A boutique business is one that provides unique or personalized products or services -- often trendy and expensive -- that are tailored to a particular market segment. Any type of business can be a boutique if it cannot be easily replicated. Sarah Petty and Erin Verbeck, authors of “Worth Every Penny: How to Earn What You are Worth,” write that boutiques are a reflection of the owners' personalities and tastes. It is this characteristic that can cause them to be high risk.
A boutique brand is not going to appeal to everyone. The target niche is small, but a large amount of revenue can be earned from a small percentage of the population. Louis E. Boone and David L. Kurtz, authors of “Contemporary Marketing,” use an 80/20 principle whereby the largest part of a company's revenues comes from only 20 percent of its clientele. For a boutique, the challenge is in pinpointing the 20 percent and making that percentage repeat customers.
Offering a product or service that appeals to only a small portion of the population makes it a risky proposition but with possible higher returns. A buyer may pay a high price for a product that is not available elsewhere. The boutique owner must be able to cover the costs of production from those customers who value their product. Unless it is Internet based, a business may be limited to a market by its geographic location. A March 2012 article in “Inc.” magazine highlights a business called Shoptiques that offers products from various global boutiques on one single website, solving the geographic problem.
A high quality product is expensive to produce and high rental costs may be a consequence of accessibility to the niche market. A January 2012 article in “Inc.” magazine suggests studying demographics to find areas that contain both the desired higher-income demographic and attractive rental rates -- Dallas or Atlanta as opposed to New York or Los Angeles, for example. A boutique business may also have significant research costs allocated to monitor changing trends and customer demands.
The success of a boutique business often depends on the individual relationships nurtured with clients. Although the Shoptiques business model solves the problem of geographic limitations, it does not solve the problem of providing personalized service, a relationship that often attracts boutique customers. Offering personal touches over the Internet such as thank you notes with packages and reaching out via social media to showcase new product lines and trends can address this problem.