunity for small businesses to compete against larger companies who may have a strong hold on the mainstream market. However, even large multinational companies have products for different niches. For example, most of the largest automakers now offer energy-efficient hybrid models  for environmentally-conscious and urban consumers. 

Niches can be defined by particular needs of buyers. Ways of defining a niche are based on behavior, benefits, culture, demographics, features, location, language, lifestyle, status, risk tolerance or style.

Companies that focus on a niche market tend to have a strong relationship with customers because of the well-defined focus of the business. This is important in building customer loyalty. 

Some of the benefits of focusing on niche markets include: more effective marketing, higher conversion rate for sales, the ability to charge better prices and more effective sale strategies. 

Examples of niche businesses

  • An organic foods store – some consumers will strictly buy organic foods because it is free of any hormones and pesticides. 
  • Pet grooming – a pet grooming business is focusing on pet lovers who care a lot about the appearance of their pets. 
  • Electric vehicles – an EV business focuses on a subset of the auto market who tend to be more environmentally conscious.