If you’re building a software/social/ecommerce startup, then at one point or another, you have been advised to start in a niche market and expand into the masses. This is solid advice: when your product is focused on a slice of the market, it’s much easier to customize your solution for the specific needs of those users and capture more market share than if you tried to build a general ‘all things for all people” solution.
But, the key question is: after you nail down a niche, how do you expand into the mainstream and capture a bigger piece of the pie? There are three strategies:
1. Expand categories (it worked for Amazon)
With e-commerce platforms, adding new categories is usually the best way to get to a mass audience. Amazon is a good example here. They started out as bookseller. And today, if a product has a SKU, you can buy it on Amazon.
The interesting piece in Amazon’s strategy is how they use the marketplace activity to determine what to sell themselves. When a third party has success selling a particular product, it captures Amazon’s attention and they’re usually interested in adding this product to their own offerings.
Likewise, crafting supplies became one of the largest categories on Etsy after the team saw tons of activity on the marketplace around such goods and decided to create a dedicated category for supplies. This is one reason why category expansion can be such a successful strategy for marketplaces: they can see activity on their own platform and decide where to expand.
However, not every marketplace has the same results of Amazon. With my startup, AbeBooks, we didn’t have any success trying to expand out from the niche of selling used and rare books. The main reason is that Amazon was already too strong a player in the general book category. So, we ended up selling the company to Amazon in 2008.
2. Expand audiences (it worked for Facebook)
Social platforms usually try to expand into related audiences. For example, Facebook started connecting college students and at some stage decided to open up the platform to everybody.
The secret to Facebook’s success was that they made the product very mainstream to use from the start. This is different than other social platforms that either have very tight communities that aren’t always welcoming to new users (e.g. Reddit) or have developed very specific UI/language that isn’t mainstream (e.g. Twitter with retweets and Snapchat with disappearing photos).
In my opinion, Reddit and Twitter failed to expand into more mainstream audiences, and the jury is still out as to whether Snapchat will be able to do so. The bottom line: if you want to expand your social platform to a mainstream audience, be sure to build a mainstream product experience in the first place.
3. Grow by expanding the niche audience (it worked for Lululemon and Etsy)
In some cases, you don’t have to expand into different categories or new audiences if your underlying target audience grows rapidly enough. For example, Lululemon got started right at the time when Yoga was taking off in the mainstream. As the number of people interested in Yoga grew, so did Lululemon’s target customer. They also did a great job of developing their company into a lifestyle brand that attracts people who don’t actually practice yoga. In a similar way, Etsy has been riding the wave (and maybe fueling it) for artisan/handcrafted goods.
Even when you know your strategy for moving from niche to masses, it is still hard to know when is the right time to expand categories or audiences. In the case of AbeBooks, we were too late, as Amazon had already won too much mindshare. But, many other startups never can scale in the first place because their experience is too broad and they can’t win any market.