September 8, 2020
7 min read
In a business context, vertical markets – also known as ‘verticals’ – are markets that cater to the needs of specific customers within specific industries. You’ll find business verticals in a huge number of industries, from healthcare to travel to construction.
Companies that operate in a vertical market can provide niche products to both individual consumers and other businesses.
Industry verticals are becoming increasingly more eCommerce focused, thanks to the appeal of reaching an audience that is niche but global.
Here are some examples of companies within vertical markets and what needs their products or services are fulfilling.
Founded on the idea that everyone should be able to make the perfect cup of espresso, Nespresso is an eCommerce retailer within a very clear vertical market.
A great example of an innovative vertical market, Nespresso sells to business-to-business (B2B) and business-to-customer (B2C) customers.
It has a singular focus on good quality coffee and every product is centered around that.
Customers need to purchase Nespresso capsules to use in their Nespresso machines. The company offers a recycling scheme and a subscription service.
The Nespresso customer:
This app-based car-sharing service allows users to pay by the minute, hour, or day for the private use of their vehicles.
Offering cars and vans, Zipcar users can either take a one-way ‘flex’ journey and park the car anywhere within a city zone or make a longer round-trip, dropping the vehicle off where it was picked up.
Users unlock cars with the Zipcar app, pay to fill the tank with a ready-installed fuel card, and can only keep hold of their vehicle for a couple of days max.
The Zipcar customer:
What started as a low-cost, high-quality razor retailer, Billie has rapidly grown into a beauty brand for women with clean principles.
A vertical market within the beauty industry, Billie is all about basic, hard-working products made using harmless ingredients.
With a simple shopping process, they also want to eliminate the ‘pink tax’ – razors targeted at women are generally more expensive.
Customers can expect to find essentials, like dry shampoo, lip balm, and the razor starter kit. Billie offers refill shipments of blades, depending on how often the customer shaves.
The Billie customer:
No, not the now-defunct British car manufacturer.
The new Rover is a global online network of pet sitters and dog walkers.
Appealing to a pet care vertical market, users can either search for services or provide services.
Tailored to the needs of dogs and cats, Rover users can choose daycare, boarding, and walking for their furry friends.
Rover allows users to find services close to them for added convenience. The mobile app enables sitters to message directly with owners, sending them photos throughout the day.
The Rover customer:
Who needs an imaginative name when you can just describe what you sell instead?
My Custom Candy is a one-stop-shop for completely customizable candies. This is a great example of a business plan fixated on a vertical market.
Shoppers can purchase bulk lots of branded mints and love hearts, or opt for individually packaged sweets in personalized bags or cubes.
This online store is limited in options but big on brand names.
Targeting the business market with their offer, My Custom Candy makes it clear that they have worked with Google, Kiehl’s, NBC, and Kim Kardashian to name a few.
The My Custom Candy customer:
When it comes to horizontal vs vertical, you’ll find one clear difference.
Horizontal markets cut across vertical markets and hit a much broader customer base regardless of their niche.
In other words, products or services sold in a horizontal market can be used in a wide range of industries.
Vertical and horizontal market structures are pretty well intertwined, but are different.
A horizontal market will have far more customers than a vertical market, and in turn far more competitors.
Horizontals and verticals both have their pros and cons, but entering a vertical market for eCommerce may just be more lucrative.
Verticals can be a lot more profitable than horizontals when it comes to eCommerce. Here are some of the advantages of focusing on a vertical market.
With verticals, you know exactly what your customer base looks like, plus what they want from you.
Businesses specializing in a niche can find and target their user with relative ease, by using that deeper understanding to implement strategies on the right channels, at the right time.
With a smaller or more refined pool of customers, elements like personalized mail-outs and targeted promotions get a whole lot more accessible to businesses.
Also, less competition gives way to more exposure to a business in organic search results.
Being able to implement impactful marketing campaigns with lower cost and time implications is always a huge advantage, so this is where verticals can pay off.
It sounds like a sweeping generalization, but bear with us.
When your business is laser-focused on a target audience, it can be just as easy for them to reach you as it is for you to reach them.
It’s in a company’s best interests to pay attention to customer feedback, particularly when they’re within a vertical market.
By working with specific products for a clearly defined customer base, users are much more able and empowered to say when and how a product isn’t working.
This makes it easier to improve goods and services until they are perfect.
While companies within vertical markets are not without competitors, they will have far fewer rivals than if they were operating in a horizontal market.
Verticals are all about specializing in particular product areas, which in turn allows for a more advantageous pricing strategy.
Businesses can confidently show that they’re one of the best at what they do, and by knowing that competition is scarce they can command better prices for their products.
It’s worth noting that new businesses are often verticals that are filling wide-open gaps in existing industries.
With that freedom, they’re more able to pioneer and set the boundaries within their niche.
Vertical markets are admittedly a lot smaller and potentially harder to crack than horizontals – here are some of the downsides you should consider.
It’s worth thinking about the long road ahead when you get into business.
While a business could have a very clear, very present target audience in their sights, they may not help generate the revenue the company wants or needs.
Niche markets could lack growth potential or even not be active enough.
For example, customers looking for revolving beds will probably only buy one in their entire lifetime. With no repeat custom, that niche might not be able to stand up on its own.
Even if a business is an overnight success, turning over millions of dollars in its first year, it could just be riding the wave of a passing trend.
Demand ebbs and flows for all businesses, but for one that’s firmly positioned in a vertical market, a sudden permanent dip could be catastrophic.
Companies founded to serve a momentary purpose may also flounder, too.
If their sole product is designed for an event – the Olympic games, or a pandemic, for example – their revenue potential will disappear with that event.