The basis of any good elevator pitch, and therefore any decent business, is the crystallising of a problem and a compelling explanation of how your start-up will solve that problem.
Unfortunately, it’s likely that many other people will have had thoughts along similar lines to you. Solo “Eureka” moments do occur, but by the time you get your idea to market, you can find yourself rubbing shoulders with a number of competitors.
Don’t let this be a cause of dismay. There are plenty of other factors – strategy, price, service, cashflow management and marketing, to name a few – that will set you apart from those in the same sector as you.
But it is worthwhile to be aware of industries that have become saturated or those where start-ups have miserably failed to challenge market leaders.
With this in mind, we’ve put together a list of the 10 start-up niches that have become overcrowded. Don’t let this put you off forging ahead. In fact, we’ll be happy if you prove us wrong. But don’t tell us we didn’t warn you.
1. New ways of search
It would seem a no-brainer to most of us, but some start-ups feel that the iron grip Google and, to a lesser extent, Bing has on the search engine market is somehow vulnerable.
Numerous search sites, such as Cuil and Powerset, have come on gone, unable to break this stranglehold.
The latest ploy is to encourage people to use recommendations on social media sites as a way to find products or services on the web, as demonstrated by the admirable Dane Westerweller’s Mate of Mine.
It remains to be seen whether this approach will bear fruit but the clear lesson from recent history is not to go head-to-head with the search giants.
2. Mexican restaurants
At StartupSmart, we’ve been repeatedly told about the same gap in Australia’s culinary market – the need for fresh, authentic Mexican food.
Separate US expat entrepreneurs have rushed to fill this need with the creation of Guzman Y Gomez and Mad Mex, while Zambrero also espouses the need for an alternative to the sub-standard Mexican fare traditionally found in Australia. These three impressive franchises are rapidly expanding across the country.
So, if you are set to launch a Mexican chain on the premise of food imported from Mexico, made by Mexican chefs, served in an upmarket fast food kind of way, save the explanation. We’ve already heard it, unfortunately.
3. Clothing for children
One of the most striking aspects of the inaugural StartupSmart Awards was the number of submissions from parents who based a start-up idea around their own experiences of raising children.
Given the welcome rise of “mumpreneurs” and the lower barriers to entry when starting up, this deluge perhaps wasn’t surprising. However, it was interesting to see how many, whether it’s Olibaby.org, SleepyWings.com.au or Rashoodz.com.au, focused on children’s clothing.
These examples are all great ideas. But accessories and quirky t-shirts for babies are now near-ubiquitous among parents with the disposable income and inclination, as even a quick Google search or a stroll down a shopping strip will demonstrate.
If you plan to build a sustainable business in this sector, you will have to provide a genuine point of difference in what’s becoming a very crowded field.
Also, there are only around 300,000 births a year in Australia. As a target market, that’s not a huge space to tussle over.
4. Group buying sites
Unless you’ve spent the last 18 months in a monastery, it’s unlikely that you will have failed to notice the avalanche of group buying sites that has descended upon Australia.
Spreets, Catch of the Day, Scoopon, Star Deals, Jump On It, Cudo, Ouffer – the list goes on and on. Indeed, we are already starting to see consolidation, as evidenced by Star Deals’ acquisition of Crowdmass.
But, aside from coming up with something completely new in a packed field, you will also have to grapple with the possibility that this bubble could burst spectacularly in the foreseeable future.
5. Web developers
If you’ve started up a business with a half-decent website, there’s a good chance that you will have crossed paths with a web developer.
If so, you probably didn’t have to look far. The ability of web developers to work at home with low overheads and affordable technology has seen their numbers explode in recent years.
Where previously you’d need a fairly expensive agency to build you a top-level website, the job can be done by a one-person band working remotely from their home office.
The industry has become so commoditised that some savvy developers, such as Angry Monkeys, have branched out into other areas. Think carefully before you decide to join the throng.