Competitor analysis is the process by which you identify your existing and potential competitors, along with their strengths and weaknesses based on a number of parameters. It gives you a better idea of where you stand in the market, and what you can do to improve your position. As new online stores are springing up every day, it is important that you understand and acquaint yourself with your competitors. The following reasons will help you to understand why competitor analysis is important.
1. Helps you understand your market better
Understanding your competition is vital to the growth of your online store. Market research about other e-commerce stores in your domain helps you to track industry price trends, assess the quality of their products, and monitor their services so that you can improve your own. By understanding how they serve their customers, you can also enhance your own customer service and compete with them.
Most businesses use Google Trends and the Google Keyword Planner to develop a successful content marketing strategy. You can use these two tools to check how your competitors are faring with respect to their content and understand what their audience is looking for. In other words, these two tools help you do market research better.
2. Keep track of your competitors’ operations
To be successful in the e-commerce space, you will need to know how your competitors will counter with pricing or online discount strategies. The competitive analysis allows you to keep track of your competitors’ operational information and business models.It also helps you predict how they may react to your online operations so that you can have a contingency plan in place.
In a Harvard Business Review interview, professor Robert Hayes states that studying your competitors’ operations will help you learn and provide you with a competitive edge.
3. Formulate strategies for organizational growth
Feel like you are doing all the work, but your e-store is going nowhere? Comparative market analysis is an important aspect of strategic planning and scaling of business. Competitor analysis helps you to study other e-commerce success stories as case studies, and implement their strategies where applicable for your own organizational growth.
A SWOT (Strength, Weaknesses, Opportunities, and Threats) analysis of your competitors helps formulate better strategies for your e-commerce success. This scholarly paper helps you get acquainted with e-commerce SWOT analyses.
4. Improve market share
Want to gobble down your competitors’ market share?Competitive intelligence helps you to undertake corrective measures before you make the same mistakes that your competitors do. There are a number of software tools that help in gaining access to competitive intelligence so that you can improve your market share. Use these tools to learn things about your competitors that they probably wouldn’t reveal to you over their dead bodies.
This Kissmetrics article lists 37 tools to help you gain competitive intelligence (CI).
5. Plan diversification and expansion
You can diversify either by modifying existing products or by adding new products to the online store. However, it is capital intensive and you cannot execute it without proper planning. Competitor analysis helps you diversify your product portfolio by studying expansion plans of your competitors. Why do your homework when your competitors have already done it?
6. Analyzing past and present strategies of competitors
Why research afresh when you can learn from your competitors? Analyzing past and present strategies of competitors helps you to observe their growth trajectory and how it impacts your business. It even helps you to pinpoint where they faltered so that you can learn from their mistakes. The purpose of competitor analysis is to save time and expenses so that you can learn from what your competitors have gained or lost through their strategies.
This Forbes article is great to understand what you can learn from your competitors.
7. Understanding competitive advantages and disadvantages of competitors
When it comes to other online stores, what meets your eye may not be the real story. You need to look beyond aspects such as fundamentals of price, customer service and location. Use competitive analysis to understand your competitors’ strengths such as financial resources, superior talent, and operational efficiency. Similarly, you can use competitive disadvantages that other online stores may have, to your advantage, if you are aware of them at the right time.
Check out this informative article to learn how to combine SWOT analysis with competitor analysis.
8. Developing barriers to prevent competitors from entering your market
You already rule the online market space in your area and you know it?Great, now stop others from eating out your success.Competitor analysis helps you establish barriers for your competitors in a market where you already dominate and have a competitive edge. Use defensive marketing strategies to retain existing market share through extensive distribution and aggressive marketing strategies, all with the help of competitive intelligence you gain.
This chapter by John Roberts is a great resource on defensive marketing strategies.
9. Exploiting weaknesses in product development cycle
A good competitive analysis example is when you identify the weaknesses in your competitors’ products or services. Even a great product or service may have its weaknesses, and a good competitive intelligence strategy helps you understand all the weaknesses that your rival e-commerce store’s latest product may have. Get to know those weaknesses, and make something better.
10. Play the advertising game better
One of the key advantages of competitor analysis is, you always get to play the spy. You can start with tracking your competitors’ keywords, and how you can develop a concurrent content marketing strategy to enhance your own SEO. Competitive PPC analysis helps you to understand how your competitors’ display or paid campaigns are doing, allowing you to learn a lot before spending on ad campaigns yourself.
There are many emerging tools to implement competitor analysis such as Kompyte and Similar Web, which help you to understand what your competitors are up to in general. Backlink tools such as Monitor Backlinks and Open Link Profiler are emerging as popular tools as well. For a great list of emerging competitor analysis tools for the year 2018, take a look at this well-researched article published by Brand Watch.
How can you implement competitor analysis more efficiently?
As you can see, competitive analysis has a number of implications for businesses to succeed and compete with other businesses. After all, the main purpose of the competitive analysis is to gain an understanding of your strengths, weaknesses, opportunities, and threats when compared with your competitors in a number of areas. However, it is painstaking, cumbersome, and takes a lot of time and resources if you do it alone.
Outsourcing your competitor analysis requirements to an external vendor will help you focus on building your e-commerce store, and implement the knowledge and intelligence you gain from competitive analysis more efficiently.