In any retail market independent retailers must compete with mass merchants to get their piece of the pie. And while it’s often customer service that gives them a point of difference, finding and capturing a niche can keep them a step ahead.
Rebecca Spicer explores some successful niche outlets to find out what gives them their competitive advantage.
Finding a niche in the marketplace, with a product specially designed to meet target needs or even creating a whole new market, is a promising alternative to mainstream retail and the increasing pressure of price-driven competitors.
“Targeting a niche can be beneficial to retailers as it can give them a competitive edge. If no one is providing a good retail offer in that area and there is demand, then entering this niche would provide lucrative benefits,” says Natalie Hedrick, researcher at the Australian Centre for Retail Studies.
We spoke to three niche retailers and a new business providing a niche product to retailers to see how they’ve captured a market and how they plan to stay ahead of future retail rivals.
From managing a gymnasium to working for a large cinema advertising company, Chris Gibbs had no experience in food retailing, let alone owning and running his own store. But when his girlfriend gave him a home-made cupcake with ‘Happy Birthday Chris’ written on it for his 24th birthday, he saw an opportunity. “I looked at it and thought, 250 locations across Australia. And that’s honestly where the idea came from.”
The idea was to create a cupcake shop that Gibbs could make successful and then franchise around Australia. Research told him no one else was doing this in Australia. “So to get an understanding of that industry, I started by sitting out the front of places like Muffin Break and Donut King, the places we would compete against, and I started picking off their sales. I wrote down their menu and was there for hours—various shops on various days for almost six months—calculating their turnover, how much they were selling and how people interacted at the counter.
“From there I went to places like the Small Business Development Corporation (SBDC), which has been absolutely monumental in the creation of this because there’s a lot of reference material there which got me heading down the right path.”
The next stage involved finding out things such as how to lease a shop at a shopping centre, how to order stock from a main supplier and how to sell brand-name products. Coming up with a business name was one of his biggest and most expensive decisions. “We spent tens of thousands of dollars researching a name and creating the logo. The brief from the beginning was to create a name that was unique, something people would question and something that would have an instant effect on people’s minds. We researched the word ‘Friday’, and in 99.9 percent of people we surveyed it created a positive reaction, and so the name Sweet Friday was chosen.”
Two and half years later, with the help of some investors, Gibbs turned his idea into a reality and has been operating Sweet Friday for more than six months in one of Western Australia’s largest shopping centres, Westfield Carousel in Cannington.
He believes having a shop in a large shopping centre is a recipe for success. But while he admits you can’t buy that sort of traffic flow anywhere else, he didn’t account for how competitive the environment would be. “But my opinion from the beginning was, if Sweet Friday is going to work, it’s going to work everywhere from day one, right next to Donut King and Muffin Break.”
Baking anywhere between 200 and 700 cupcakes a day, volume is important for Sweet Friday given its specialty in such a low-ticket item. Therefore catering for corporate and social functions is a big part of the business as is the on-selling of coffee.
Yet Gibbs believes it’s the realness of the actual product which sets it apart. “All of the product is baked on-site and we also scratch bake. So we crack all the eggs in the morning and we measure out the flour,” he says, “we don’t use pre-mixes and that’s probably one of the biggest things we have going for us. I honestly believe we have 100 percent conversion. Once people try it we’ve got them for life, that’s the power the product has.”
However, Gibbs admits it’s been a challenge trying to get people to taste them in the first place. “The biggest hurdle we face is adults walking up to the counter and saying, ‘wow, this would be great for the kids,’ and off they go (to find something for themselves).”
So he is already making some substantial building changes to the store. “We realised there were some problems with some of the views and how people looked at it, and some of the wording and graphics are incorrect.” And while the store has a bright design, it mainly attracts the kids, which Gibbs is trying to change. “I believe the design part of it is absolutely crucial to the success of the store and we did make some big errors there. Everything is being tested. Six months down the track I’ve learnt a lot and now I’m trying to make some of the changes quite subtly.”
A major challenge in going forward is maintaining Sweet Friday as a niche without the concept being used by others. “I’m sure these things will spring up everywhere and that was always a concern. But at the moment this is very niche, and it’s so nostalgic. We all used to make cupcakes as kids and we all used to fight over who was going to lick the beaters, and we hear that at the counter every day. We think that’s what will carry this niche product right through, and it will hopefully become a trend and that’s what will make it succeed.”
Gibbs says he’s on target to opening two more stores in the business’s second year. This means he will have set up three company-owned stores before he starts to look at franchising.
We use countless pens in a lifetime, and yet it’s a specialised market that one family has captured, selling high quality pens and accessories in its niche retail store, Pen-Ultimate.
Barbara and Bruce Nichol started the business in Brisbane in 1980. Linda Somers, Barbara’s sister, joined the business not long after and in 2002 decided to expand the business into Sydney. She took over premises in North Sydney, and, after getting a lot of feedback from people asking them to move into the city, a second Sydney store was opened in the Queen Victoria Building (QVB) in September last year.
Finding a city location was the easy part, Somers says. “We were actually approached by QVB when we were looking for city premises because they were looking at changing the level we are on to having more destination, selective, up-market stores. The then retail manager found us in our Brisbane store because we’re in a beautiful heritage arcade up there, so he contacted us through them.”
Somers believes deciding to establish and operate a shop dedicated to pens was somewhat influenced by the brands. “There has always been a market for pens but there was a big resurgence in the eighties in calligraphy, and Montblanc also hit Australia around that time and had a huge advertising campaign. Waterman then came into the picture and more and more companies penetrated the Australian market and exposed Australian people to beautiful products they only ever saw when they went overseas.”
She believes Pen-Ultimate’s true point of difference is its selection of merchandise and the service. The market for pens is a lot broader than one would think. According to Somers there is more than enough business for them between the two Sydney stores because customers buy pens as an everyday writing instrument but they’re also collector items, as well as a big gift busine
“We sell pens that start at one dollar, or you can ask to try some fountain pens and we can sit down with you for a couple of hours and take you through a range of pens from $40 to $4,000. There are some people who love pens and just love owning more and more nice pens, and of course the pen companies are always coming up with wonderful designs. I’ve got pens that look like bamboo, ones that have carbon fibre in them, and I even have Porsche pens that have some of the brake cabling from a Porsche car in them.”
Somers says one of the most expensive pens she has ever sold was a solid gold America’s Cup fountain pen for $18,500. “If it’s something people want, it’s amazing what they’ll pay.” And although pens are the core of the business, Pen-Ultimate also sell a range of other items such as desk accessories, leather journals and diaries, clocks, calligraphy sets, and Swiss and French stationery. They also offer an engraving service and sell specialty pen magazines. “What we try to do is select things you don’t see in other stores,” says Somers.
The style and atmosphere of the stores also sets them apart. “We very much decided to stick with the old English antique style.” In the QVB shop for instance, Somers displays a pen museum which starts from the quill up to modern pens.
So product knowledge and service are paramount, and being a family business adds to their advantage. “We’ve developed a lot of knowledge by visiting pen factories in Europe and watching them being made. My sister is a very well-known calligrapher. She’s also written books on the cursive style which was introduced throughout primary schools in the eighties. She’s got a very strong background in pens and her qualifications are a major influence on the whole family.”
Describing Koko Black as a chocolate shop would be an understatement. As owner Shane Hills says, they’re not just selling quality chocolate, they’re selling an experience.
After running another confectionary business, Suga, with his father-in-law for several years, Hills wanted to create something for himself and he wanted it to involve chocolate.
“I don’t think it was all that creative but probably more innovative,” explains Hills. “We borrowed a lot of things we knew worked really well with Suga, which involved creating something that was more than just a product sitting on the shelf. So I started to think about what a chocolate experience would look like.”
Hills travelled to Europe and did a renowned chocolate course in Germany. “I managed to find our master chocolatier there, which was obviously a big component É he’s been brilliant.”
Store design and positioning were also crucial factors. “I thought from the outset that a high percentage of customers would be women, and so I really focused on the indulgence of chocolate and maybe even a bit of romance about chocolate,” Hills explains.
“It was going to be upmarket and we chose a very decadent style of fit-out. And of course we wanted to incorporate the production into the store so we could achieve the freshest result, but also to draw the attention of people who would enjoy watching the chocolate being made.
“We also worked on keeping people in the store, and the cafÈ element is popular. I chose Melbourne because I think it’s a real chocolate city, because of the climate and because it’s the foody capital I guess. We did want to be in the centre of the city because we figured we’d work well with the tourist trade. The Royal Arcade in Bourke Street is a beautiful old arcade that’s almost finished being restored, and it goes well with this decadent, romantic image we’re creating for the brand.”
Koko Black’s handmade chocolates are mostly created with Belgian and French chocolate but also have a range using Australian ingredients. “As much as we have a very strong focus on the experience and atmosphere within the store, we’ve also had a very strong focus on the product. Our product travels three metres from our production area into our cabinet. No one can beat us on freshness, and that’s what people notice about our products.”
In terms of promoting the store, Hills hired a PR consultant who has been successful in getting Koko Black editorial coverage in magazines, newspapers, local media and radio. “We’ve found by offering something really different, it’s given the media something to comment on. However, word-of-mouth from our own customers has had a huge impact.”
After a year in business, the second Koko Black opened its doors in February. “One of the challenges we’ve had is keeping up with production, and the Royal Arcade in some ways was a concept proving this business was going to work. So we’ll be opening a store in Lygon Street (the Italian restaurant strip in Melbourne) and we’ll be opening a small factory too.
“What we wanted to do from the start is open in the evening because we think it’s a great time for chocolate. The Royal Arcade restricts opening hours, but Lygon Street is probably the best night strip in Melbourne and so we expect to be open to midnight or later.”
For Tammy Raine, founder of Giddyupgirl, carving a niche specialising in funky fashion for young horse lovers, has been made easier thanks to the brand being snapped up by specialty retailers.
Raine noticed a gap in the market when she attended a horse training camp with her daughter. “I realised that 90 percent of the girls were wearing surf labels but none were into surfing,” she says.
After doing some research, Raine found the teenage market was screaming for edgy horsy fashion. “I found that no one else in Australia was dedicated to making fashion for young girls passionate about horses.” So she decided to start her own fashion label targeting this specialised market. “After the research, I had to think of a name and I wanted it to be really catchy and depict that you must be into horses. So I came up with Giddyupgirl, registered it, and then started looking for manufacturers, fabric and graphic artists. Even though I’d worked in the fashion world before I didn’t have a clue how to put a garment together but it didn’t take long with my contacts to do that.”
When Giddyupgirl began just over six months ago, the launch range sold out in six weeks. “At first I thought I’d have a nice little internet business sending out parcels, but within two weeks I was approached by a saddlery and I now supply 60 stores Australia-wide.”
Raine believes her advertising is helping drive a lot of the demand. “As well as using some PR I’ve been running full-page ads in the two main horsy magazines that are a sort of bible to people in the horsy world. It’s very different advertising to what people have seen in there before. It’s very much along the lines of Roxy or Billabong type advertising. They can’t miss it.”
Raine is also optimistic about growing the business, and while at this stage all but one of the retailers is a saddlery, increasing interest means she will eventually start supplying the mass market as well. “So I can supply to those kids who might still love horses even though they don’t have one,” she explains.
Already distributing to New Zealand, the UK is Raine’s next target and then she hopes to expand beyond just fashion lines. “I’ll be on every horsy item you can think of—horse shampoo, grooming items and rugs
—anything to do with the equestrian world, Giddyupgirl will be there.”