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Competitive analysis for eCommerce business



Table of Contents


1 What is Competitive Analysis?

2 Why is Competitive Analysis so Important for eCommerce Business

3 Tips on How To Conduct Competitive Analysis

4 Conclusion

Competition is an inevitable part of having a business. This is even more so the case for those who manage an eCommerce business, as the eCommerce landscape is under constant pressure to innovate and dominate the market. As an eCommerce business it is vital that you monitor and analyse your competitors. Keeping a close eye on what your competitors are doing allows you to evaluate your own strengths and weaknesses. 


This blog will outline what competitive analysis is for eCommerce business, its importance and how to conduct it. 

What is Competitive Analysis?

In eCommerce business, competitive analysis involves the comparison of other rival businesses with your own in order to evaluate the strengths and weaknesses of your business. Competitive analysis enables you to identify areas of change and improvement. Doing so is helpful in understanding what products or services are viable and what sells well seasonally. With this comes many theories that help to conceptualise how competitive analysis is carried out.


One such theory is Porter’s Five Forces model. This model illustrates the main forces at play which add to the competitive nature of the market you are in as a business. Some of these ‘forces’ consist of the bargaining power of suppliers and the threat of new entrants into the market. The bargaining power of suppliers for instance is an important competitive force to note as it is a key pillar in a businesses sales. No supply means nothing can be sold. Because of this, suppliers have a great influence in the market and over certain businesses. 

Therefore we can observe that competitive analysis seeks to help us understand the force that competes against an eCommerce business’ goal to maximise sales and profit. Being able to analyse the competing forces your business faces is key to staying competitive in the market.



Why is Competitive Analysis so Important for eCommerce Business

One of the main reasons why competitive analysis is so important for eCommerce business is that it allows you to identify where you differentiate from your competitors. An important aspect of any business or organisation is having a value proposition. This is a statement that outlines the value and benefits you believe your products and services provide. Without understanding what makes you different from your competitors, how will you be able to create effective selling points for your product?

Moreover, competitive analysis is helpful in knowing your competition. This is vital as due to the competitive nature of the eCommerce landscape, failing to understand your competition will inhibit you from knowing whether you are doing what’s ideal for your business or not. Due to the low barrier of entry eCommerce businesses have in the marketplace, it means that you are competing against a multitude of different businesses, with some selling similar products to your own. Because of this, it is necessary to conduct competitive analysis as it helps you to improve your marketing strategy and form a unique value proposition.


Tips on How To Conduct Competitive Analysis

If you are new to eCommerce business or simply need tips on how to refine your competitive analysis, here are some tips on how to do so effectively. 


Something to consider before jumping straight into your analysis of competitors is to ensure you have a solid 7 or so competitors to evaluate. It’s important that your sample size is neither too big nor too small. A small sample size means you won’t have an adequate enough sample to get an accurate reflection of the market. Too many competitors to analyse can lead to ‘analysis paralysis’, and can be time-consuming and counter-productive. In your sample of competitors you want variety. You want to choose some that either market similar products to you, are new to the market or share the same value proposition. 


Another tip is to research how your competitors market and sell their products. Doing so is helpful in evaluating your marketing tactics. Factors such as how they advertise their products on social media and how they sell their products on their site are invaluable information. Sometimes it may involve you following them on social media to get a closer look at how they carry out their marketing. 


Furthermore, a great approach to competitive analysis is to conduct a SWOT analysis. SWOT stands for strengths, weaknesses, opportunities and threats. This is a business analysis technique that helps companies evaluate the internal and external positives and negatives that can affect their business. Strengths and weaknesses are internal, it involves a business looking within their organisation to identify things they do well and areas for improvement. Opportunities and threats are external, they focus on external factors that can undermine your business objectives or be an opportunity to grow and expand. In the case of an eCommerce business, strengths and weaknesses will focus on factors such as the brand's reputation and the assets they have. For opportunities and threats will focus on factors such as the products your competitors sell as well as consumer trends in the market. 


As briefly mentioned earlier, Porter’s Five Forces model is another way to help conduct competitive analysis. As an eCommerce business it is important to be aware of factors such as the bargaining power of your suppliers as well as the threat of substitutes within the market.


Competitive analysis is a vital part of any business, and even more so as one in eCommerce. Being able to understand factors such as your competitor’s marketing strategies, pricing and their target audiences can better inform your decision making. 


Ultimately, conducting this analysis will grant you the edge in overcoming the competition and staying on top in the market. With many threats such as low barrier entrants, market prices and substitutes you need to be aware of the factors that can undermine the growth of your eCommerce business.


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