Why I’ve been obsessing over Fragmented Markets for the past 8 days
Recently, I read this Shopify case study about Tecovas, an ecommerce business that does more than 10 million dollars in annual revenue selling cowboy boots.
Paul, the founder talks about how he was able to identify a potential opportunity in cowboy boots, when he discovered it was a 4-billion dollar market but there was no business that held more than a 25% market share.
And that’s exactly what a fragmented market is. It’s a market where no one company or group of companies dominate or exert enough influence to move the whole industry in a particular direction of its choosing.
Take a look at the smartphone market for example:
If you look closely, you’ll realize that 71% of the market is controlled by only 6 brands. This is a clear example of an unfragmented market. A new business could find success by solving the needs of an under served group of customers but would find much difficulty scaling further due to the already established leaders in the market.
But another startup could enter into a fragmented market, solve the needs of a small group of customers, bringing it to the same level as other businesses in the market and then scale to become the stand out brand in the industry.
Nigeria is full of markets that are generally fragmented. Consider markets like tailoring, hair styling, where most of customers a directly involved with the owner of the business, or referred to the business by a friend. Industries that don’t already have a nationally recognized leaders.
Case Study: Da Viva Fabrics
The textile industry in Nigeria worth N4.7 billion today. When we think about the ankara manufacturing in Nigeria some of us might picture low income individuals toiling away in the sun trying to create fabric that would be shipped to the closest market and sold for a marginal price.
And you are partly right, a lot of ankara fabrics are being manufactured by small scale businesses in the western and northern parts of the country. But Da Viva decided to revolutionize the industry and put structures in place to help it scale larger than the average industry player.
With over 65 outlets and dealers all across Nigeria, they have been able to take a large share of the market.
Why should I care?
With this knowledge it is easy to realize that some markets have huge opportunities hidden in them, especially those that don’t have a unique market leaders.
With the right team, a constant pursuit for innovation and access to funding, smart business owners can easily establish themselves as the go-to brand in the industry and gain a large percentage of market share fast.