Spotting a gap in the market and rapidly launching a business to exploit it can put your start-up on the path to success. Unlike many companies that sell existing products and services to established markets, successful start-ups have taken advantage of emerging shopping trends and new technologies to launch innovative products and services that have rapidly taken off.
Identifying a gap in the market is tricky. It involves spotting customer needs which those existing businesses are not meeting. While that may seem a daunting challenge, gaps exist in many markets and industry sectors. Taking advantage of emerging trends, such as Netflix capitalising on fast home broadband to deliver streaming TV and films, can be a way to launch entirely new businesses that don’t have competitors when they launch.
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What is a market gap?
A gap in the market is an area that businesses don’t currently serve but that there is customer demand for. This could be a new and unique product or service that hasn’t previously existed or a new way of delivering an existing service.
Market gaps can result in transformational businesses. Airbnb makes it simpler for people to rent out their spare rooms or properties on short-term lettings without going through traditional lettings agencies, and renters to find cheaper, short-term accommodation as an alternative to hotels.
Market gaps don’t have to be sizable or revolutionary. A local restaurant opening that offers a different type of cuisine than existing restaurants or a store opening that sells refills for household cleaning materials and food to help cut down on waste packaging are examples of market gaps.
Recognising gaps in the market
Spotting a gap in a market can give your new business a competitive edge. It can also help determine what you sell, how you sell it and which customers you are selling it to. It’s worth keeping an eye out for potential market gaps, even as a newly launched business, as it can help you plan how your business can expand and grow.
1. Imitate and reinvent overseas businesses
Exploring new businesses operating overseas can provide a wealth of ideas for a start-up providing services and products in the UK. Unique, exciting products – from Japanese bubble tea to nettle fertiliser tea kits from Ukraine – can find a market in the UK as shoppers respond to new ideas and intriguing creations.
Alternatively, look to add a unique spin on existing businesses. Uber, for example, turned the taxi model on its head, connecting passengers with minicabs to enable them to be picked up and pay for their journey using GPS-enabled smartphones and digital payments. Look out for start-ups making headlines in Europe, Asia and the US and see if something similar could work in the UK.
2. Stay on top of market trends
Things move fast. The Covid-19 pandemic has been a prime example of shifting customer buying habits and new business opportunities. From the rise of online services such as tutoring and fitness classes to an increase in new dog owners looking for grooming and walking services, trends can rapidly reveal new opportunities.
Technology trends are a useful barometer, as they open up new products and services not previously possible. Examples such as aerial drone videography, virtual reality events and exhibitions and remote freelance services have opened up new markets.
3. Survey customers
A gap in the market often addresses problems and needs faced by customers. Survey customers about the issues that affect them, the frustrations they face buying or using products and services, or new features they’d like to see. Customers are a great way to identify ideas. You can unearth issues by studying negative reviews of companies on reviews sites such as Trustpilot and Reviews.io – could you launch a business that addresses those problems?
4. Brainstorm unsolved needs and problems
As well as problems faced by other customers, brainstorm the issues and problems you face as a customer. Print at home postage labels, for example, was partly the result of customers being frustrated at having to purchase stamps or go to the Post Office. Write down a list of problems or needs that are not being met, and brainstorm ideas of how you could address them.
5. Transfer your skills
If you’re thinking of launching a business after a career in an unrelated field, think about how you can transfer your skills and experience to come up with a unique take on an existing business. For example, you may have a background in technology and IT and apply that to craft-making, launching an e-commerce store and online crafting community.
Alternatively, explore where your skills and knowledge can unearth new opportunities. You may have worked for a large corporation and identified how you might be able to offer a more personal service to a group of customers, opening the door to going-it-alone with your take.
6. Investigate niche markets
Gaps in the market are often small. Rather than try to conjure up a vast business that revolutionises an industry, investigate niche markets to see where customers are underserved or who can be served differently, such as with modern technology or improved customer service. Look for other niche businesses in different sectors that launched a new, successful niche product. What did they do? What innovation did they bring? What can you replicate in a different niche?
7. Reinvent existing products and services
Products and services evolve – the trick is to be the one evolving them. This can be especially true with new businesses offering similar products, where adapting and changing them can result in more customers and more profits. Technology giant Nintendo reinvented the video games console with a low-powered model that appealed to older and younger customers, going against the established grain of releasing a more powerful console than its rivals.
8. Monitor legal changes
New laws are a huge catalyst for change and can open new gaps in markets almost overnight. For example, the Legal Services Act 2007 introduced regulated alternative business structures, allowing non-lawyers to own law firms for the first time. This led to an explosion of modern legal services, such as online conveyancing that hadn’t previously existed.
Environmental legislation could be instrumental in creating new markets for the coming decade. From innovative technologies such as carbon capture to greener reuse and recycling services, requirements on businesses and consumers to be more environmentally friendly could create demand for greener products and services.
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