A market niche is a smaller sub-category of a market segment, where a part of the customers consider only niche products substitutable with one another, but not substitutable with products from the broader market segment.
In Life Cycle Assessment, understanding market niches is particularly important for consequential LCA modelling. When assessing which activities will change in response to a change in demand for a product, practitioners must determine whether the product belongs to a niche market or a broader market segment. This distinction affects which competing products are considered substitutable and therefore which production activities are likely to be displaced.
For example, within the broader market segment of dairy products, organic milk may constitute a market niche. Customers who specifically seek organic milk may not consider conventional milk a suitable substitute, even though both products serve similar functions. This limited substitutability means that changes in demand for organic milk would primarily affect organic dairy production activities rather than conventional dairy production.
Market niches relate closely to imperfect substitutability. When products occupy distinct niches, they face different marginal suppliers and different market dynamics compared to the broader market. This affects which activities should be included in a consequential product system and which marginal technologies will respond to changes in demand.
As Chief Operating Officer, Iris leads our organisational development and oversees day-to-day operations. Before joining 2-0, she worked in the biotechnology sector. As an LCA consultant, Iris has devoted her expertise primarily to the domains of sustainable agriculture and food production. She is dedicated to teaching LCA and is responsible for our educational efforts. Iris holds an M.Sc. in Biology – Biotechnology from the University of Copenhagen.
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Glossary terms are clearer once you have seen them applied. Our guide to what LCA is and how it works walks through the complete methodology: goal and scope, inventory modelling, impact assessment, and interpretation.
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