The act of starting a new business is full of excitement and possibilities. In the early stages, you have all the ideas—and they all sound great. But as you get closer to turning your business idea into a reality, you have to fine-tune and refine your ideas and develop strategies to effectively promote your business. Part of that fine-tuning process may involve settling on a vertical market.
While some businesses sell lots of products to lots of different customers, others focus on more specific categories or customer groups. Below, we’ll take a look at what a vertical market is and some examples of successful ecommerce brands in vertical markets.
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What is a vertical market?
A vertical market refers to companies that share a commonality, typically a specific niche market. Companies that operate in vertical markets may sell just one or multiple products and/or services. Vertical markets are specific and targeted, typically appealing to a certain customer group.
Some examples of broad vertical markets include:
- Health and wellness
- Beauty and skincare
- Fitness and sports
- Consumer electronics
- Fashion and luxury
- Home goods and appliances
- Baby care products
- Toys and children’s products
A vertical market can also be more specific and niche than the broad categories listed above. Ecommerce brand beelove, for example, 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 in a niche, horizontal markets are spread across various niches. So a business operating in a horizontal market serves a variety of customer segments across different niches.
For example, ChocoSol is a chocolate brand that operates in a vertical market selling chocolate-based products. Target, on the other hand, also sells chocolate and chocolate-based products. However, you can also find tons of other products across a variety of markets at Target, while ChocoSol only has chocolate-based items. Target operates in a horizontal market.
From the 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 you have a question about chocolate, you’re likely to take that to ChocoSol’s team, which is specifically trained in the area of chocolate, as opposed to Target’s associates, who are trained with 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.
Example of a vertical market 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 first launch with a single product. You can use that first product to learn more about the industry and your customers, and then find ways to expand your product line according to market demand and other insights.
LastObject is a perfect example of a brand operating in a vertical market that took this approach. The brand creates and sells zero-waste products but launched with just a single item: a reusable “cotton” swab. Since then, the merchant has expanded in their vertical market by introducing product line extensions, including reusable tissues, cotton pads, and other personal care products.
You might also consider 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 benefit 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. 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—customers 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, skincare 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
When you launch your ecommerce business with Shopify, you can take advantage of a whole suite of business 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 vertical market 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.