Do you go niche, or try to be a one-stop shop?
By Gayle Bryant
Should a business specialise in one particular product or service, or become a one-stop shop that offers the widest range? Here are the pros and cons.
When you set up a business there are generally two ways to go: you can specialise in one particular product or service, or become a one-stop-shop that offers a wide range. How do you decide which is best for you?
Both models have different advantages and disadvantages that you need to carefully think through before going down a particular path.
- You can become an expert in one particular area. This means customers may view you as the go-to person for that service as you will better understand their motivations and issues.
- When you are a viewed as a specialist, people are more likely to pay a premium for what you sell, which leads to greater profitability.
- You can better focus your marketing efforts and spend on the one area - you just need to ensure your message is consistent.
- Your business is likely to be easier and cheaper to set up if you specialise. This is because you don't need to carry a wide range of stock and generally deal with fewer suppliers.
- It can be easier for other organisations to operate in your space. This is especially true if you are an online-only business as the barriers to entry are low.
- Specialising in one area may reduce the number of customers you attract.
- It is usually more difficult to scale up because you're only offering the one product or service. You may be happy with this, but it's something to be aware of when you start out.
One-stop shop advantages
- You are able to offer your customers everything they need that is related to a particular industry sector so they don't need to shop around.
- By not putting all your eggs in one basket you are spreading your risk - areas that are performing well can prop up underperforming parts of your business.
- You are likely to attract more customers than if you were offering just one product or service.
- By not relying on one supplier you are in a better position to negotiate more attractive rates.
One-stop shop disadvantages
- You will need to know a little about a lot of things. This may be an issue if a customer wants more detailed information about one particular product or service you provide.
- It is more difficult to build a brand and key marketing message when you offer a range of products. Customers may become confused about your offering.
- Identifying areas for growth can be an issue if your business model relies on selling a wide range of products and services.
Before you choose which path to go down, make sure you have a clear plan for where you want to be in five years. This will help focus your efforts on what is the best approach to take for your business.