Urban Outfitters: Challenges of Start-Up Companies

An entrepreneur, who intends to set up a business, has to overcome many obstacles. One of them is the necessity to provide products that would be distinguishable from the goods offered mainstream companies. They must create distinct value for the customers. Certainly, the company can manufacture goods which are already available on the market but in this case, they will be able to attract customers only by lowering down the prices. As a rule, start-up companies cannot do it because they are not economies of scale and they cannot pursue cost leadership strategy. This was one of the issues faced by Urban Outfitters. The second challenge is identification of the target audience. Entrepreneurs must know for whom their products are intended and why the clients may purchase them (Needham & Dransfield, 2010, p 282). Without this knowledge, a company can hardly develop its marketing campaign. Moreover, this task is very time-consuming and expensive because it requires in-depth market research. Thirdly, one has to speak about financing and possible lack of funding. The management of a start-up business must convince other people, especially investors that their enterprise is capable of breaking even and generating revenues. These are the main questions that an entrepreneur needs to answer.

Definition of “niche” product

Such term as “niche” products can be defined as those goods which are intended for a narrow segment but profitable segment of the population (Mater et al, 1992 p 179). Furthermore, the main feature of niche products is that very few companies can offer them to the customers. One can draw several examples of niche products such as the drugs for very rare diseases, software specifically designed for people with disabilities, or equipment for golf players. The strategy of Urban Outfitters was to sell a variety of niche products like incense burners, Madras bedspreads, or Bohemian knick-knacks.

The advantages of niche company

There are several reasons why niche companies can gain competitive advantage over others. First, they are able to focus on the specific needs of a customer and create product that would best suit him/her (Lamb, Hair & McDaniel, 2008, p 41). Large-scale manufactures cannot always do that as they have to manufacture goods that would appeal to a very wide target audience. Very often this strategy helps companies achieve commercial success but their products lack exclusivity. For instance, a large software company can develop a graphics editing program that would suit the needs of many amateur users, but it will not be appropriate for professional designers. When we are speaking about niche products, cost and price leadership is not necessarily an advantage since the customers pay more attention to the qualities of the product such as reliability or functionality, rather than to the price. However, the management of a niche company should take into account such factors as the exact number of businesses which serve the niche market, the customer’s awareness about them, and the threat of substitute products (Berends, 2004, p 44). These factors can greatly affect the pricing strategies of such enterprise.

Exclusivity and its appeal to the customers

One can identify single reasons why customers can be ready to pay for exclusivity. First of all, “exclusive” can create more value for them and offer opportunities. In the previous section we have already discussed the example of a graphics editing programs which are developed for a very narrow target market, namely professional designers. The second reason is that such products or services are provided only by a few companies and occasionally the customer is virtually forced to pay since he/she has no other choice. Such situation is typical of pharmaceutical market, in particular, the medications for very rare diseases (Valverde & Weissenberg, 2005, p 109). Finally, one should not forget about psychological of customers’ behavior: people associate exclusive products with prestige and high social status. This argument is particularly relevant when we are speaking about vehicles, clothes, cell phones and so forth. These are the key reasons why people can pay more for exclusivity.

Niche players and large competitors

Niche players can compete with large manufactures because they are offering goods and services which are designed for a specific population. These companies know what their customers expect from the product and which attributes are of the highest priority for them. Overall, they can represent different industries. For instance, such company as Aston Martin manufactures luxury sport cars and this niche player can “chip away” the customer base of mainstream automotive companies like Ford, Toyota, or Daimler. Secondly, we can speak about the journals or newspapers which are intended for a very limited group of readers, mostly professionals or scholars. One of such newspapers is The Financial Times (FT) which features news about stock markets, the development of economy, or taxation policies. In comparison with such newspapers as the Times or the Guardian, the reading audience of FT is narrower; however, for these readers, FT is a more reliable and relevant source of information. Niche companies can also be found among food and drinks companies; one of them is Perrier which sells mineral water that comes only from one spring in France (Doyle & Stem, 2006, p 160). These companies do not claim to be the market leaders but their key advantage is that clients feel loyal to their products and services.


Berends W. (2004). Price and Profit: The Essential Guide to Product and Service Pricing and Profit Forecasting. Toronto: Berends & Associates.

Doyle P. & Stem P. (2006). Marketing management and strategy. NY: Pearson Education.

Kelly, M., & McGowen, J. (2010). Business: 2010 custom edition (2nd ed.). Mason, OH: South-Western Cengage Learning.

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Needhann D. & Dransfield R. (2000). Advanced Business. NY: Heinemann.

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Valverde J. & Weissenberg. (2005). The challenges of the new EU pharmaceutical legislation. London: IOS Press.

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