A good way of starting a business is looking for untapped demand & filling the gap. Having a narrow niche business or targeting a specific audience is a good way to create a vacuum like noncompetitive environment.
Finding a narrow unsatisfied niche demand is fairly easy on local level. An example of a niche business would be a store that specializes in selling camel-wool or other focused bedding or a store that sells herbs. Niche business most often requires a special set of skills or knowledge and enthusiasm in the subject. The problem with this type of business is the continuity & expansion, as the business is likely to dissolve when the specialist leaves the business & it’s difficult to open new locations or franchise it without having another enthusiastic & devoted person in the filed. That said, with the right niche, the competition can be virtually absent & the initial capital investment required can be comparatively minimal. For this reason it can be a godsend for a startup.
Supplying for a Targeted Audience Demand
Unlike niche business, this type doesn’t require much skills, is heritable or transferable in nature. Instead of going after a specific narrow product or service category, this one goes after a specific audience base. For example a European themed bar in the US areas where there is presence of significant European demographic base. While there can be 20 other well established bars in the area, & technically you’ll all be selling the same thing, you’ll face virtually no competition from them.
Analyzing demand before starting a business or launching a new product is a common practice. Many large corporations spend substantial amount of money just for doing that. There are some local market research companies that might be able to provide some collected statistics and/or run specific polls for a specific research. If you decide to use them, make sure they have a solid track record. Most of the startups just go with their inner feeling & judgment, without having much information to base it on & it seems to work just fine for many. If you are new to the area, doing this might not be the best idea.