Definition: Vertical markets, or "verticals," are business niches where vendors serve a specific audience and their set of needs. Vertical markets are increasingly being served via ecommerce businesses because of the minimal overhead and ability to reach a worldwide audience.
By contrast, a horizontal market has a focus that reaches a wide array of individuals, regardless of their industry or particular niche. Online businesses commonly engage verticals in targeted marketing or outreach campaigns.
For example: an online store that sells specialized football cleats — targeted at football players — constitutes a business aimed at a vertical market. Each department within such a company, such as Youth and Adult, can also be considered narrower vertical market.
From a customer's perspective, identifying vertical markets simplifies their shopping process and offers them a business that specializes on serving their specific need.
Other advantages of verticals include:
The primary advantage to verticals can also be the disadvantage: a smaller customer base that may limit the revenue potential. As a business specializes, it can reduce the number of potential customers interested in their products or services. While broader markets can target a large portion of the population, a focused vertical has fewer interested consumers. The key is to find a profitable vertical with growth potential.
Another potential downside of verticals is the risk factor: if the specialized market decreases in size, the business will suffer. Some specialized verticals go out of fashion or get replaced by products from another vertical. Therefore, the intricacies of the vertical should be studied before the business specializes. An accurate assessment of the space is necessary to determine if the business should operate in such a specialized niche.
With a thorough business plan and comprehensive understanding of the market, an online business can enter — or expand to — a vertical market and enjoy near-term success.
Learn more about branding an online business to excel in a vertical marketplace.
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