Start With A Niche
To make it big, you must reach market liquidity. However, if you start small and smart, and evolve from there, you can end up sitting in a castle. Many times people look to the likes of eBay or Facebook and see that their tremendous liquidity is their strength. But it didn’t start out this way; instead they grew into it.
Every e-marketplace behemoth or innovative disruptor seems to be on the same route to success. Each one is at a different point on the spectrum, but certain patterns are clear. The four ingredients of success are:
- Baby Steps: Secure a niche, then build out
- Make It A Party: Over-the-top service and friends
- Never Stop Fishing: Helpful reminders/alerts keep business flowing
- Get them hooked for good: Make your service a habit hard to break
A study of this evolutionary process can guide any business to move up to the next level.
Back To The Future
Before examining humble beginnings, the end results of well-fortified industry leaders like Facebook (FB) provide an overview of successful B2C characteristics. Facebook has built the most sophisticated social network ever. People are linked by their likes and shares unlike in any other space, virtual or otherwise. The Facebook social graph cannot be exported or copied. This advantage maintains the company’s massive market liquidity despite heavy onslaught by competitors like Twitter and WhatsApp.
The exclusive personal information is so powerful that some feel that Facebook could build a better search than Google. Ironically, Google has moved away from traditional keyword based search instead hoping to know about who you are and your search intent. Who knows this info better than Facebook?
Started Small And Built Out
Facebook was built originally as an online photo album. FB secured this niche then built out from there. This building out, or evolving, recurs over and over again in the strongest B2C examples.
FB’s other huge advantage is that it delivers a great package at a great price. It’s free. You can upgrade to increase visibility, but the foundation of the platform is its millions of users that go there to connect with friends, family, classmates, and colleagues every day. In short: it’s always a party at FB.
Also, FB never stops reminding you that you need to check in on the party. Contact remains engaging with weekly updates and alerts when you are liked. Who doesn’t like to be reminded that they are liked?
All of this has created millions of FB addicts – they’re hooked. The effect is so great, that some even suffer from psychological FB addiction. Either way, the liquidity that FB yields is largely based upon the fact that millions must “check their Facebook” every day or many times a day.
FB is the fully evolved creature of a powerful, solid B2C business equipped with a nearly bulletproof defense of huge market liquidity. How exactly does this process occur?
Beanie Babies And Building A Niche
Anybody under age 20, when they hear eBay, thinks of a website where you can buy practically anything new or used. They are certainly aware that eBay is big (revenue was $16.05 billion in 2013). The company’s massive liquidity is protection against any other online auction site. Sixteen billion is a wide moat to cross.
For those over 35-40 years old, however, eBay is remembered originally as a collectibles site. It was where quirky adults went to buy and sell things, like Star Wars action figures. This niche was well-established when an unexpected windfall came – Beanie Babies.
In the late 1990s, these stuffed animals and the deliberate scarcity behind their production created a huge collectibles aftermarket helping catapult eBay ahead of its competitors. The key was the pre-existing, well-established niche business.
We can see how other companies, such as Lehman’s, have followed this example. Lehman’s started out in 1955 by selling human powered tools to the Amish community. They got strong in their niche and then, when the environment was ripe, they were in position to profit. On every pasture some rain eventually falls. Now Lehman’s is an international company that has built out into spaces such as eco-friendly products, disaster prep, and even toys.
1-800-DIAPERS – Do One Thing Good First
Best friends since grade school, Marc Lore and Vinit Bharara began a diaper delivery service in 2005. Their objective was clear: “To make the busy — and sometimes chaotic — lives of new parents a bit easier by delivering low priced baby essentials really fast with great customer service.” They stated out renting trucks, buying diapers at Costco, and filling orders from a friend’s garage. By remaining focused and faithful to their mission, their customer base grew rapidly.
This is the secret to securing a niche: develop customer loyalty with over the top service. For Diapers.com it was fast, free delivery. For the busy parent, this type of service was embraced wholeheartedly, and it developed a trust relationship.
It Doesn’t Take Forever
Just because other companies, like Lehman’s, waited many years for their niche to explode, it doesn’t always have to be that way. Within two years, Diapers.com opened up a formal office and hired employees. They quickly built out and began to deliver gear, clothing, and beauty supplies. Within four years, the company’s revenue was $181 million, and they had reached market liquidity. The company now goes under the Quidsi brand and “delivers everything but the baby.”
Their business wasn’t diapers though; it was delivery. The niche was solidified because they were loyal to their customers and received loyalty in return. Diapers.com delivered only baby supplies at first, but now Quidsi delivers food, books, toys, furniture, and even barbeque grills. In 2010, Quidsi was acquired by Amazon for $550 million, and the delivery company continues to operate independently. Now their facilities use Kiva robots to pack orders, and UPS and FedEx do the shipping.
Lore and Bharara had a strong advantage when they began – a vision of the future. Their website says, “If they could accomplish this better than anyone else, then they’d use this same value proposition to sell other items to their loyal, trusting customers.”
Everything Has Been Done Already
Many become discouraged thinking that there are no more new markets. The Quidsi story should serve as an inspiration since delivery was by no means anything new when the business began in 2005. Consider these keyword search stats:
- how to stop gambling (2,900 monthly searches)
- foreclosure help (1,000 monthly searches)
- how to pay for college (5,400 monthly searches)
- how to save your marriage (3,600 monthly searches)
New services could be built around any of these markets. Even when many competing resources exist, if loyalty to clients remains focused, the rain will eventually fall upon the business’s pastures.
Successful B2C business models have certain key factors in common. Securing a niche and building out is a critical foundation upon which castles can be constructed. Future articles will discuss how parties, fishing, and hooks make a business even stronger.