Starting a new business is full of excitement and possibilities. But as you get closer to turning your business idea into a reality, you have to fine-tune your ideas and develop strategies to effectively promote your business. Part of that fine-tuning will involve deciding what to sell, and to whom.
While some retailers sell lots of products and services to a broader market, others focus on more specific categories or business segments. One way to achieve this focus is by concentrating on a vertical market.
In this guide, we’ll define what a vertical market is and explore some examples of successful ecommerce brands operating in vertical markets.
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What is a vertical market?
A vertical market refers to a narrow industry group that shares a commonality—typically, a customer niche or similar products and services. Companies that operate in one or more verticals may sell just one product, or offer multiple services to a particular audience. Either way, vertical markets are clearly defined and appeal to a well-defined customer group.
Examples of vertical markets
Some common examples of vertical markets include:
- Health and wellness
- Beauty and skin care
- Fitness and sports
- Consumer electronics
- Fashion and luxury
- Home goods and appliances
- Baby care products
- Toys and children’s products
Business verticals can also serve a narrower customer base than the categories listed above. As a real-world example, ecommerce brand beelove makes and sells products made from honey and related byproducts. It’s a very specific vertical market. And then there’s Satya, which sells plant-based skin care. This is also a vertical market, but it’s a bit broader than the one beelove is focused on.
Vertical markets vs. horizontal markets
While vertical markets are concentrated on selling specific products and services in a particular niche, horizontal markets are spread across various products and niches. So a business operating in a horizontal market may sell a variety of products, or serve a variety of consumers, or both.
Vertical and horizontal markets have different strengths and weaknesses. For instance, companies in vertical markets enjoy reduced competition, but are vulnerable to fluctuations in demand for their specialized products.
By contrast, because they offer a wide range of products or serve a wide range of people, companies in a horizontal market are less vulnerable to demand changes in a specific niche market. However, this broad approach also means companies in horizontal markets face more competition.
For example, ChocoSol is a chocolate brand that operates in a vertical market selling chocolate-based products. Grocery stores, on the other hand, sell chocolate and chocolate-based products in a horizontal market. However, you can also find tons of other products across a variety of markets at, say, Target, while ChocoSol only has chocolate-based items.
From a buyer’s perspective, Target may offer a more convenient and possibly more affordable option for buying chocolate. But if you’re looking for the best chocolate made with high-quality ingredients, you’re likely to opt for ChocoSol over Target.
Benefits of vertical business markets
Brands that operate with a business model in a vertical market garner a certain credibility or expertise in said market. Refer back to the example of Target versus ChocoSol: If customers have questions about chocolate, they’re likely to take that to ChocoSol’s chocolate experts, rather than Target’s associates, who have more generalized knowledge. A buyer will probably assume that ChocoSol has deeper chocolate expertise.
Because of this perception, brands in vertical markets can also charge a premium price for their products.
Additionally, it’s arguably easier to market a vertical business. You have a specific target audience, which lets you tailor messaging and promotions to directly appeal to them.
Examples of vertical marketing strategy
If you’re interested in starting a business with a vertical market strategy, there are a few ways to go about it. One approach is to pick a vertical and begin by marketing a single product. You can use that first product to learn more about your specific industry and potential customers, and then find ways to expand your product line according to market demand and other insights.
LastObject is a perfect example of a vertical brand that took this approach. LastObject creates and sells zero-waste products, but began with a single item: a reusable “cotton” swab. Since then, the company has expanded in its vertical market by introducing similar products, including reusable tissues, cotton pads, and other personal care products.
You might also consider marketing product line extensions—basically reimagining what you already have. Product line extensions might include:
- New flavors
- Different forms of product
- New colors
- Different ingredients
- Various sizes
- New types of packaging
One of the advantages of product line extensions is that you can build upon what you already have, at a pace that works for you. You don’t need to start from square one in product development, since you’ve already done that. Now it’s just about reimagining your existing products.
Product line extensions also allow you to appeal to a broader audience beyond your initial niche. While a vertical market strategy involves specific customer segments, you can grow your potential audience by introducing product line extensions.
Maybe you have a premium and a base version of a certain product—consumers who tend to spend more will be perfect for the premium product, while your less aggressive spenders may be more suited to the base version.
Like LastObject, skin care brand Bushbalm exists in a specific vertical market. Its product line has also grown over time, expanding from products for preventing ingrown hairs to offerings that treat other skin challenges, like skin irritation or dark spots.
While LastObject only has one product offering for each “category,” Bushbalm has extended its product line a bit further. It has products in the same category at different price points, taking the approach of a premium versus base product. Bushbalm has also created product bundles, an additional offering that fits within its vertical market.
Launch in your vertical with Shopify
Whether you’re operating an ecommerce business in a vertical or horizontal market, Shopify offers a suite of tools and apps to help you manage every part of your business. You can customize the look and feel of your website to fit your brand and ecommerce strategy with Shopify’s templates, or hire a Shopify Expert to help you along the way.
For new and growing merchants alike, Shopify is the one-stop shop to run every aspect of your business from a centralized command center