Competition Analysis – Understanding the competitive landscape for your product on e-commerce

Blog, eCommerce

First let’s understand the different types of competition you can face online. There are direct competitors and then there are indirect competitors.

Direct competitors are other sellers who have similar products listed online. For example, if you are a seller of men’s shirts – any other seller who has listed men’s shirts is your direct competitor. Suppose by searching this way, you were able to identify 20 direct competitors online. But you may not find all the competitors very relevant. Therefore, you narrow the definition of your competitors by style, fabric, occasion or price point. By doing so, you are able to identify direct competitors for the products that you intend to sell.

Indirect competition on the other hand is from sellers of listed products that are potential substitutes for your products.  A simple example of a substitute product is a t-shirt as customers during the pandemic substituted a shirt with t-shirt as they worked from home and preferred lounge wear.

So while you need to keep an eye for the direct competitors, you should also look at market trends and shifts in consumer behaviour that may impact the demand for your products.

Types of Sellers

Next, not all competition is at the same level. There are different types of sellers and for each type of seller, you need to build out a different strategy to compete.

First, there are large companies selling their own branded products. They usually have a well-established brand presence outside the marketplace itself. Further, marketplaces want these brands on their platform as they are able to attract traffic to the marketplace. Therefore, these brands get better visibility from the marketplace, and usually better terms of trade.

Then, there are digitally native brands. These brands have been incubated online. The brand has been built keeping the online channel in mind. Unlike legacy brands where online contributes a small share of the business, digitally native brands derive majority of its sales from online. Therefore they are usually quick to react to changes, and are flexible in their approach.

Then, there are private label sellers. These are usually marketplace operator brands created to compete in the market and offer a distinct, and usually affordable offering to the customer. Since they are owned by the marketplace itself, they have all the tools, visibility to compete with all other sellers in the market. They build on the trust of the platform and focus on customer service and quality controls to establish themselves with customers.

Further, there are wholesalers of branded / unbranded products who buy in bulk from manufacturers and would usually sell it to the retailers. Now, a lot of these wholesalers have started to become sellers on e-commerce. Therefore, they often offer competitive prices and a wide range of products keeping their overall cost of operations low.

Next, there are dropshippers who do not own the products they sell. They simply take orders from customers through the marketplace. They pass on these orders to the  manufacturer who directly ships the product to the customer. This is a low-cost method but can be risky if the manufacturer doesn’t deliver on a delivery promise or quality.

Then, there are resellers who buy from other sellers and sell on marketplaces for profit. These generally operate on scarcity and focus on niches not available in other marketplaces.

Finally, there are importers who import products from other low cost manufacturing countries such as China. They enjoy cost advantages and often offer unique products not available in India.

The growth trend of sellers will vary depending on the product segment they will operate from. While branded sellers and digitally native brands will continue to dominate the markets, private labels will grow fast and some will even join the ranks of branded sellers. Wholesalers and drop shippers will grow at a slower rate driven by increased competition. Resellers and importers will see growth as they contribute to the expansion of product markets. Cross-border trade is also expected to scale up based on the international demands.

In terms of market share, branded players along with digitally native brands will continue to hold the largest market share. While wholesalers and private label sellers will be the next in the pegging order for market share.

The Importance of Competitor Analysis

Unlike physical retail where there is a limitation in terms of space, e-commerce has an endless aisle offering infinite products. Therefore, this results in much more competition for your brand. Therefore, it becomes extremely important for you to know exactly who your competitors are and how they are selling to win in the market.

You should always start with a list of sellers who are sizable in the segment that your products are. You look at their assortments, pricing, and reviews. You figure out what they are doing well and emulate those practices. You also find what they could do better and use that to make your business stronger.

You need to have a periodic cadence of competitor benchmarking. This includes their product catalogues, marketing campaigns, and reviews. This will help you get insights that will help improve your product offerings, marketing, and customer service.

Regular competition analysis is required to stay abreast of new customer trends and industry developments. This also helps translate the benefits of new trends for your business. This will also help you in protecting your market share by staying ahead of the curve and coming up with new strategies to beat the competitors. Competitor analysis can help you avoid costly mistakes such as missing features or spending on the wrong marketing channels.

Competitor analysis can help improve pricing strategy. You should always look at pricing history to check how the competitor changes price. You need to figure out a strategy for pricing on sale days as well as non sale days. By doing so, you will figure out the optimum pricing strategy to protect your products.

Competitor analysis can help sharpen marketing strategy and campaigns. Look at the kind of content your competition is creating and what channels they use to reach their customers. You also need to closely look at competitor’s reviews. This will give you tons of insights into what customers like and dislike about the competitor. This can be a rich source of information to help you improve your customer service and as well as product offerings.

Further this will help you fine-tune your target segments and figure out if you have missed out on any relevant customer segment. Channel mix analysis of the competitors also tells you if your channel mix is right or if you have missed out any important channel.

Competitor analysis also helps in customer service by benchmarking customer delight initiatives. You should emulate the best practices that would help you retain your customers.

Identifying Your Ecommerce Competitors

First, to identify competitors, you need to map direct competitors, that is sellers who sell the same products as you do. Next, you need to map the indirect competitors, that is sellers who could be selling products that can prove as an alternative to the products that you are selling. Third, you need to map sellers that sell new and innovative products that might appeal to your customer segment. Further, you need to track global products in the same segment as ours. Finally, you should track social media sellers and influencers who operate in the same space as your products.

The best method to find competition is by using keyword research tools. You need to make a list of keywords that might work for your products and search for the same on these tools. These tools give out the ranking of websites on those keywords and their search volume.

You can start with a Google search to make a broad list of competitors. You can also leverage tools such as SEMRush, and Ahref, to get traffic and keyword volume of competitors. Similarweb shows competitor website metrics such as engagement, demographics, and traffic sources. You can also use Spyfu for competitor research, keyword ranking, advertising campaigns, and backlinks. Moz tool can also be used to see competitor strategies for optimising for search traffic.

In addition, you can also attend industry events and look at exhibitions to find the competitors.

Analysing Competitor Strategies

Once you have identified your competition, you should look at competitor websites to understand their assortment, pricing, and positioning. Also understand how they are building a catalogue, what keywords and strategies they are using, and customer reviews. Also, follow competitors on social media. This gives insights on customers and marketing campaigns.

Reaching out to the consumers and talking to them always gives insights into the products and competitors. Always ask customers what they like and dislike about the competitors. You can also use competitor analysis tools to track traffic, sales, and other metrics. There are services that would benchmark your competitors and provide you with in-depth information.

Competitor analysis is a good tool to evolve your own strategy. As competitors keep making changes, you must figure out how to change your own strategies. You will not be able to better all competitors at once. So you must build a set of best practices in every sphere – product, marketing, pricing, and customer service. You should then beat the competitors in the most important item for your customer and be at least at par in other aspects.

This continuous evolution in consumer behaviour and changes in the products they seek will require you to pivot as the landscape changes. You need to be flexible and always monitor competition. Monitoring competition marketing strategies is important. It will not only help you sharpen your campaigns but also help save money by eliminating the wrong channels.

You should look at competitors to identify the target audience they are trying to reach. The channel mix and the messaging on each channel are important. Classify the approach in terms of acquisition, retargeting, and approach. Also, look at informative or transactional ads that are being sent.

How they are positioning the brand and if there are changes in features highlighted. What kind of creatives are built? What kind of colours and backgrounds talk about the kind of customer segment? The copy quality and attributes along with keywords are also important.

Always check the metrics of campaigns and websites. What can you learn from the approach and some elements that you would avoid? Take what this exercise has taught you to build your own marketing plan.

Pricing strategies and product offerings are also important to understand. What kind of pricing, feature focus and bundling approach does the competitor have? The approach to handling customer inquiries and complaints and their return/refund policy. Their shipping and delivery policy and which partners they are using. What kind of payment options do they accept and how can you better that? Loyalty programs are another route to take.

Monitoring Social Media and Customer Reviews

One of the most important things to track about a competitor is their social media. As you find the presence of the competitor you will understand which social media play what role in their strategy. There are a lot of social media tracking tools that can help track brand mentions, products, and keywords related to your niche.

Watch their posts, frequency of posting, and engagement gathered to improve the ideas. The benchmarking of competitor practices will tell you how you are better. Building a social media strategy to your advantage is a good practice. If the competitor mentions your brand, respond fast. This shows the proactiveness of the brand in image-protecting activities.

You can set up alerts for every time a brand name is mentioned in social media. This way you can get the most updated feeds and also react to any negative comments about your brand.

Collect customer reviews from multiple sources such as websites, social media, and third-party review sites. Categorise the reviews by sentiments (positive, negative, and neutral) to get the full picture. Tracking the sentiment of customer reviews also gives areas that you can improve. Understand the customer pain points and needs from the reviews.

Competitor reviews are a great way to audit your own products. If a competitor is being praised for a feature, highlighting that feature of your product in your marketing campaigns will work.

Social media is also a great way to build relationships and take part in customer conversations. Monitor competitor social media content, contests, giveaways, and collaborations to build your own. Be creative and original. Take ideas but build your own unique content and engagement activities. Be consistent in your posting and engage with the audience regularly.

This document above provided a good overview of the different types of competitors and ways to identify your competitors using different methods, tools and techniques. Once identified, what you need to analyse and monitor about the competition from product, pricing and range perspective as well as their social media engagement to understand who they are targeting, what customers are liking about their products, reviews, wtc. To understand what is working and what is not and making notes to build your own brand strategies.

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competitive, eCommerce, Marketing, product

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