November 03, 2023

Companies are pushed to up their game, think creatively and personalize their offerings to stand out. Going back several steps, market fragmentation creates new companies altogether. Conversely, the so-called moat, or barrier, for entry into a fragmented industry is low. Thanks to the fragmentation of markets, businesses can develop a local marketing strategy that will help them to gain a competitive edge over larger businesses.

1. In other words, it avoids standardizing products to homogeneous groups and instead seeks to personalize them.
2. Hitesh Bhasin is the CEO of Marketing91 and has over a decade of experience in the marketing field.
3. These entities are often in different countries, especially where labor is plentiful and inexpensive.
4. For some businesses – especially the larger industry incumbents – market fragmentation often spells trouble.
5. An excellent example of this process can be seen by looking at online cycling marketplace BikeExchange, a deep vertical, niche marketplace powered by Marketplacer’s enterprise marketplace platform.

In 2022, supply chains were affected by the COVID-19 pandemic as consumers saw shortages of products on shelves and price increases for those products. Global suppliers and sources of items such as computer chips, coffee, and lithium for electric vehicle batteries were impacted by the challenges of lockdowns and shipment issues. Globalization and improved technology paved the way for fragmentation, as it becomes increasingly cheaper and easier to source, ship, and track goods as they travel from place to place. Fragmentation is common in the electronics, transportation, and apparel industries. Firms that operate in developed economies research the components needed and find available suppliers. They then use the cheapest sites to source and assemble the parts for their finished items.

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Once peripheral players, discount chains like Aldi and Lidl tapped into the fragmenting grocery market by drawing customers away from traditional supermarkets – placing their focus on lower prices, not variety and brands. Just like globalization fuels diversity among people and within communities, it in turn does the same for the products and services being demanded. New submarkets are created and new businesses are launched to cater to them – often leveraging globalized supply chains to make it all happen. Other examples of a fragmented market include clothing retailers, businesses selling furniture, agriculture, plant nurseries and landscaping, book publishing, bulk building supplies and others.

For instance, companies may source cheaper materials in one country and inexpensive labor to produce their goods in another while the finished product ends up being sold in yet another country. Navigating the maze of market fragmentation can be complex, but understanding how to segment your customer base is a powerful way to steer through it. ‘How to Drive Profits with Customer Segmentation’ is your free guide to mastering this craft.

What is market fragmentation?

Instead of one or two dominant chains serving identical products, today there’s a whole range of smaller niches, from artisanal spots to specialty bean roasters, and themed cafes to coworking spots. One of the key factors to identify in establishing a successful online kvb forex marketplace is a fragmented industry. B2B companies are transforming their strategy and exponentially growing their businesses’ revenue by embracing a marketplace model. Fragmentation involves using different suppliers and manufacturers in the production process.

Leveraging market fragmentation can be a game-changer for businesses – particularly nimble and adaptable startups and smaller companies. It’s a fragment of the groceries market that has grown in response to stricter food safety and farming regulations, bitfinex review and consumer demand for food products free of things like pesticides. Market fragmentation is the concept that a marketplace can divide into many small markets, each containing customers with distinct preferences or requirements.

Market Fragmentation

This allows companies to identify and target certain trends based on how individuals consume goods and services, thereby increasing efficiencies and profits. Product quality may also suffer because of the use of cheaper labor and materials. Going abroad to produce goods can also lead to this problem since laws and regulations vary in different countries. For example, some countries may use items like lead paint in the production of their goods and services while others no longer use them. The 2008 financial crisis saw many consumers become more price-conscious, which led to the rise of budget grocery stores.

Is market fragmentation good or bad?

The nature of fragmented industries means they often provide fewer barriers to entry than more consolidated industries. A fragmented industry is one in which many companies compete and there is no single or small group of companies which dominate the industry. The competitive structure of the industry means that no one company is in an overly strong or influential position in the industry. Whether it’s caused by globalization, regulatory changes, or market forces, the goal is normally to lower costs and boost profits. Not only does the metal have to be acquired but larger items, such as electronic systems, must also be assembled. Companies often source these materials in addition to labor in countries where they are cheaper.

A concentrated market also makes it easier for an existing player to dominate the market and increase their profits. However, BikeExchange recognised that increasingly educated and selective consumers were encountering friction because they had to work very hard sometimes to find the bike or bike equipment they wanted, even from online stores. Build and strengthen your marketplace platform with a large assortment of solutions from our highly experienced technology partners – endorsed by Marketplacer. Unlock the potential for elevated growth in the grocery industry by diversifying your offerings through strategic marketplace expansion. Each industry represents a unique opportunity for businesses to harness the capabilities of Marketplacer’s platform.

Market fragmentation, as it relates to market research, is important because it happens in every industry, both domestically and globally, and can determine brand positioning, marketing strategy, and product development. It’s all about turning the challenges posed by a fragmented market into opportunities by creating targeted groups within your audience. From understanding the what and why to getting down to the nitty-gritty of building your first segmentation study, this eBook is packed with insights to help you connect with your customers more effectively.

By going to different suppliers and manufacturers, companies can cut their costs. This benefit can be passed on to the consumer, resulting in more affordable goods and services. Fragmentation becomes a greater factor over time as a market grows, so it’s no surprise that today we can see many that are heavily fragmented. The Kraken Review payoff to consolidating a fragmented industry can be high because the costs of entry into it are by definition low, and there tend to be small and relatively weak competitors who offer little threat of retaliation. Fragmented industries make ideal targets for companies looking to enter and potentially dominate a market.

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