Why swim in a crowded sea, when you can swim in your private pond? Personally I find that it is easier to compete in an immature market, as compared to a well-established industry. Using Singapore as an example where I am based, I established my niche brand MakeShake to compete in a very specific milkshake centric product range. Most Ice cream parlours sell a wide multitude of ice cream flavours with a small selection of milkshakes, while I do the inverse, selling a large range of milkshakes but a small range of ice cream, as well as Yoghurt.
The reasoning for this is simply first mover advantage. With a brand new segment, you are free to create the perception and image in consumers minds- the price point, product standards, brand image and other cognitive links. Milkshakes are not a completely new product, but they are not as established as say Japanese Sushi, with major well-known brands such as Sushi Tei or Ichiban Sushi that have dominated the Japanese dining market. There is no clear market leader for milkshakes. Also, if the new trend takes off, we will be the forerunner and be in position to capture the highest profits. As a start-up, you will need a substantial amount of funds to break into a mature market, as well as time for consumers to switch to your brand. How does your $100,000 paid-up capital compare to the millions that have been spent over many years by seasoned players in capturing loyalties? It boils down to an attrition battle, which most start-ups will lack the resources for a dragged out dog fight. Entering late markets after the consumer hype, like Asian bubble tea, exposes you to the lower tail of a dying product cycle and would potentially yield losses instead, since you are competing against big players as well as a saturated market.
That being said, the main challenge in creating a new segment is awareness. Without awareness, consumers will not even get to consider buying your product. Much time,effort and resources has to be spent on building awareness. Also, with any new product, there is risk to receptivity of the product too. You first worry whether you have the funds and energy to last until you hit the critical sales mass, then you worry whether this critical mass is even enough for profitability, and lastly how long can this sales trend last. Competition can be good for a startup, since it helps promote the new product faster and creates the market pie instead of dividing it like late entrants in a cycle. It also proves other people have noticed the potential of this new trend.
Nonetheless, there is no right or wrong market choice, if you have proper strategies in place. If you want to enter the pizza business, what is your winning edge against Pizza Hut? And how realistic, tested and valued by consumers is this competitive edge that Pizza Hut has no way to imitated? Even highly contested industries, like the airline industry, can produce new champions like SouthWest airlines that have excelled in the harshest of business conditions with their high standard of service as well as automated ticketing systems to cut cost.
