Wednesday, May 4, 2011

Niche Markets

To The Left, capitalism works solely to the benefit of the biggest companies, who drive small companies out of existence.

Blockbuster put out hundreds of small video rental stores; this didn't stop Movie Gallery from doing the same to them.  Movie Gallery is defunct now, Blockbuster just shy of.  This without even getting into Blockbuster's predecessors.

The Blockbuster near me is closed.  The two locally owned video rental stores are still in business; I am an occasional patron of one, by virtue of that it's cheaper than Netflix.  (I very rarely watch movies, so a monthly plan is not to my benefit.)

Being big didn't save Blockbuster; indeed, to a significant extent it killed it.  The video store I am an infrequent patron of, I chose for its selection of cult movies which could not be found in the Blockbuster, such as Six String Samurai.

It succeeded because it catered to more eclectic tastes which were not sufficiently being serviced by the bigger companies, who focused on the common denominator - comments on "low culture" aside, as these are the domain of Left-leaning elitists, ignorant of the history of culture.  (Guess which characterization was used of Shakespeare among his contemporaries?  It wasn't "high culture.")

I am a niche market - and capitalism serves me well.  Communism, and collectivization more broadly, never has served niche markets, save by fiat and at the expense of the common market.  Capitalism can sustain both.  And as markets grow, ever-more niche markets will be viable.

You could say they're the bread and butter of small companies, but this would be patently false.  Most small companies serve the same common markets as the large companies (although in some sense they take advantage of niche markets anyways as a result of a popular move for local products and/or companies, I ignore this where they do not choose the market).

Niche markets aren't the bread and butter of small companies, but small companies -are- the bread and butter of niche markets; partly because if the market took off the companies would cease to be small, but perhaps more importantly because of the aforementioned flexibility, and the fact that niche markets also tend to be fad markets, prone to vanishing - small companies often don't get the opportunity to expand before their business dries up.

This is why large companies stay away from them, which leaves substantial room in the spaces of the economy for companies to grow, possibly prosper, possibly die, and rarely to explode in an unexpected way. The niche markets are perhaps the defining characteristic of capitalism.

Wal-Mart doesn't just fulfill the basic shopping needs of a populace - it fulfills a specific and limited set of those needs.  If you want to buy a top-20 book, it's just fine.  If you're looking for a book that's been out of print for 20 years, you'll need to look elsewhere; thus, it simultaneously puts small bookshops out of business, while creating a new and more specific market for them to exploit.  (We'll put aside the ways the internet has changed this, being irrelevant to what I'm getting at.)

The specificity is important, because it requires niche players to service a broader range of that niche than it otherwise would; a small bookstore might have stocked a few old books and a lot of new books before giants filled the "new books" space.  In the new market, it must cater to those the giants miss in order to survive - a significant percentage of which it ignored before.

Think of a sex toy shop, itself a niche market.  They have a broad range of toys - which is great if you're looking for what everybody else is looking for - but in truth, the selection is really rather scanty in regards to any particular thing.  They might have four or five different varieties of restraints, four or five vaguely S&M related things, three or four different kinds of strap ons, a rainbow of different vibrators/dildos (the largest market segment for them), a few hundred of the more popular (and less imaginative) porn titles, etc.  To the genuine S&M fan, completely useless, which is why these individuals have typically had to resort to mail-order (or homemade) goods in the past.

Imagine if Wal-Mart started selling "marital aids".  Sex shops would be forced to broaden their niche markets in order to survive, because that would become their selling points - things which Wal-Mart (or more ordinary stores more generally) wouldn't stock.

Wal-Mart has generally encouraged niche players, actually - it frequently owns the surrounding storefronts, and leases out to even companies which compete with some of its products, like GameStop - this is because GameStop, while it does compete to some extent with Wal-Mart's electronics department, caters to a different market that Wal-Mart is largely unable to capitalize on.  Same with some office supply stores, and pet supply stores, which also frequently appear in proximity.

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