Vertical markets, or “verticals,” are business niches where vendors serve a specific audience and their set of needs. Vertical markets are increasingly being served via ecommerce businesses because of the minimal overhead and ability to reach a worldwide audience.

By contrast, a horizontal market has a focus that reaches a wide array of individuals, regardless of their industry or particular niche. Online businesses commonly engage verticals in targeted marketing or outreach campaigns.

For example: an online store that sells specialised rope gloves — targeted at a specific set of racing yachtsmen — constitutes a business aimed at a vertical market. Each department within such a company, such as Youth and Adult, can also be considered a narrower vertical market. More commonly verticals refer to specialist hobbies, chandlery to sailors, bikes to cyclists, skiwear, saddlery, fishing tackle etc.

Why defining vertical markets is beneficial for both consumers and merchants

From a customer’s perspective, identifying vertical markets simplifies their shopping process and offers them a business that specialises in serving their specific need.

Other advantages of verticals include:

• From an advertising perspective, vertical markets are preferred because they allow for the creation of a single unified advertising effort that can be instituted across the board.
• Even businesses prefer verticals, as their existence permits companies to specialise in niche products where they thrive. When a company is allowed to specialise, it can perfect its product or service more easily and dominate the market.
• Specialization often means reduced competition, resulting in the market being able to support a higher price for the particular product or service. While some specialised markets are crowded, businesses usually target verticals where there is an opportunity to innovate and offer something different.
• From a marketing standpoint, less competition translates to quicker and cheaper exposure in organic search results (SEO) and paid keywords.

Factors to consider before entering a vertical market

The primary advantage of verticals can also be the disadvantage: a smaller customer base that may limit the revenue potential. As a business specialises, it can reduce the number of potential customers interested in its products or services. While broader markets can target a large portion of the population, a focused vertical has fewer interested consumers. The key is to find a profitable vertical with growth potential.

The positive is a higher-than-average degree of loyalty and affinity with the retailer of those products. Companies like Snow and Rock, Ellis Brigham and The North Face enjoy a respect rarely experienced by horizontal marketers, being on a rock face in the Himalayas is not the place to be thinking about returning goods because they don’t work. Therefore to be able to rely on product testing and selection by the retailers becomes a two-way street, as in “You look after me and I’ll always buy from you.” Beware the fickle consumer though, as they may offer this but rarely limit it to one supplier. Verticals usually are mirrored by specialist vertical presses. An ad from an esteemed alternate supplier can persuade even the most devout customer.

To head this off personalised product selection solutions, using AI hyper-personalisation technologies, of which the distinctions are considerable, identify consumer’s future behaviour by ranking every SKU by the greatest likelihood of that individual consumer purchasing from all the SKUs you have listed, in order of greatest likely buying propensity. In other words, the ones they love best. 

Another potential downside of verticals is the risk factor: if the specialised market decreases in size, the business will suffer. Some specialised verticals go out of fashion or get replaced by products from another vertical. Therefore, the intricacies of the vertical should be studied before the business specialises. An accurate assessment of the space is necessary to determine if the business should operate in such a specialised niche.

With a thorough business plan and comprehensive understanding of the market, an online business can enter — or expand to — a vertical market and enjoy immediate success.