Push and Shove

Entrepreneur, Oct, 2001 by Nichole L. Torres

THERE'S PLENTY OF ROOM, NO MATTER HOW CROWDED THE MARKET. YOU'LL JUST HAVE TO USE YOUR ELBOWS.

WHAT THE HELL ARE YOU thinking? Why in heaven's name would you want to start a business in an already saturated market? With a ton of competition on the right and a truckload of already-been-done ideas on the left, you'll only be trampled into oblivion--or, at least, that's what the powers that be would like you to believe.

Starting a business in a saturated market is not the suicide mission many people think it is. If you've got a stellar idea for a start-up, a brilliant business plan to go with it, a whole lot of chutzpah and no fear of playing with the big boys, then there just might be room for you in any seemingly saturated market.

We say "seemingly" because experts like Laurence Weinzimmer, an associate professor of strategic management at the Foster College of Business Administration at Bradley University in Peoria, Illinois, are doubtful the concept even exists. "I don't believe there's ever such a thing as a saturated market," says Weinzimmer, also the author of Fast Growth: How to Attain It, How to Sustain It (Dearborn Trade). "There are numerous stories of entrepreneurial companies that have found ways to grow, even in declined markets." Frankly put, if you've got a new take on an old idea, you can almost always find a place to make it work.

Do It With Passion

Even if the industry you adore seems to be swimming with competition, your passion for it could be your secret weapon. Remember, though, you'll need to offer a better product, better service--better everything--if you want customers to buy from you.

Jason Labowitz wasn't thinking about market saturation when he and brother Aaron started their online specialty toy store, Entertainment Earth, in 1996. The avid collectors were simply passionate about offering mint-condition toys, memorabilia and action figures to collectors like themselves. "As we've learned, you can't just throw money at an idea," says Jason. "You really need people [who] are committed to that type of product."

The fact that huge toy retailers already ruled the market didn't particularly bother these entrepreneurs. The competition just didn't offer the collector's dream that Entertainment Earth did: full sets of mint-condition toys, in the original packaging, with no bar codes, price stickers or security stamps to speak of (a big deal to collectors), delivered right to customers' doors. Says Jason, "We just went a step further and offered services that big retailers didn't provide."

Jason points out that big-name retailers offer a lot of the same toys as Entertainment Earth--but as collectors, Jason, 31, and Aaron, 33, knew that pounding the pavement looking for specific toys can be both grueling and time-consuming. Their one-stop-shop idea, without customers' ever having to leave their homes, is Entertainment Earth's big edge.

Says Jason, "We treat our customers with a certain level of respect." In other words, these entrepreneurs know they're serving a different crowd. These aren't moms buying toys for their kids; rather, Entertainment Earth's customers want the best and they're willing to pay for it--to the tune of about $3 million in projected sales for 2001. Moral of the story: Get into the market with your passion, and stay there by serving people like you. Add a healthy dose of expertise, and just watch the receipts multiply.

Do It Differently

But going head-to-head with the big boys at the outset isn't the best way to approach your market. As much as we hate to say it, your business probably won't blow Procter & Gamble out of the water--at least not right out of the gate.

The good news, though, is that you don't have to. "Don't compete," advises Weinzimmer. "Go after periphery networks." Sure, you're still technically in the same market, but your customers will come to you because they're looking for something different.

The e-card business, for example, is dominated by names like American Greetings and Blue Mountain Arts. Who would notice a small e-card start-up out of Seattle? More people than you'd think: With a user base doubling every month, Phototunes.com targets customers seeking grown-up messages free of the saccharine verses found on many e-card sites. Founder Richard Duval takes a fresh approach with his selections, thanks to superb natural photography coupled with original jazz. "I wanted to [offer] something a little more sophisticated," he says. "I hate the cute."

Duval knows he shares the World Wide Web with a few Goliaths, but he also knows he offers a fun and different product. In doing research, Duval found that--of the 800 other e-card sites he visited--no one else offered original art with original, studio-quality music.

Proud of his unique offering, Duval, 46, markets Phototunes as a sophisticated e-card Web site. "I never once thought to myself, 'OK, I've got a great idea and in three months, Blue-Mountain's out of business,'" he says. "That would've just been foolish." What he is doing is using his free e-cards to entice people to buy his art prints, smooth jazz CDs and deluxe multimedia e-cards. Although his company--like many e-businesses--has yet to reach profitability, Duval is planning to add corporate clients to his roster by providing them with Phototunes products to manage customer relationships.