1) It's economical. Imagine you have $100 to spend on supplies. That cash in a more focused shop could go a long way toward more supplies to build your inventory. In a more scattered shop, bits go here and there, but overall you have less options for a potential buyer of a certain item.
2) A niche gives you a chance to be known for and even a trusted expert in something. From whom do you buy your socks, house paint, or favorite ethnic food? My guess is that for each item it's someplace different (imagine buying socks, paint, and perfect samosas in the same place...)
3) A niche isn't a prison sentence. Within each niche there is a huge range of possibilities. Maybe you paint and sell your originals, you might also add prints, magnets and other objects featuring your art or style...I'd say that that falls into your niche...since I said it, it's so :-D
4) Not to get all yoga-y or anything (though I do love yoga) Before you pounce on the next thing that looks so fun to do, breathe and quiet yourself. Check in with your core to make sure that it's something that really feels right and something you won't regret putting out there as a product offering. There's nothing worse than putting something out there that you'd never want to do again. I have a few butt bruises from kicking myself for not doing this so I swear by it now.
5) Before I got more focused, telling people I did "this and that" was a HUGE conversation killer. It wasn't lack of interest, people just don't know what they should say next. Now that I say "I knit and crochet handmade accessories." even someone who isn't in the market right now gives and emphatic "Oh! I'm going to have to check out your stuff when it gets cold", maybe one day they really will buy or tell a friend who's looking.
OK, five seems like plenty, right? Next time, I'll post on deciding your niche when you can do lots of things because this post is getting long! It's taken me a whole year of processing where I see myself going, so if I can make it easier for you, I will do that!
*love and hugs* Jen