Many would-be entrepreneurs spend a lot of time trying to think of the next big thing. Most end up spinning their wheels and never getting a new venture off the ground. It’s hard to come up with an original business idea. However, if you look at some of the most successful businesses in the world, you’ll find that they aren’t based on new ideas at all.
The truth is that you don’t have to be original to start a successful business. Many startups succeed in crowded markets by doing their homework and executing their business plans. Nerd Wallet, for example, succeeded among a crowded marketplace for credit card recommendations.
Working to capture market share where strong demand already exists can be easier than creating a market from scratch. Here are some tips on how to find opportunities in existing marketplaces.
Embracing disruptive innovation
One of the ways that startups can succeed in a crowded market, and even become a dominant player, is through disruptive innovation. That’s how Netflix grew from an upstart DVD-by-mail business into the world’s largest streaming entertainment provider. Their example is one that startups should try to emulate to succeed in a crowded market.
Netflix’s original innovation was to offer movie rentals by mail without any late fees. They recognized that consumers were tired of punitive fees when they forgot to return a movie so they built a business model that didn’t rely on collecting late fees. Netflix further succeeded when they launched their disruptive streaming service, which accelerated their ability to capture their market.
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The same idea applies to much smaller companies. Merch38, which sells branded merchandise, experienced a sharp drop-off in sales volume as the pandemic began forcing the cancellation or postponement of business and entertainment events. Seeing that in-person events were going virtual, they sensed an opportunity to innovate. They created a portal where event planners and sponsors could encourage virtual attendees to order personalized event merchandise. This helped them capture market share from rivals that were slow to adapt to changing conditions.
Vasily Danilenko, the founder of Merch 38, explains “During the lockdown, we saw the events industry struggling to adapt to a new reality, and the idea of bringing real merchandise into online events seemed like a unique opportunity.”
Seek strategic partnerships
Frequently, entrepreneurs try to build market share on their own. However, it’s not the only path to take, especially in a crowded market. Sometimes you can seek partnerships with established businesses or platforms to reach customers.
Try to find companies in adjacent industries that focus on a similar target market that can benefit from partnering with you. Consider the recent partnership between the dating app Hinge and meditation app Headspace. On the surface, they seem to have little in common, but Headspace agreed to create meditations designed to help calm pre-date nerves, resulting in a cross-promotional benefit for both parties.
Law firms similarly pursue partnerships to grab market share. According to George Mgdesyan of LA Lawyers, it would be very challenging for a single-practitioner firm to survive in a crowded legal market like Los Angeles. That’s why after having a track record filled with early case successes, he sought partners with more diverse legal experience. He says, “No new law firm can capture existing market share without making a strategic choice to diversify in one way or another. You can either try to grow by buying the capabilities of others, or you can offer your capabilities to a willing partner. The former can be costly, but the latter offers a sure and steady path to growth and success.”
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Finding an underserved niche within a market
Startups can also succeed in crowded markets by identifying a niche within a market that existing businesses may have ignored or underserved. In many cases, there are opportunities that would generate meaningful revenue for a startup that would not be worthwhile for a bigger company. In other words, just because nobody’s tried to service a particular market segment doesn’t mean it’s not worth trying.
A good example of this is Wish. They realized there was an e-commerce opportunity to sell extremely low cost items sourced from China. They discovered there was a segment of the market that cared more about low prices than product quality. They recently went public and are now worth over $17 billion.
With less competition focused on a niche, this strategy can offer a faster route to revenue and profitability. Moreover, once that foundation is laid, you can move upstream and expand to additional market segments.
Going Deep with Market Research
A benefit of entering into an existing market is that there is plenty of data to look at when assessing an opportunity. Unlike more groundbreaking lines of business, you already know what customers want and how existing players meet those needs.
To be successful, you can’t be a me-too company. Rather, it’s important to dive deep into market research to look for market segments or ideas that existing companies have missed. By using available data found online and some careful analysis, you can build an excellent picture of existing market shortcomings.
According to Boris Dzhingarov of marketing platform ESBO, search data is an effective way to find areas of differentiation. He explains, “Now that it’s possible to mine search engine trends and cross-reference them against competitor strategies, startups have advantages they’ve never had. They can look for hidden customer demand evidenced in search data that doesn’t match with what existing companies are doing. Then they can cater to that audience to get a fast foothold in otherwise cutthroat markets.”
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Crowded markets aren’t off limits
It’s easy to overlook markets where there is existing competition. However, with some differentiation, many startups have proven that you can not only be successful, but also become a market leader.