If you wait to find an idea or niche which is completely unique, whether globally or just within your local area, before you start your own business, chances are that you'll be waiting a long time.
And this point is easily proven looking at the world around us; we don't just have one doctor, nurse, mechanic, coffee shop or builder, we have lots. And this is because often times there is enough of us (customers) to go around, i.e. one provider wouldn't be able to service us all even if they wish they could, and also because we value having the ability to choose who we provide our business to.
The amount of competition you face can certainly prove to be problematic as it effectively dilutes your potentical customer pool, however it's not necessarily cut and dry that if you face a lot of competition you won't be able to compete in business; just like in sporting events, teams and individuals compete against each other and some win and others don't.
If we look at things in chronological order the largest and most difficult obstacle to overcome is also the first, when the amount of competition you face makes it difficult to establish that first footing. Building your reputation is relatively easy, provided you do a good job, if you have those first few customers to impress and help spread your reputation. The problem is you need to get people in the door when they're otherwise used to going elsewhere.
In this case offers and incentives can be an excellent strategy to help you get going. If budget permits, money off, multi-buy discounts and coupons can all be very appealing and are typically easy to market using advertising space in local newspapers and magazines, for example.
More long term
However beyond a certain point you'll need to transition to more long term strategies which are more sustainable from a business perspective in order to sustain your longevity.
In it's ultimate simplicity, the best way to outcompete your rivals is to do something cheaper, do it to a higher standard or do something that they are not. Ultimately, we're all looking for value for our money and as consumers we tend to feel we've ahiceved this when we get a good deal on price or we at least feel we paid for and recieved a high quality product or service.
So first of all let's take a look at price, and whther you can offer your services for less than that of your rivals. Remember lower prices doesn't necessarily mean lower income if you get more customers through the door. This may or may not be viable depending on things like supplier costs and logistics however, and if it's not then don't worry there are several other avenues for you to explore.
Focus on quality
The next area to think about is whether your services are or can be developed to be of a higher quality compared to your competition. If they are, and given enough time, you should accumulate a strong customer base assuming there is a genuine need for your products/services. If this is not the case you should ask yourself whether you can refine and develop your approach so that they become of a higher standard.
The next area, and probably the one which is most open to a thinking outside the box approach is to do something which your customers, both potential and current, will find useful or appealing and one which your competition is not.
A good example of this would be offering a pay monthly scheme on large scale purchaes which can help ease the financial strain on customers (for example, our pay monthly web design services or web hosting). Another example would be to offer your products or services in a combination, such that purchasing one would entitle customers to a discount on the purchase of another; even if you only made profit on the first item and broke even on the second you've still made profit.
Obviously, there's a lot of scope for customisation depending on you, your ideas, your business and the types of customers you have. It would be impossible to suggest that a one size fits all approach could work here but it's not too difficult to come up with ideas which can help set you apart from your competition.
The above are areas which you can look to develop and improve upon to help your business succeed in a crowded market place. I'm sure you'll agree the points that i've made in this post are certainly not complex, but then business strategy doesn't need to be complex in order to be effective. Ultimately, if you can find ways to provide your customers with real value for money then you can succeed despite the competition you may face, and putting yourself in your customers shoes is often a good way to approach the creation of new business ideas and strategies.