Nicheing down, or focusing on a specific target market, is beneficial for businesses because it allows them to better serve the needs of a specific group of customers. When business niches down, it can tailor its products, services and marketing to a specific group of customers, increasing the chances of attracting and retaining them. By providing a specialized and targeted solution, the business is able to stand out in a crowded market, differentiate itself from its competitors, and establish itself as an authority in that specific niche.
In summary, niching down is beneficial for businesses because it allows them to better serve the needs of a specific group of customers, stand out in a crowded market, focus resources more efficiently, develop a loyal customer base, increase profit margins, and achieve organic growth.
Source: https://wakefield.actioncoach.co.uk/4-reasons-for-niching-down-your-business-61-profit-increases/