How to launch a start-up in a crowded market

Last year, the number of entrepreneurs in the UK increased by 6.4 per cent. Though the business school formula often seems so simple – identify a need, create a product, make some profit – what do you do when there are hundreds, if not thousands, of competitors already out there? We initially kicked off this conversation with Courier and three founders from the highly competitive food and drink industry on the lessons they had learned and what businesses need to look for when navigating a saturated market.
A crowded marketplace is often proof that there’s a serious demand to be fulfilled. Ultimately, this is the reason why it still makes sense in the automotive industry to produce over 600 models of car rather than six, or 50 models of mobile phone and not five. What really matters is carving a niche for oneself.

In the busy world of beer, Founder Matt Lane grew his beer subscription service, Beerbods, from the ground up. In the early days, he was conducting beer tastings in his garden shed, but as word of mouth grew, he developed the idea into a carefully curated service where new beers and tasting notes were delivered monthly. When he started, in the nascent days of the craft beer revolution, he found himself as a lone innovator; a year later, his competition had grown to include 26 similar services.
Focusing on particular subsections can often be more important than trying to capture the overall market. Anna Hansen, founder of The Modern Pantry restaurant, saw an opportunity as the waves of the 2008 recession came rolling in. In an industry rife with failing businesses, Hansen saw that the mood had changed; that the public weren’t interested in the glitz and glamour of the noughties, but wanted the same quality with fewer frills. Commenting on a panel talk at House of Killik in October, Hansen said that 2009 was “the end of an era”; a period of change which for her marked “the end of a time when people unthinkingly went to expensive restaurants. The Modern Pantry quickly became a name, an identity, associated with having all the Scandi-style and Michelin-quality of the old haunts, without the gratuitous price tag.” She caught the mood of the moment perfectly and has gone on to create a successful small chain of restaurants and a ‘pantry’ of products.

Markets might be saturated but they are rarely homogenous. The top levels are often dominated by big players, which produce a completely different type of product to those further down the food chain. This is particularly true in the case of gin. For years the gin market was dominated by a few key brands – often owned by the multinational conglomerates Diageo or Pernod Ricard – whose presence dominated on- and off-trade sales. But in the last decade, a slew of smaller challengers have reinvented the way the public view gin, which has led to an explosion of pretenders to the throne.
“Breaking the mould also often means refusing to do things the conventional way.”

Breaking the mould also often means refusing to do things the conventional way. Ian Hart, Master Distiller at Sacred Gin, could hardly have hoped to challenge Diageo on its own turf, so instead he took samples to his local pub every Sunday for a tasting session until the gin became so popular, the landlord decided to stock it. It was this organic growth that soon allowed him to work on an industrial scale, managing over 4,000 cases for export within a few years.

Capturing more market share is never easy. It often involves investment in competitive marketing and advertising campaigns that inflate your own brand, usually at the expense of another’s. It doesn’t have to be that way though. Sometimes competition increases the size of the overall market. This was certainly the case when UberEats took on Deliveroo, Just Eat and Hungry House in the crowded take-away market. Instead of each firm sapping the oxygen and taking the market share, the market size increased as restaurants saw an opportunity to build on their number of nightly covers without investing in their infrastructure. Deliveroo and UberEats offered them everything from drivers to software and saw high-quality chains and gourmet independents enter the market, which in turn attracted a new market of take-away customers that has driven market expansion.

For decades, people have also been calling time on another saturated industry: budget airlines. Yet despite the truths behind over-supply arguments, the ability of budget airlines to stimulate new traffic by opening up smaller regional airports has been astonishing. Which is why new competitors like Norwegian Air and Air France’s Joon are lining up to join the likes of EasyJet and Ryanair as they battle it out in the skies, slashing prices and adding new destinations.
“Most disruption does not come by re-inventing the wheel at the product end, but rather rethinking the model at the business end.”
Most disruption does not come by re-inventing the wheel at the product end, but rather rethinking the model at the business end. A great case of this was when Kyle Willis thought to start up No to the Quo (N2Q Consulting) at a time when the market was flooded with two-a-penny social media consultation companies. Instead of pretending to have superior knowledge or expertise, or offering a new package, he flattened the contract offered so it became a non-binding deal that allowed clients to leave at any time if they suspected he was failing to deliver. This manoeuvre, which might have looked superficially naive and lacking in confidence, instead resulted in a long list of clients and a surge of support.

In almost all of these stories, the two ingredients to success in a saturated market remain the same: commitment and creativity. Whether the space is crammed with major brands or SMEs, there are always going to be new players that are able to crack these sectors with smart thinking and marketing strategies that will open up a new audience for their product.
 This is a write up inspired by a talk we hosted in October 2017 at House of Killik Mayfair on how to navigate a saturated market. This article is designed to throw an everyday lens on some of the issues being discussed and debated by investors across the world; it is not research, so please do not interpret it as a recommendation for your personal investments.