I once read from Austin Kleon’s book “Steal Like an Artist,” the excerpt: “Every new idea is just a mashup or a remix of one or more previous ideas.” The successful brands in your niche attained success because they implemented the ideas.
These successful online stores combine and adapt existing ideas to innovate. I don’t suggest copying their ideas, but learning from their successes and failures can reduce your investment risk. Every big e-commerce brand has strengths and weaknesses, and doing a competitor analysis exposes you to their winning strategies and missteps.
Maybe your business is well-established, newly launched, or still in the planning stages; conducting a competitive analysis allows you to refine your unique value proposition and marketing strategies.
In this guide, you’ll find how to conduct, analyze and leverage an e-commerce competitive insight. We also touched on why the industry is competitive, plus how to stand out in your niche.
But before proceeding, let’s clarify what competitive analysis truly means.
What is competitive analysis in e-commerce?
Competitive analysis in e-commerce is the process of systematically evaluating your competitors’ strategies, strengths, weaknesses, and overall market presence in the online retail space. It is the process of checking out what your competition is up to online. Think of it as spying on them (but in a totally legal and ethical way, of course!).
It’s all about figuring out what they’re doing right, where they might be falling short, and how you can get ahead of the game with the information.
Take yourself as being a detective, but instead of solving crimes, you’re figuring out opportunities for your online store. You’ll investigate things like:
- Your competitors’ target audience: Who their ideal customers are, and how are they reaching them
- What your competitors are selling: What products or services they offer, and how they’re positioning them
- How your competitors market: Marketing strategies, the channels they use in content distribution, and what kind of messaging they use
- Their pricing strategy: Are they offering discounts or promotions, and how do their prices compare to yours?
- Your competitors’ strengths and weaknesses: What they do really well, and where they’re falling short
You’ll likely find a new marketing channel you hadn’t considered before, or you’ll find a way to differentiate yourself from the competition.
How Competitive the E-commerce Industry Looks Today
Is the e-commerce industry competitive? Take a look at what Cezary Kozon, the CEO of Spyrosoft, said in a recent interview about how competitive the market currently stands:
“e-commerce businesses that were based solely on acquiring new traffic to increase sales will need to shift their strategy to the retention and increasing cLTV. The ROI on a single purchase from a new Customer is in the red, which strengthens the need to make the Customer base loyal by providing new offerings and complementary sales. The tools to support this trend will see a significant rise in popularity and increased complexity to deliver the results.”
For sustainability, you need good planning, budgeting, and research for the latest software that simplifies customer retention. To stand a competitive edge today, your marketing and sales strategy need to retain buyers.
A drastically reduced customer loyalty is on trend, and the tough competition is discouraging new players. A publication from Researchgate confirms how competitively difficult it is for new players in e-commerce due to intensive starting capital, scaling challenges, and market share constraints.
To survive the competition, clearly demonstrate what makes your brand unique, and ensure that your UVP is in demand.
The Competitive Advantage of the E-commerce Industry
We’ve seen the pressure in the space, but what then is the competitive advantage of e-commerce?
Lower costs
e-commerce majorly requires focus on smooth, fast and user-friendly websites where customers can order from the comfort of their bedrooms. You don’t need to worry about monthly rent on physical stores, utilities, or as many staff members as needed to run a physical shop.
Unlimited geography and reach
Traditionally, your market would be limited to customers in your local area or those willing to visit your physical store. Consider the Chinese jewelry market, for instance. Establishing a physical store in China is limited by various factors such as regulations, logistics, and costs.
You can be in your bedroom in Japan today and dominate the beauty industry without stepping into China. Online stores give you that wider reach even to dominate the entire Asian market.
24/7 availability
Your online store is always open, so customers can shop whenever they want. No worries about them driving or flying down to complain about your service. A typical e-commerce store has various plugins to help customers browse and buy products anytime from the comfort of their homes or on the go.
Whether late at night, early in the morning, or on weekends, your customers can browse products and make purchase decisions without feeling rushed. 24/7 availability not only widens your audience reach alone, but you’ll also provide better customer service, as you’ll resolve customer issues at any time.
Personalized shopping experiences
You can easily document customer behavior and preferences information for personalization purposes. It is easier to track what products customers view, add to their cart, and purchase without the stress physical stores demand. Easily track how long they stay on a particular product page, how far they scroll down the page, what emails they open, and what links they click on.
Targeted marketing
Online stores expose you to marketing tools that’ll make marketing easier, especially when you’re targeting specific customers. You can leverage customer data, online to know what your audience uniquely wants and prefers differently from another audience you’re targeting.
Then, you can create personalized marketing campaigns that resonate with each segment. For example, you can send targeted emails with customized product recommendations, offers, or loyalty rewards to increase engagement and conversion rates.
Scalability
You can quadruple your stock size with new products or expand into new markets without physical infrastructure costs. This ease of scalability even allows you to adapt quickly to changing market demands and capitalize on new opportunities.
For example, you can easily add new products to your online store’s catalog without buying additional inventory or shelf space. You can now test your new products and gauge customer demand before investing more.
Data-driven insights
Your e-commerce store can show how your customers behave with your brand, sales trends, and marketing performance through relevant tools. Use these data to identify growth opportunities and make relevant adjustments to your branding and positioning.
Take a brief look at how data-driven insights can help refine your branding and positioning:
- Customer behavior analysis: Analyze customer behavior data to improve the customer experience, and create products and services that better meet the needs of the target audience
- Sales trend analysis: Identify seasonal fluctuations to adjust inventory levels, optimize pricing strategies, and allocate marketing resources more effectively
- Marketing performance assessment: Determine which channels and strategies are most effective in reaching and engaging your prospects
e-commerce generally simplifies how you differentiate your value proposition from competitors. It streamlines how you build stronger customer relationships and also sustains rapid growth.
Competition Insights in e-commerce and Why They Matter
Competition insights in e-commerce are the valuable information you gather about your competitors’ strategies, performance, and overall online presence.
The process of gathering and analyzing competition insights is called competitive analysis. It involves systematically examining various aspects of your competitors’ businesses. When you understand your competitors’ strengths and weaknesses, you:
- Identify opportunities: Spot gaps in the market that you can fill with your own products or services
- Differentiate yourself: Develop unique selling points that set you apart from the competition
- Improve your marketing campaigns and strategies: Refine your marketing, pricing, and customer service strategies based on what’s working for your competitors
- Stay ahead of the curve: Anticipate market trends and adapt your business accordingly
E-commerce competitive insight example
Let’s say you own an online clothing store. Through competitive analysis, you discover that one of your main competitors is heavily investing in influencer marketing on Instagram to redirect prospects to their website.
Their posts featuring popular influencers wearing their clothes generate a lot of buzz and drive sales. It means you just found a valuable competitive insight to leverage to your advantage.
Now, you might consider partnering with influencers yourself, or you could focus on creating high-quality content that showcases your clothes stylishly and appealingly.
How to do competitor analysis
The right market intelligence exposes most of your competitors’ strategies and activities. Use these steps to identify and analyze their strengths and weaknesses.
Step 1 – Identify your competition type
You need to distinguish the type of competition you’re analyzing. Are they direct, indirect or potential future competitors?
- Direct competitors: They sell products similar to yours to your target customers.
- Indirect competitors: They might not sell the same thing, but they’re after the same customers. Just like two different food trucks at a festival – they’re not serving the same dishes, but they’re both competing for hungry bellies.
- Potential future competitors: These are the big players, the ones you admire and want to be like someday. Checking them out can give you some serious inspiration.
Step 2 – Gather information
Check out their site design, how easy it is to use, how they describe their products, prices, shipping, and the vibe they’re giving off. Take a look at what they’re up to on various social media platforms, how many people follow them, what kind of stuff they post, and who’s interacting with them.
Head to Google, Amazon, or social media to see what their customers say. You’ll find out what they’re doing right or where they’re messing up here.
Study how they’re getting the word out, where they’re advertising, and what kind of deals they’re offering.
Keep an eye on what’s happening in your industry and what people are saying about your competitors in the news.
Step 3 – Do a competitive pricing analysis
Buy some of their products, browse through their store, or look up customers’ feedback to collect data on how they price. Look for pricing premiums, promotional, volume discounts, and bundle pricing.
Demand and supply affect their pricing strategies, so you want to know where they price their products higher and lower than other competitors.
Look out for patterns and trends where they offer goods at a premium or a discount, and adjust your pricing strategies if needed.
Step 4 – Observe their product ranking
Product ranking is the order in which your competitors’ products appear in search results, product listing pages, or their recommendation widgets. Their most relevant products for a search query show at the top of the results page, while those that don’t match your search criteria are ranked lower.
Your competitor most likely uses product information, customer behavior, and transaction history to optimize the product ranking with what product category sells or performs best. Analyze the top-ranking keywords for your products and see which brands consistently appear.
Use keyword-rich titles on your products that are closely similar to the top-ranking product listed on the page. Optimize with clear and concise titles, and then group your products together by category to make them easier to find on your product listing results.
Step 5. Develop actionable insights
Look for areas where your competitors need to catch up and where you can differentiate yourself. Spot new trends or unmet customer needs that you can jump on. Spot emerging trends or underserved customer needs that you can tap into.
If your competitor is doing something better than you, figure out what they did to thrive and how you, too, can catch up through the model. Use what you’ve learned to improve your marketing, pricing, products, and customer service.
Competitor analysis parameters
When conducting a competitor analysis for your e-commerce business, use these key parameters to know what to avoid and what to attempt in a way that’ll distinguish your brand offer.
Product range and pricing
A product range shows what product offerings they’re expanding on to serve customers’ needs and preferences better. Compare the quality of service with yours, and examine the following:
- Product assortment: What types of products do they offer? How does their range compare to yours in terms of variety and depth?
- Pricing strategy: How do their prices compare to yours? Do they offer any discounts or promotions?
- Product descriptions and images: How detailed and informative are their product descriptions? Are their images high-quality and visually appealing?
Marketing and branding
Look out for the channels they use in promoting their products (e.g., social media, email marketing, paid advertising). Inspect how they implement these:
- Content strategy: What kind of content do they create and share? Is it informative, engaging, and relevant to their target audience?
- Branding: How do they position their brand in the market? What is their unique value proposition?
- Social media engagement: How active are they on social media? How do they interact with their followers?
- Customer reviews: What are customers saying about their customer service experiences?
Shipping and returns
Knowing what shipping options they offer and how much they charge for shipping reveals what pricing model works for their target segment. Look for reviews on social media to know what people are saying about:
- Delivery time: How quickly do they deliver orders?
- Returns policy: How easy is it for customers to return items?
Wrapping Up
A solid competitive analysis strategy is the backbone of any sound ecommerce business. Without it, you’ll hardly detect how to differentiate your brand, create a unique value proposition, and deliver superior customer experiences.
Figuring out your competition’s strengths, weaknesses, opportunities, and threats (SWOT) to see what they are doing rightly and wrongly drastically impacts your operations. So, analyzing your competition is necessary to keep an e-commerce business relevant, competitive, and thriving in the long run.
