An essential part of making your e-commerce store work is keeping a watchful eye on your competitors. In order for your brand to succeed on the market you have to know what your competitors are doing that puts them at the top. It is especially important considering how vast the competition in every niche has become. This leads us to a mandatory business practice — e-commerce competitive analysis.
No doubt, analysis of the market and future competitors in your e-commerce niche is an important part of your business plan. However, regular evaluation of the competition in e-commerce for your niche through the years is also crucial for staying on top of the game. Monitoring changes on the market and staying flexible to be able to quickly adapt is a major component of long-term success.
In this article, we will explain:
- What e-commerce competitive analysis is
- Why you should definitely conduct one
- How to conduct target competitive analysis step-by-step
Let’s start with the basics.
What Is E-commerce Competitive Analysis?
A competitive analysis is a process of strategic research and identification of competitors in a specific industry. It helps merchants evaluate internal and external factors, like weaknesses and strengths, of the competitors in a niche that offers the same or similar services and products. E-commerce competitive analysis is a long-term process that should be conducted periodically to monitor the state of the market and be able to respond to the new challenges right away.
The main purpose of a target competitor analysis is to uncover and leverage the things your competitors are lacking as your competitive advantage. Merchants can perform holistic competitive analysis, meaning digging deep into every business aspect of the competitor’s company. Conversely, you can perform a targeted competitive analysis that focuses on certain aspects of an operating business, like their marketing strategy or website features.
Why Is E-commerce Competitive Analysis Important?
So, why is evaluating your competition in e-commerce actually important? First and foremost, because you can’t effectively compete without knowing your competitors, or what makes them attractive to customers, or what pushes other customers away. Second, in order to differentiate yourself on the market, you need to know the current state and positioning of your competitors. That way you can build your brand in a way that fills the gaps of what customers demand.
Retail competitive analysis helps businesses in many ways, such as:
- Assessing your current position on the market
- Identifying your unique selling proposition (USP)
- Determining the right marketing strategy
- Discovering the technical and visual features your competitors use on their website
- Improving your customer service
- Establishing a competitive pricing policy
For now, let’s move on to discussing the ways to perform e-commerce competitive analysis.
How to Perform an E-commerce Competitive Analysis
Like we said before, e-commerce competitive analysis can take many forms, depending on what kind of information you’re trying to gather and analyze. However, we will be going over basic techniques of conducting competitor analysis, so you know where to start. We segmented these techniques into seven steps to make your retail competitive analysis more digestible and organized.
These steps are:
- 1. Define your business and set the goals
- 2. Identify your e-commerce competitors
- 3. Research competitors’ product offerings
- 4. Analyze your competitors brand positioning and SMM strategy
- 5. Investigate your competitors’ websites
- 6. Conduct a SWOT analysis
- 7. Centralize your data in one framework
In the last step, we will provide some framework options that you can use to store your findings in one place. For now, let’s jump into discussing the steps one by one!
#1 Define your business and set your goals
The initial steps you need to focus on before jumping into e-commerce competitive analysis is defining your own business, evaluating your position on the market, and setting your goals. Defining your business essentially means understanding the peculiarities of your business model, what your customers’ needs are, and how you’re going to satisfy them. For the data you’ve collected to make sense, you must know what goals you’re trying to achieve.
Regardless if you’re writing a totally new business plan or looking to update an existing business strategy, realistically assessing where your brand currently sits on the market is crucial. Once you have those basics down, you can define what you want your brand to become. This is where the goal setting comes into play.
Again, there are many different goals entrepreneurs set when it comes to retail competitive analysis. Here’s some of the goals you can achieve by performing competitive analysis:
- Upgrade the marketing or branding strategies
- Grow the social media presence and the number of followers
- Increase e-commerce conversion rate
- Grow traffic and engagement on the website
- Improve the website’s functionality
The answers to these questions will represent what kind of end result you’re looking to achieve. By clearly establishing your goals, you’ll know how to process the data and how to incorporate the analysis results into your business strategy.
#2 Identify your e-commerce competitors
Identifying your e-commerce competition is a process that can be divided into two steps.
- 1. Find out who your competitors are.
- 2. Categorize them by certain criteria that we will name later.
Let’s start by discussing the ways to identify your competitors.
How to find your e-commerce competitors
All you need to unveil your e-commerce competitors is internet connection. The initial research can be done with the following methods:
- Conducting keyword research. Using tools like Ahrefs, you can research terms that your potential customers would use when searching for your products. A tool will reveal the companies that appear on the first page of Google search results. These are your primary competitors. Eventually, you’ll want to outrank them by optimizing your pages for the chosen keywords and finally appearing on the first search engine results page (SERP). This must be your primary goal, since more than 67% of all the clicks on SERPs go to the first five results.
More than 67% of all the clicks on SERPs go to the first five results.
- Utilizing social media. By searching through relevant hashtags and keywords on social media platforms like Instagram and Facebook, you can find and learn more about your competitors, their social media presence, and how they position their brand in comparison to others.
- Getting on Amazon. Being the largest marketplace in the world, Amazon has become a sort of database of businesses that offer the same or similar products and services. Comparing prices on Amazon should also give you an approximate price range to consider.
Of course, more in-depth research can be done by going undercover as a customer to test out competitors products and services to get the sense of their customers’ buying journey and assess the level of customer service. For now, let’s move on to how to properly categorize your competition.
How to segment your competitors
Once you have the list of your competitors down, it’s time to segment your e-commerce competition into three types:
- 1. Primary competition, also known as direct competition. These are the brands that are targeting the same audience and offering the same or similar products or services.
- 2. Secondary competition offers a variation of your product, either on a higher or lower end of the spectrum.
- 3. Tertiary competition offers products or services that are somewhat similar to yours, but may be targeting an entirely different market segment.
While primary competition is your most valuable research subject, it’s not wise to sweep under the rug your secondary and tertiary competition. After all, their product offerings may satisfy the same need or solve the same problem as your offering. It’s best to keep a watchful eye on all of your competitors.
#3 Research competitors’ product offerings
Now you have the list of your competitors and it’s time to analyze their products. This step is called competitive product analysis. It can be a part of the overall e-commerce competitive analysis or be performed separately. Product analysis is a useful tool for evaluating your competitors’ products to determine their strengths, weaknesses, and current position in the market.
You can begin your research by visiting the competitors’ websites, which is where you will find descriptions, detailing the product’s features. It’s also a good idea to collect data about the products with the highest ratings and learn what exactly customers love about them. More research on Google or review platforms and you can find information about the competitors’ flagship, or sometimes called core, product — the company’s most popular and recognizable item.
By the end of your competitive product analysis, you should have clear answers to questions like:
- What are their products?
- What is their flagship product?
- How many products are similar to yours?
- What product features are the same and which are lacking?
- What is their pricing compared to yours?
If you have the opportunity, you should purchase a few products that are the most similar to yours and investigate them in real life. When it comes to collecting product analysis data, you can use a separate framework or choose among those that we list below. In case you want to organize product data separately, you can use Klue’s extensive product analysis template.
Product analysis as part of the retail competitive analysis helps merchants greatly in keeping their products or services competitive. You can also discover some customer demands that are still not fulfilled by your competitors and take advantage of them.
#4 Investigate your competitors’ websites
Considering how technologically advanced e-commerce has recently become, the demand for high-quality websites is now a standard. To be truly competitive on the market, using a website builder or default templates is just not going to cut it anymore. It’s a good idea to investigate your competitors’ websites to see which kind of features, layout, and design they use in their online stores.
The range and variety of website UI and UX designs are enormous. For instance, a marketplace website and a single product website layout are going to differ drastically, because they require different approaches. Even taking a look at your e-commerce competitors’ websites, you will notice that the fonts, graphics, color schemes, and other design elements all fit specific branding requirements.
Besides the visual aspect of the website, what you should pay close attention to is the user experience on a website. User experience is defined by the perception and psychological responses of the user when they interact with the product. Hence, UX design focuses on delivering usability and shaping the buyer’s journey in an intuitive way that would lead to a conversion.
To give you a visual example, let’s compare how two primary competitors’ websites — Clean Origin and Marrow — approach usability.
Clean Origin vs Marrow
Both Clean Origin and Marrow sell accessories and offer custom made jewelry. What’s interesting is how each website shapes the user experience. Let’s start with Clean Origin.
The homepage opens with a colorful hero banner and a decent CTA. The category navigation, search bar, shopping cart, and a personal account are all clearly visible and easily accessible. On scroll, the user is prompted to begin building their custom jewelry. High-quality product photography beautifully highlights the best products features. Minimalist visual design with intuitive icons don’t overload the user, instead gradually leading them to a purchase. By all means, Clean Origin demonstrates great website usability.
Turning our view to Marrow, we immediately see that the design is a bit overcrowded. The homepage features a large hero banner with a small CTA that was buried by large text. Surprisingly, the navigation menu is hidden behind a hamburger menu and lacks any category images, making it quite difficult to navigate the site at first glance.
On scroll, we’re shown animated icons and the user is prompted to visit a few category pages. However, the downside of animated and crowded homepage is significant reduction of loading speed. Marrow may have been aiming for a unique design, but ended up hindering the website usability.
This shows that your best course of action would be hiring an E-commerce development company to ensure your website follows UI/UX best practices. A team of professionals understands the latest trends of website usability and design, being able to propose the best optimization plan for your business. This will undoubtedly elevate customer experience and your competitiveness in the niche.
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#5 Analyze your competitors brand positioning and SMM strategy
E-commerce as we know it now thrives on branding and social media marketing. A well thought out approach to branding and SMM can generate more leads than other types of strategies. Which is why it’s imperative to understand what works and what doesn’t work in your competitors’ marketing plan.
A good way to start your e-commerce competitive analysis is to subscribe to competitors’ social media accounts and blog newsletters, if they have one. This will reveal the tone of voice they use, as well as the frequency of their posts and the level of customer engagement with the content.
Social media ads are also something that you should look into closely. Tools like Anstrex or Sprout Social can reveal and collect the data about your competitors’ advertisement campaigns. It is highly useful information for analysis, since comprehensive and well thought out ad campaigns often generate more direct sales. Such ads are definitely changing the way we think about traditional advertisement, since 26% of social media users say they tend to buy brands they see advertised.
26% of social media users say they tend to buy brands they see advertised
This shows that a quarter of your e-commerce competitors’ customers are dwelling on social media. So understanding what converts them while they’re scrolling their timeline is quite important. While you won’t be able to see a click-through rate, you can still analyze the composition of their ads. Learning what techniques they use to communicate their values and benefits to the customer’s is going to clear up what actions your brand needs to take.
#6 Conduct a SWOT analysis
SWOT analysis is a competitive analysis framework that helps you understand your competitors’ positioning on the market. It is a useful e-commerce competitive analysis tool, since it evaluates not only the internal factors, but also external ones and future potential.
SWOT analysis is based on four main principles that will help you understand your competitors’ and market’s strengths, weaknesses, opportunities, and threats better. It’s used to conduct a fact-based assessment of the competitors’ core structure, performance, and possible initiatives. While SWOT analysis offers a holistic approach to competitive analysis in retail, this method is prone to confirmation bias.
Still, it’s a good idea to perform such analysis, as it reveals and categorizes fundamental information about your competition. It’s an easy to use framework, since most analysts present it as a square segmented into four quadrants.
To understand the principles of SWOT analysis and how they’re meant to work, you can pose them as questions that you need to find an answer to.
- What are the strengths of your competitors? Determine what your competitors do better and what separates them from you.
- What are the weaknesses of your competitors? Understand what your competitors lack and what can be brought to the table to fill that gap.
- What are the opportunities your competitors create for you? Use things that your competitors are lacking (e.g. a certain product feature) as your advantage.
- What are the threats to your business your competitors bring? Things like a new product launch, press coverage, or improved customer experience all pose a threat to your store.
Depending on what kind of data you’re trying to collect, you can pose these questions differently to reflect your target competitor analysis goals. While not perfect, it’s still a relevant analysis framework businesses use to this day.
#7 Centralize your data in one framework
Once you’ve gathered all the necessary data, it’s time to centralize it in one framework. A competitor analysis framework is a tool that presents the information you’ve collected regarding your competitors’ business operations. There are many types of e-commerce competitive analysis templates that categorize and segment the data in different ways.
You can download competitive analysis templates online. Here’s where you can find some of the popular templates:
All of these templates differ from one another, so you have a little bit of room to test and decide which framework you like best. If you have more experience conducting retail competitive analysis, you can try creating your own custom template using Asana. In case none of the templates work for you, opting out for tools like Excel or Google Sheets to organize and store the data is also okay.
Regardless of which type of framework you end up choosing, be sure to not let your findings get buried in an obscure folder. Utilize the data you’ve collected to make or adjust your strategic business plan. Conducting competitor analysis periodically can prove to be majorly beneficial to the success of your store in the long run.
E-commerce competitive analysis is a tedious and quite technical process that should, ideally, be an ongoing practice in your company. Despite that, implementing a strategic and timely evaluation of your e-commerce competitors can make or break your long-term success in the industry. After all, observing and promptly adjusting to changes in the niche is how you stay ahead of the competition. This will ultimately reflect on how customers view your brand and interact with it compared to others in the industry.
In this article, we took a deep dive into discovering what e-commerce competitive analysis is, what makes it so important for entrepreneurs at any stage of their journey, and how to perform basic e-commerce competition analysis. Remember that the purpose of competitive analysis is not to see how your competitors are doing, but how they are doing compared to you. So be sure to work on upgrading your store, branding strategy, and marketing campaigns. And if you have any questions regarding your e-commerce website development or optimization, don’t hesitate to reach out to us for a free consultation!
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