Turning a niche into cash: “glocalisation,” record stores, and Toronto’s Dynamite Network
Focusing on one product, especially a product for which there’s only a small customer base, isn’t easy. But it can pay big dividends.
“There’s a beauty in the niche market,” says Brynn Winegard, a professor of entrepreneurship and strategy at Ryerson University in Toronto, “Now is the time for small businesses to take heed.”
Take heed, she says, of the still-present North American recession, and of a shift in customers toward supporting local business.
“People are trying to help out the everyday man, their friends, their neighbours,” says Winegard.
This trend is part of “glocalisation”, a term coined by economists to describe how the globalization of a product is more likely to succeed when it’s adapted specifically to each locality in which it’s marketed.
This renewed commitment to supporting grassroots businesses is healthy for communities, but can also lead to an increase in competition between those vying for a very small market.
“A few record stores opened up in the area after us,” says Kyle Turner, one of the owners of Of A Kind, a vinyl record and vintage clothing store that opened this year on College Street.
Winegard says the keys to maximizing profits while catering to a niche are researching target demographics, focusing on products, and charging a higher price per unit.
“Look at what the competitors are doing and charge slightly above that,” advises Winegard, “This creates a perception of value.”
According to Jeff Musson, taking advantage of technological resources is also important when trying to understand customer tastes. Musson is the owner and president of video marketing company Dynamite Network, and also created North of 41, a Toronto-based organization that helps Canadian entrepreneurs expand their contacts through discussion with American investors, entrepreneurs and customers.
“If a business utilizes the internet in addition to its traditional bricks and mortar storefront, they can go from just servicing the Toronto market to serving a global marketplace,” says Musson. He adds that mobile devices such as smart phones and tablets, and platforms such as Facebook and Twitter, can also be used to facilitate purchases.
“When a customer is allowed to “promote” their purchase to their social media friends, this becomes a unique and cost effective way in which a Toronto based company can extend its reach,” says Musson.
Adds Winegard, “Social networking has allowed for a return to local businesses.”
Musson says this model can be applied to any niche market in order to scale up quickly and cost-effectively.
Another way to lower operating costs? Keep employee numbers low, especially in the beginning.
“I always see less overhead as an advantage,” says Winegard, “Businesses with a smaller staff are more likely to break even.”
Businesses can always hire more people as they grow, but, says Winegard, only when staff numbers are proportional “to the number of dollars they’re making.”
But even perfectly managed cash flow doesn’t guarantee a successful business. Eileen Fischer, program director of entrepreneurial studies and family enterprise at York University’s Schulich School of Business, says “jolts” to a business’ environment are a constant threat in a niche market.
Something as simple as a construction project making it difficult for customers to find parking can derail a small business for weeks.
“The company hasn’t done anything wrong, but they suffer hugely because they don’t have cash reserves to wait out the disruption in customer traffic,” says Fischer.
She adds that, while there’s no sure fire remedy for dealing with such disruptions, businesses can take pre-emptive measures, such as establishing strong relationships so customers are willing to trek past excavators taking up their normal parking spots.
“Being really, really close to your customers can help,” says Fischer, “They will make every effort to patronize you regardless of the circumstances, and you can get a sense of when there are ways of serving them better.”
And sometimes a business’ environmental awareness can mean fitting in is just as important as standing out.
Even though Turner lives near his store, he was unsure of what customer Of A Kind would attract when it first opened. But, by hosting local artists, becoming a venue for live music during festivals, and offering the right mix of merchandise, the business has slid into the neighbourhood groove, and built a solid clientele with minimal advertising.
“Especially where we’re located, it’s about blending into something that’s already happening,” says Turner. “There’s something special here.”