When I was a business reporter, in addition to enjoying covering entrepreneurs, I liked covering retail (and yes, there is considerable overlap between the two). The nice thing about retail is that you can see how it works, even if you don't realize at first glance what it is you're seeing.

One thing that baffles people at first glance is when they see, say, a Chinese restaurant open up, and then another opens up across the street, and a third opens two doors down, and a fourth opens one block over. They think, Oh, that must be bad for the first guy!

But it's usually not. If you have a bunch of Chinese restaurants in the same area, you have a district! The Chinese-food district! Got a hankering for Chinese? You'll go there, and then you'll look around and pick a place--the first place is really fancy, the second place just does take-out, the third specializes in seafood, and the fourth does spicy Sechuan.

Being located together helps all four restaurants.

It also helps that the restaurants don't all have the exact same menu or ambiance. They're not actually in competition, even if it seems that way at first glance. If you're in your sweats and just want something quick, you're going to go to the take-out place, not the fancy place. There may be some overlap (the fancy place probably carries some seafood, for example), but not a lot.

Each has a niche to serve.

Niches are key to retailers. Wal-Mart has a niche--low prices. The Wal-Mart shopper is extremely price-sensitive and doesn't care about anything else: You could put an $4,000 Cartier watch on sale at Wal-Mart for $500, and no one will buy it because $500 is still a lot to spend on a watch. Wal-Mart has for years attempted to move out of its niche and appeal to more-upscale shoppers, and for years it has gotten slammed for it--your Wal-Mart shopper goes to Dollar General when Wal-Mart's prices go up, and your upscale shopper will not shop at Wal-Mart. Ever.Wal-Mart could carry organic milk at half or a quarter of the price of Whole Foods, and your Whole Foods shopper wouldn't even know it.

Book retailing is niche-y, even if book retailers seem to be bent on pretending it's not. Take this Publishers Weekly article (via PV), which mentions a South Carolina regional publisher called Hub City that opened a bookstore last year to serve its niche market:

Last March, Hub City executive director Betsy Teter explained that “We have a Barnes & Noble in town, but it isn't terribly friendly to regional and local book producers.” In its first year, Hub City Bookshop sales exceeded projections by 77 percent.

 

Of course, the body of the article isn't about how indie bookstore realized long ago that they can't chase the same customer as Barnes & Noble and survive. No, it's about them getting upset about Amazon.

Do you hear the CEO of Cartier getting upset because Dollar General is challenging Wal-Mart? No? But, hey, they all sell jewelry--why shouldn't the CEO of Cartier give himself an ulcer over Wal-Mart's problems? Oh, because he knows his niche. He knows the average customer at Cartier would rather get shot in the face than buy jewelry at Dollar General or Wal-Mart. Likewise I'd bet the average Hub City customer doesn't even think about either Barnes & Noble or Amazon when they are looking for some South Carolina flavor--they just go right to Hub City, home to all books South Carolinian!

If you are selling your book as an author, it also makes a lot of sense to know your niche. It will not only help you position your book when you pick the cover and craft the jacket copy, it will also help you chose how to spend advertising dollars. You don't want to waste money advertising your romance to true-crime enthusiasts, for example, and if your book appeals to a relatively narrow niche, advertising that reaches a more general audience may well prove less effective.

When writers point out that getting press coverage or having a popular blog or using social media doesn't help sales (or conversely, that sucking at social media doesn't hurt sales), that happens because of niches. I think Joe Konrath's blog is wonderful--I read it regularly and really appreciate it. I also don't like horror novels, so I don't buy his books. His blog appeals to one niche (self-published authors) that I occupy, but his books appeal to another (lovers of the thriller/horror genre) that I do not. If Konrath wanted to, he could monetize his blog by selling ads, but his blog would still be a discrete business from his books--success in one does not translate to success in the other, because they appeal to separate niches.