How to do an eCommerce Competitor Analysis?
Just the way before opening a brick-and-mortar store, when you are planning to launch a webshop you need to know who you will be competing against in order to succeed on the ever-growing online marketplace. Statistics show that there were over two billion people who made a purchase online and eCommerce stores made over 4.2 trillion USD in 2020. This reveals that there is a huge purchasing power globally and a vast customer base that you can compete for. The best way to get to know your competition on the market is to conduct an eCommerce competitor analysis.
As the eCommerce market is moving quickly and hundreds of online stores are popping up daily, this should not be a one-off practice. Doing an eCommerce competitor analysis on a regular basis is key for benchmarking yourself against your opponents and improving your business further. In this article, we will give you a hand on where to start and how to best analyze your competition in the eCommerce sphere.
The definition of eCommerce competitor analysis
Competitor analysis in the eCommerce world is rather similar to any other competitor analysis which is essentially evaluating your competitors based on multiple criteria. The most common analysis is assessing the market shares of your competitors, their product portfolio, strengths, and weaknesses. Although this can be further extended to areas such as sales channels, marketing strategy, tone of voice, and so on. Also, you can decide to focus on one area only, for example when you are comparing your social media presence with your competitors’ you can exclusively evaluate their strengths and weaknesses on social media.
Why is eCommerce competitor analysis important for your business?
ECommerce competitor analysis helps you to understand your competition and benefit from knowing who you are competing with for the attention of consumers. By doing your research, you can eliminate costly lessons when you are learning from experience and you can make your business stand out. This way you can identify the shortest path to success and the areas you can be unique and outdo your competitors. There are some success stories that successfully made it on the eCommerce market by championing competitor analysis and finding their niche.
How to do an eCommerce competitor analysis?
As we highlighted above, there are multiple areas you can analyze your competition, but in this section, we will have a look at a top-line approach that would benefit most eCommerce businesses regardless of the segment they are operating in.
Determine your competitors
Identifying your competitors is the first step which might seem pretty straightforward but you actually need to consider your picks throughout in order to be sure you are comparing yourself with the right businesses. When determining your competitors you need to consider the target audience you want to reach and the competing businesses you need or want to beat for your audience’s attention.
Define the groups of your competitors
You would want to start with ranking your competitors based on different attributes of their business as this process will allow you to categorize them as your primary, secondary, and even tertiary competitors. This will allow you to explore your direct competitors further, while still keeping an eye on the broader market. To be able to complete the ranking, you have to establish what you mean under primary, secondary, and tertiary competitors. We suggest you use the below definitions:
- Primary: those who compete in the same niche with similar products;
- Secondary: those with medium overlap on products and niche, so either competing in the same niche with different products or with the similar product within a different niche;
- Tertiary: those who have minimal overlap with your business.
Ultimately you would want to focus on your primary and secondary competitors and get to know their business better. Your tertiary competitors can start being interesting when you are looking to expand your business further. Now let’s see how you can rank your customers and cluster them into these three classes.
Points of evaluation when doing an eCommerce competitor analysis
Once you have established the three categories you would want to fit your competitors in, let’s see what criteria you need to evaluate them on:
- Size and revenue: you would only want to focus on those businesses that are actually making sales;
- Recognition and market share: when you are looking to increase the size of your business, you would want to look at the most defining, prominent players on the market;
- Targeted niche: the more significant the overlap is among your target audience, the more likely you have to watch out for a competitor;
- Product offering: again, you would want to keep an eye on how your competitors are advertising products that are similar to those you are selling;
- Price points: you would want to model your advertising efforts based on competitors that have similar price points to you.
Now that you have ranked each competitor based on the abovementioned criteria, you can clearly see who are the ones that are your direct competition and who are only secondary or tertiary ones.
Identify your competitors’ main strengths and weaknesses
The next step when conducting an eCommerce competitor analysis is to identify the strengths and weaknesses of your competition. This can be conducted by putting yourself into your customers’ mindset and list at least five strengths and weaknesses for each. Try to think about attributes your target audience would and would not like. Also, you can use the SWOT analysis which is a strategic planning technique that can help you with assessing this. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats and can serve you with real gems of insight. Answering the below-mentioned questions can also help you list the attributes you are looking for in an eCommerce setting:
- What are the strongest and weakest points of the eCommerce store of your competitors?
- What are the strengths and weaknesses of their social media presence?
- How products are displayed both on the social media channels and the website of your competitors?
- What is their take on SEO and how are they getting on with it?
- How strong is their copy when taking the tone of voice, the structure of headlines, the flow and structure of page contents, and the CTAs (Call To Actions) into consideration?
Keep your products available at all times
Another important aspect you want to take a look at when doing eCommerce competitor analysis is the product availability across your competition’s webshops. Having a product out of stock on your website will mean a sale lost to a competitor. Hence, product availability is key when operating an eCommerce business. If you happen to run out of an item and you are not able to restock it for at least a couple of days, make sure that you are linking other relevant products within your store. This way you might still be able to make a sale despite having a product out of stock.
Customer reviews and ratings
From a customer’s point of view, when looking to purchase a product online, product and retailer reviews will highly affect the purchasing decision. Be sure that your potential customer will look through the feedback they can find about you online before making their first purchase. When you are looking to make an eCommerce competitor analysis you can get a good sense of the product and service quality of your competitors when looking at online reviews. Their online shop and products might look great and have high-quality pictures but the truth always lies in the customer’s feedback. While reading these, you can get a good sense of the quality of the products and the potential gaps where you could outdo your competition. If you see a good number of negative reviews on a certain competitor, especially if it’s primary, you have a great opportunity to win their customers over by simply providing a better service or product.
When you are running an eCommerce store, outstanding customer service should be your priority as it is important to not only attract the attention of your audience once but also manage to convert them into returning, loyal customers. You can find out a lot about an eCommerce business’s customer service practices if you have a look at how they respond to negative reviews and feedback. Also, see if they have FAQ pages and all the necessary information available for potential customers. Having an online customer service chat on their website can also be a good point. If you want to dig deeper into their customer service process you need to also learn how to deal with unhappy customers and craft a strategy that will help you outperform your competitors for this aspect.
Implement track and improve
Finally, when you are done reviewing your eCommerce competitor analysis, it is time to start or improve your business. As we mentioned earlier, a competitor analysis is not something that you can just do once but you always have to keep an eye on your competition so it’s recommended to repeat on a regular basis. Keep monitoring your results against your competition to make sure you are on track or identify the areas of improvement. Also, when you are watching the activity of your competitors constantly, you can discover opportunities where you can beat them and attract even their existing customers to your shop instead.
To sum up
Conducting a competitor analysis is the key to your success regardless of the market your business is serving. Therefore, waste no time and uncover your potential growth opportunities or those where you can outperform your competitors. If you identify those, make sure to put them to your use and explore new ways to expand your business even further.
Table of Content
- The definition of eCommerce competitor analysis
- Why is eCommerce competitor analysis important for your business?
- How to do an eCommerce competitor analysis?
- Implement track and improve
- To sum up