If you are planning to start your e-commerce store, you might have done the required research in terms of product idea selection, product validation, e-commerce store design, and more. But what about competitive analysis? Have you checked who is already selling the kind of products you want to include in your inventory?
Clearly, there could be nothing more frustrating while in business than seeing your competitor grow more than you do. Even though you might be doing everything right, getting an edge against your competitors requires you to understand your strengths and weaknesses along with that of your primary competitors.
This is where doing an in-depth competitive analysis can be immensely helpful. In this post, we will take you through competitive analysis meaning, its importance, steps to analyze your competitors, and more. The valuable information given here can be put into use irrespective of whether you are just getting ready to launch an e-commerce business or are just re-evaluating your view of the competition to support an existing business.
What is Competitive Analysis?
A competitive analysis, also known as competitor analysis, refers to the process of comparing strategies followed by your competitors with your own to understand their strengths and weaknesses. It helps determine possible barriers and advantages around products or services within a market segment. Besides this, you can also monitor how your direct and indirect competitors are executing different business tactics for marketing, distribution, and pricing with detailed competitive analysis.
Example of competitor analysis
Your competitive analysis strategy can vary widely depending on what you specifically want to learn about your competitors. For instance, you might want to analyze your competitor’s website design approach to have a 360-degree view of all that it sells. Similarly, you may want to dig deeper into their distribution channels.
You can structure your competitive analysis strategy in different ways by considering some of the primary elements such as:
- Who is their target audience?
- What is their product differentiator or Unique Selling Proposition (USP)?
- Which features do they highlight in their marketing and sales strategies?
- What are their price points across different marketplaces?
- How do they approach the logistics side of the business?
- Are they bootstrapped or have received any external funding?
The answers to these questions can help you zoom out on what separates your brand/products from your competitors. You will also learn how different competitors are trying to differentiate themselves from the competition within your market segment.
Why Does Competitive Analysis Matter for an E-commerce Business?
Like many aspiring business owners, you might have thought – “Do you really need to invest time and effort in competitor analysis while starting out?”
One of the main reasons this is important is that you can’t differentiate your brand/product without knowing what actually makes it different. If you are starting an e-commerce store, a competitive analysis will help you:
- Make informed business decisions
- Identify the current trends you can benefit from
- Benchmark against the competitive products
- Build a USP
- Determine the right product pricing
- Find new ways to speak to your customers
- Find the existing gaps in the market
- Know if there is a market in the existing gaps
Even after you have built your e-commerce store, competitive analysis should be a live document that evolves as your company grows and matures over time. Maintaining such a resource can help you stay on top of how your business stacks up against competitors.
How to Do Competitor Analysis: 7 Effective Steps
If you are ready to deep dive into competitive analysis, follow the steps given below to organize your research appropriately:
- Identify five-seven competitors
- Compare competitors in a well-curated spreadsheet
- Determine the type of competition
- Identify the positioning of current competitors
- Look at their offerings and competitive advantage
- Consider how they market their products
- Perform a SWOT analysis
Let’s dive deeper into each of these steps.
Identify five-seven competitors
To find relevant competitors to be analyzed in detail, begin your competitive analysis with a simple search on Google around your product or product ideas. You can also search marketplaces like Amazon and Flipkart to find various brands selling the type of products you want to include on your e-commerce store.
This list of competitors should include the ones that:
- Sell similar products
- Have a similar business model
- Target similar or slightly different audience
- Are experienced or new to the market
Having such a list of diverse competitors by your side will give you a clear picture of the competitive landscape in the target market.
Interested Read: How to Find Profitable Product Ideas?
Compare competitors in a well-curated spreadsheet
Having just a name of competitors in your list will not be enough as you would also want to gather data around different business parameters. To make the next better version of your competitor’s list, create a spreadsheet and enlist competitors in one column against different parameters/criteria, such as:
Sales channels
This should include online stores/apps, social media channels, offline stores, and marketplaces.
Product offerings sold across channels
Here, you need to enlist product lineup across categories and channels. See how your competitor prioritize selling specific products through distinct channel and dig deeper to know why. Also compare their products with your offerings to find out areas of improvement.
Price range
Check for the price at which your competitor(s) are selling similar products and consider the profit margin. Mass-appealing products can be sold at lower margins, while exclusive range is mostly available at a premium price.
Social media presence
Check the social media channels where they have created the profiles and how they are promoting the business through regular posts and paid ads. Consider their recent marketing campaigns to understand how they try to position themselves in the market.
New customer offers
Find out how they attract new customers and what kind of discounts they provide for the first purchase.
Regular discounts on product promotions if any
Consider the kind of running offers and discounts your competitors offer over time and how it affects their sales, brand reputation, and web/app traffic.
Current and upcoming market trends
If your business can benefit from seasonal hike in the demand of certain products, look at how your competitors prepare for the same.
Reviews and ratings on marketplaces
Genuine reviews and ratings on competitor’s products shared by buyers on marketplaces can help you define the USP for your product by solving the pain points that still persist with using rival products.
Determine the type of competition
Add another column in that competitor analysis sheet to mention the category of competitors. This will help you understand how they are related to your business. The following table covers different types of competitors you can include in your list:
| Type of competitor | Description |
| Direct | These are primary competitors that sell similar product(s) to a similar target audience. Example: Flipkart and Amazon are primary competitors. |
| Indirect | These competitors either offer a high-end or low-end version of your product to different consumer niches. Example, Amazon and Baggit (a brand that sells handbags for women) are indirect competitors. |
| Tertiary | These are related competitors that may be targeting the same audience as yours but do not sell the same products. They are not in direct competition with your business in any way. For example: Red Bull and Cult Fit can be considered tertiary competitors. |
Identify the positioning of current competitors
Positioning, in relation to the products, involves presenting the product benefits to a specific target audience. Through detailed market research, you can determine how to position your product/product lineup to the right target audience based on which product benefits are most appealing to them.
Good positioning can help you connect with the prospects better and retain them for a longer period. It will also determine the messaging and business strategy around your product. Besides understanding how you should position your product, you also dive deeper into the competitors positioning. This way, you can learn to create the differentiating factor and build a reputation in your buyer’s eyes.
While looking at competitors’ positioning, consider:
- Which stories do they make around their products to attract customers?
- How do they position what they sell?
- How do they describe their USP?
If you can pinpoint their positioning framework, you can plan to position your brand differently and set it apart.
Look at their offerings and competitive advantage
Once you have a good idea of the competitors’ positioning as a part of competitive analysis, take a look at their product specifications to find what makes them stand out. That competitive advantage or the secret sauce is what separates successful businesses from others.
For instance, your product lineup advantage could be high quality, reasonable price, and expedited shipping that when taken together are not easy to replicate.
Invest time to look at your competitors’ goods and compare them with your own. Find out what their customers say about the products – both negatives and positives to figure out how you can offer something better.
Consider how they market their products
The right marketing mix can make your e-commerce store successful. But many new online stores fail to undertake a review of how their competitors market the products. Assuming that everyone uses Instagram or Facebook and paid ads can work for every store might not be good for you.
Instead, work on understanding the marketing efforts your competitors plan and execute. Find out which offers they are promoting and when, how they are building their email lists, and how they are outreaching to them. Assume the role of a prospect for your competitor by:
- Buying a product to check the overall experience
- Sign up for their newsletters to find what they share
- Follow them on social media to get instant updates
- Abandon shopping carts to see how they try to reconnect
Perform a SWOT analysis
SWOT, as an acronym, stands for Strengths, Weaknesses, Opportunities, and Threats. You can consider a SWOT analysis to accompany the data you have gathered about the competition. This side of competitive analysis will also lean toward your competitors’ strengths and weaknesses to define areas of improvement for your offerings.
Look at the strengths and weaknesses in terms of their:
- Products
- Reputation
- Market share
- Assets
- Number of employees, etc.
Consider opportunities and threats in terms of:
- Overall economic conditions
- Consumer trends
- Regulations
- Market demands
- Market size
Competitive Analysis Template for Your Perusal
| Parameters/Competitors | Competitor 1 | Competitor 2 | Competitor 3 |
| Competitor name | Brand A | Brand B | Brand C |
| Price range | INR 500 – 2000 | INR 500 – 1000 | INR 3000+ |
| Target audience | Men in the age group of 20 – 30 years | Men in the age group of 20 – 30 years | Men in the age group of 30+ years |
| Market share | 10% | NA | 25% |
| Key competitive advantage | Low price | Fastest shipping period | Large Instagram following |
| Social Media Presence | Facebook, Instagram, Twitter | Facebook, Instagram | |
| Primary marketing channels | Google Ads | Newsletter for cross-sell and upsell | Instagram ads |
| Primary sales channel | Official website, Amazon | Official website, social selling, Flipkart | Official website and app |
| Product USP | User-friendly and with more features | Easy to use but has less features | High-end features best suited for specific age group |
| Running Offers & Discounts | 10% discount for first-time buyers | Seasonal sales only | No discount |
| Reviews and Ratings on marketplaces | Mostly positive | Mixed reviews | Mixed reviews |
Get Your Business Edge with Competitive Analysis
Competitive intelligence should be one of the key areas to focus on at the time of starting an e-commerce business. Ongoing competition analysis can help you be on top of your rivals and break into new markets or product lineups with less friction.
Ready to launch an e-commerce store? Learn how to start a business with less money here.
