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What to Do When Your Online Niche Becomes Saturated

Updated on January 21st, 2022
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Competition is a natural part of doing business. Even if you’re the first to market, you’re eventually going to deal with competition. It’s just the way the business world works. But there are right and wrong ways to respond to competition in saturated niches. Are you doing it the right way?

In this post we’ll dig into what to do when you online niche becomes saturated.

Understanding the Nature of Competition

Competition is misunderstood by a lot of entrepreneurs and business owners. It’s something that gets a bad rap and is usually looked down on. After all, who wants to compete for business when they could be the only show in town? But when you study the nature of competition and what it does to free markets, it becomes apparent that competition is a pertinent component of business success. 

For starters, the average business has three major types of competitors in a saturated market: direct, indirect, and replacement. Direct competitors are businesses that offer the exact same product as you. For example, Louisville Slugger and Mizuno are direct competitors in the athletic apparel industry. They both sell baseball bats and compete for the same customers.

Indirect competitors are those who sell similar products, but aren’t competing for the same customers. For example, Callaway and Nike are indirect competitors in the golf space. Callaway sells golf clubs and equipment, while Nike simply sells golfing apparel. They both target similar customers, but they aren’t directly selling competing goods. (They used to be direct competitors in this space until Nike stopped making golfing equipment.)

Replacement competitors are companies that make products that customers could choose over your products. Sticking with the sport’s theme, Spikeball and Kan-Jam – makers of popular yard games – are replacement competitors. When a customer purchases and plays Spikeball, that’s one less customer who is purchasing and buying Kan-Jam. 

While competition is often viewed in a negative light, it’s actually something businesses should welcome (to an extent). Here are four of the biggest benefits of competition:

  • They say imitation is the sincerest form of flattery

    If you were first to market and other businesses then started popping up with similar ideas, this essentially validates your idea and shows you that you’re onto something. If nobody else is entering your niche, then it probably indicates that you’re the only one who sees opportunity. And in this case, that might be a bad thing.

  • Learning opportunity

    It’s lonely being by yourself. When you’re the only business in a niche, everything is on your shoulders. When there’s competition, you can study what they’re doing and learn from their successes and mistakes. This saves you time and money, while ultimately helping you grow.

  • Complacent

    One of the biggest benefits of competition is that it forces you to stay on your toes. You don’t have the luxury of sitting back and being complacent. Competition lights a fire under your seat and keeps you focused on improving and growing every single day.

  • Provides an alternative

    Every business has target customers – the individuals who are receptive to your product and profitable to the bottom line. But most businesses also have customers who aren’t worth their time. These are customers who complain, require handholding, or end up being dissatisfied with the product. When you have competitors, you’re able to offload these customers who aren’t a good fit.

The US telecom industry is the perfect example of a highly competitive industry in which individual businesses are individually successful. The four major players – AT&T, Verizon, Sprint, and T-Mobile – all offer similar products and services to customers. However, they’ve each differentiated in ways that allow them to stand alone.

For example, did you know that Verizon and Sprint operate on a CDMA network, while T-Mobile and AT&T use a GSM network? While they appear similar on the surface, each of the big four telecom companies has carved out their own niches, using the competition to their advantage. 

4 Tips to Help You Survive a Saturated Online Niche

The internet has taken any barriers to entry that previously existed in many industries and torn them down. You no longer need the resources that were once required in order to launch a business. Thanks to free tools, massive reach, and the ability to scale with very little effort, industries that would otherwise be exclusive have undergone massive changes.

If you’re like most, you look at this competition and shake your head. Be careful what you wish for, though. Without competition, your business would probably face unique challenges that you’ve never considered. That’s not to say competition makes things easy, but rather that it exists for a reason. As you confront heavy competition in a saturated online niche, here are some tips and strategies to consider. 

  1. Study the Competition and Learn

As mentioned, one of the biggest benefits of competition is that you can observe and learn from what your closest competitors are doing. This can provide you with lessons in what to do, as well as what not to do. The key, as entrepreneur Derek Halpern points out, is to learn from the competition – not copy everything they do.

“Think about Chess for a second. If black copies everything white does, black will always stay one move behind. The same applies to business. If you copy your competitors, you’re still one-step behind,” Halpern explains. “However, if you analyze each move your competition makes, and then understand why they made that move, you’ll prevent yourself from missing out on lucrative opportunities.”

Find time in your weekly schedule to study the competition. In the online business world, this looks like spending time on your competitors’ websites, social media profiles, and review pages. Note what’s working and what isn’t. Then, every few months, you can look back and see if there are opportunities you’re missing. 

  1. Differentiate Your Product Offering 

If direct competition has led to a decrease in sales activity, then you have to consider the possibility that your target audience is more attracted to the competition’s product offering. This may be a sign that you need to differentiate.

Product differentiation doesn’t have to be a time-intensive process. There are plenty of small ways to set your products apart. Using the previous telecom example, T-Mobile came to the realization a few years ago that it was getting edged out by its three biggest competitors. As a result, the company went back to the drawing board and came out with the first flat-rate unlimited talk, text, and data plan of its kind. This offer has been a huge success and has allowed T-Mobile to make up some ground.

Are there ways you can keep your core product offering the same while differentiating just enough to set your brand apart? 

  1. Get Out of the Mud Pit

The absolute worst thing you can do when facing competition is to get in a knock-out, drag-out fist fight with the other guys. For one, this makes you look like a sleazy politician who figures the only way to win is to tear the other person down. More importantly, it’s costly. You could easily blow through your entire budget running a smear campaign on a competitor and see no positive results.

Even if a competitor decides to smear you, your goal should be to take the high road and focus on your own brand. While they’re using all of their creative energy thinking about your brand, you can use your creative energy to innovate and get one step ahead.

  1. Know When to Pivot

There are times when excessive competition creates a need for a pivot. For example, let’s say you were the first person to design and sell fidget spinners this summer. Once they became popular, hundreds of competitors emerged in a matter of days. With little brand equity, sticking with basic fidget spinners wouldn’t have made sense. Customers don’t really care if you’re first or last to market, they just want a good price and a quality product.

Using this example, the smart thing would have been to perform a slight pivot and begin selling glow in the dark spinners, movie-themed spinners, LED spinners, etc.

The point is that you must know when to pivot. Just because there’s competition doesn’t mean you have to move in a new direction. But if the competition is intense and identical to your value offering, then a calculated pivot shouldn’t be out of the question.

Don’t Get Discouraged

There are two ways to look at online competition. You can choose to shake your head and get frustrated by how saturated your niche has become, or you can look at the competition as validation and motivation. The latter perspective is far superior.

Competition is a staple of free market economies. It’s a sign that entrepreneurship and opportunity are very much alive and well. Having said that, you need a plan to approach competition and gain the upper hand. Begin developing a strategy and make sure you’re thinking about the future as much as you’re considering the present.

Serenity Gibbons

Serenity Gibbons

Local Unit Lead for NAACP in Northern California with a mission is to ensure the political, educational, social, and economic equality of rights of all persons and to eliminate race-based discrimination. I enjoy writing and interviewing people making a difference in the World. Former Assistant Editor NY Times. NYU Alum living in sunny California.

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