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It is very rare to think of a product that someone else has not thought of already. You might think that you have invented the next best thing, but as soon as you do some research you realize it was already invented ages ago!
Thankfully, creating a competitive product is not always about inventing something new and amazing. It can be just as effective to offer a familiar product with new features.
What Are Competitive Products?
Competitive products are items that you can verify a market for. And not just that, you need to verify that your competitive product is in a niche that you can actually be competitive in. You might be able to generate interest in your product, but that is not enough. If the market space for your product is too crowded, you may not be able to make enough sales to justify developing the product.
This is where competitive analysis comes in.
What is Competitive Analysis?
In every market, there are many companies trying to attract all the businesses with similar products. This can be a daunting reality to face if you are trying to sell in one of these spaces. It is possible that you will be able to carve out your own space inside of competitive spaces. You will need to offer the right combination of benefits and added value to your customers.
The only way to know if you should develop a product that will be sold in a competitive market is to do a thorough market analysis. This is the means by which you will identify the main market players for your space. You will figure out what strategies you will need to use to market to the customers in this market space. You will define the resources that you will need to leverage to dominate the market.
When you are working with economic analysis, there are two theories that are used to consider whether or not a competitive advantage is present:
1. Market-Based View to Analyze the Competition (MBV)
In this model, you can create a strategic framework that will base company performance on your discoveries about the nature of the structure and competitive dynamics of the industry. This is the most commonly used manner of analyzing a market space because it offers up an itemized resources list that will help define your market clearly.
Porter’s Five Forces Model is commonly used to describe the market using MBV. This process defines the five main forces that add competitive pressure to your industry. These forces will help you to look at the target markets in your space and you will have better information about your launch if you have done this modeling before you start the development of your product.
- Barrier to entry: This is the biggest factor in this kind of market analysis and while it is likely that a high barrier to entry means less overall competition, you will need to think about the amount of money that will be required to enter a space with a high barrier to entry. You may also find that the few players that are already in this space have a stranglehold on the market.
- Supplier: The suppliers that offer materials or other items for sale related to your product can control prices and reduce the quality of products while also setting benchmarks for other participants. An example of this might be a large supplier offering free shipping on all orders and then everyone else in their market space must do the same to keep up.
- Buyer Power: This is the demographics of the buyers that you believe to be your target customer. When buyers cannot afford to spend a certain amount, the overall quality is impacted, the prices across a market can be brought down and competition might become far more intense among businesses in the same market space.
A great example of this is when a product becomes taboo because it is not environmentally safe and a more expensive component is required to be added to a product to make it viable again. This can drive the cost up for creating the item while driving down the cost that people are willing to pay.
- Threat of Substitution: Some products can be at risk to become redundant right off. For many items, cheaper and more sustainable options can replace them. This is also common among technology items due to newer models offering better options for a lower price, or functionality. From this, you can see that an entire product can become outdated right away by new improved products.
2. Competitive Analysis Using Resource-Based View (RBV)
In this model, your framework is made up of information to do with how the internal resources that you will need to market your product can influence your competitive advantage. Your goal with this model is to identify how you will use resources to improve or secure your market position.
- Tangible Assets: These are the physical assets that your company has access to (actual buildings it owns and uses). Others are websites used for their ecommerce platform, and all the equipment needed to make the products themselves. These assets can be a competitive advantage if your company owns them outright.
- Intangible Assets: These are the items that make up your intellectual property from your brand positioning to your work culture, to your customer experience and your brand definition. These resources are much harder to replicate and they can be extremely effective when you are considering the market value of your product.
The resource types that are involved in these considerations are:
- Heterogeneous Resources: These are the skills, competencies, and capabilities of any business. All businesses have a different starting set of competencies that they use to build up a product or a business as a whole. Businesses will always differ in this way as skill sets and other internal advantages for development change and grow in new directions. These resources can make a company unique to a buyer, even if the company is in a space that is competitive and full of similar products.
A good example of this is Apple products. There are many companies on the market that make similar items now, and many of them are cheaper than Apple’s. However, Apple has created its own unique look for each item with its own software platforms. This makes the use of these items much improved compared to competitors in the same market space.
- Immobile Resources: These are the resources that cannot be transferred to another company. Items like branding and eCommerce experience as well as social awareness connections to brand focus can be hard to essentially “copy and paste” onto other company models. This is why branding is so important for selling products of any kind.
Immobile resources can make or break your ability to carve out a niche for yourself in a certain space. You will need to make sure that you consider whether your immobile resources are better or more unique than other big movers in your market. Secondly, you will need to ponder if they can be changed by internal or external forces. You should also identify immobile resources that other market players have on tap and how they are using them to stand out from the crowd.
Lastly, you will need to look at gaps in competitor capabilities and identify resources that you can offer that can fill in those gaps.
Why You Need to Do A Competitive Analysis for Ecommerce Businesses
The current estimate for the number of global buyers in 2022 has increased a surprising near 40%. The shopping reality for many people around the world has been slowly growing more connected with online buying ever since the explosion of Amazon’s model across the world, but the sharp uptick in recent months is due to the pandemic.
Ecommerce market growth is at the forefront of these buying behavior changes and the brick-and-mortar model for sales is likely a dying breed. Many large retailers have responded to these changes by changing their strategy. Many companies are going away from actual stores and moving a lot of their business to online models. This might seem intimidating if you are just now considering entering the ecommerce world. But you should also remember that many companies went bankrupt during the opening months of the pandemic.
While ecommerce might be growing exponentially, the competition in many markets is much reduced when compared to 2019 statistics. Some models are even showing a slow decrease of ecommerce growth for later in 2022.
This means that you will need to conduct the right market analysis with these items in mind if you want to be sure that your business will stand the test of time as the eCommerce market shifts and adjusts to demand.
Your analysis should cover these items:
- Is your market position stable in terms of value proposition and differentiators?
- Is the barrier of entry high or niche?
- Do you know what your consumers expect from your brand?
- Are there market gaps and opportunities for improvement?
- Are you aware of any potential risks and weaknesses in your current marketing plan?
How to Complete a Competitive Analysis
The goal of your Competitive Market analysis is to give you the insights needed to complete your product development and make market decisions. You will also want to find knowledge nuggets that will help you to create a better business plan before you start investing in product development.
Who are your main competitors? Are there various market spaces that you can leverage within your niche, or is everyone competing for the same slice of the pie?
There are many ways that competition can present itself in your market niche and you will need to look at all of the angles to make sure that you understand your market thoroughly before you start creating a business plan for long-term success.
- Direct Competition: These are the brands that sell exactly the same items in the same market with similar features and options. A good example of this kind of competition is the similarity of Xbox and Sony Playstation or Nintendo Switch. To some buyers, they are essentially interchangeable items, which can lead to market saturation.
Direct competition can be fine if there are enough of this type of good that you can still sell your own unique version of it and if the direct competition has not set the bar too high for you to be able to sell and make a profit. You cannot exceed the costs of another supplier by too large a margin or you will lose customers.
Identifying Direct Competition:
1. Use SERPs to see what product queries are being used to find the items in your market.
2. Look at market share for your space with a market analysis tool
3. Figure out who is sourcing products from wholesalers and suppliers that you might also want to use
4. Observe and note any brands that target buyers mention
Direct competition can be easy to notice but indirect competition is harder to identify in some cases
- Indirect Competition: These are the online sellers that are offering a different branding message and a slightly different product and yet they still might be able to fulfill your customer’s needs. An example would be items that are sold in the beauty market. While you might have a really unique makeup that is selling well, another company could come along and develop a skincare line that professes to erase aging and make it unnecessary to buy makeup.
These products are not similar in many ways, but the skincare line could take a lot of your business if it was truly effective. While it is possible that the two kinds of customer bases involved in this example never overlapped, it is worth making note of this kind of competitor and adjusting to try and retain your market positioning despite their product being on offer.
- Replacement Competition: These are the competitors who can replace your product altogether with a completely new item. These disruptive brands can take over an entire market in one fell swoop, making it hard to do anything to stop them from grabbing your consumers and your sales.
A great example of this is Uber, which has made Taxis obsolete in most locations in the US. There is likely nothing that the taxi companies can do to offset this unless Uber goes out of business. The only good replacement competition situation for any eCommerce business is being the replacement business yourself.
2. Complete a SWOT Analysis
This is a great way to figure out how you compare to other businesses in your niche or market space. You will need to isolate a few direct competitors to do this, and then you will analyze their business through the Strengths, Weakness, Opportunities, and Threats model.
Things to consider while doing this:
- Ecommerce website
- Brand position
- Customer experience and service
- Sales strategies
- Marketing plan
- Content on their site(s)
- Shipping model
- Discounting or promo modeling
You will need to ask these questions as well:
- Where does this brand excel?
- Are there intangible assets that you can identify that give them an advantage?
- Are there possible improvements that can be made to the shopping experience or branding of the product?
- What areas have been neglected by this business that could be improved or optimized?
- Can SEO improve this brand?
- What can your company do better based on your resources?
- Can you be substituted by this customer in any way? Do they have access to better resources than you do?
This is where you compare your strengths and weaknesses against those of the other company. You should be prepared with solutions to the possible problems that the other company demonstrates so that you can plan to take over their portion of the market.
3. Analyze Competitor Websites and Customer Outreach
Customer experience weighs heavily in the success of businesses. According to research, consumers consistently report that less than 30% of their needs are met through online sales platforms. This is a huge barrier to customer loyalty and ongoing sales as well as branding.
Your customer experience is essential to your overall business plan and your long-term business success. There are some ways that you can prevent customer experience from causing long-term damage to your success.
- Set Objectives: Make sure that you know what knowledge you need to seek. You should be looking at competitor navigation, their catalog, their listings, the checkout experience, and their shipping policy. You can also examine their buyer’s tools that are related to coupons and other sales bonuses.
- Research Hypotheses: Using this knowledge, you can create a profile of the other company’s weaknesses and strengths. Can you do a better job than they can?
- Research Methods: This depends on your resources but You will want to use benchmarks and other performance metrics to quantify this as well as looking at customer reviews and other qualitative methods.
- Conduct an Evaluation: This is where you tabulate data and set a research timeframe.
- Synthesize Findings: You will take the research data that you gathered and fill in any knowledge gaps, challenge or confirm hypotheses and evaluate alternative design opportunities.
4. Identify and Evaluate Your Competitor’s Market Position
This is the competitive positioning step and it is essential if you want to be able to directly evaluate your business against others in your market space. The difference between your business and others will often be found in value propositions that you can offer that they do not, or in branding opportunities that you are taking that they are not.
To sort out which position competitive brands hold in their market you will need to do these steps:
1. Identify the primary group of customer needs that you are trying to address.
2. Choose a geographic region that you want to examine in detail.
3. Decide if you are going to look at the entire market or just a specific segment of it.
4. Choose a price range to analyze.
5. Figure out what primary benefit the customer will get at each price point you are examining.
6. Sort your competitors related to the product price and primary benefit.
5. Examine Competitor Pricing and Offers
It can be helpful to map the competitors that you are analyzing based on the model of their pricing and their current products on offer. This will show you how much people are willing to pay for different goods from different brands.
It is not just quality and new features that drive these kinds of metrics. People are often willing to pay more for goods that offer convenience like faster shipping for example. Product traceability can also be more valuable to consumers than saving a little bit of money.
Add-ons to sales can make or break a product, so you will need to make sure that you are looking at the extra value options that are being offered by your competitors as well as their products.
5. Learn About the Tech That Your Competitors are Using
Technology is something that we often take for granted. It can be easy to think that technology is available to everyone and that you cannot create advantages through the use of new tech. This is not actually true, however, and your competitors might be using the same kinds of tech as yourself, but not leveraging it as well as you are.
When you are doing your analysis consider:
- What eCommerce solutions does the other company use and can you create a better platform than theirs?
- Do they use plug-ins or custom extensions?
- What support systems are they using such as payment processing tech, email service providers, or 3PL solutions?
- Are they using things like chatbots, AI, or other means of improving customer outreach?
- Can you offer a better online experience to customers through a better technology stack?
6. Make Sure That Your Shipping Holds Up
Shipping can be a difficult part of the eCommerce business model. Being unable to deliver products on time and with reliability is a huge stumbling block for many eCommerce brands. You will need to look at your competition to see if they offer:
- 2-day shipping
- Same day shipping
- Free Shipping
- International ordering
- Standard shipping
There are logistics providers who can help you with dropshipping and other needs related to dispersing products to customers. You might be able to offer all of these services with better shipping quality or turnaround times this way. For those with brick-and-mortar locations, look into curbside pick-up solutions to help with fulfillment costs.
7. Review Social Media for Another Environment for Competitive Analysis
Social media can be a very important tool as you do market analysis. People are willing to review and critique businesses on social media far more often than you might think.
On each platform you should do the following:
- Read the latest reviews that might show weaknesses that you can improve upon.
- Check out how the business responds to consumer complaints.
- Search using hashtags to see other commentary types besides reviews.
- Look at Pages to Watch and see how other competitors are handling these concerns.
- On sites like Instagram, look at ad styling and branding and check out which influencers they are working with.
- On Reddit, look at the cult following pages and subreddits that mention your competitors.
8. Use Tools to Stay Ahead of Your Competitors
Finally, plan on using these tools discussed here to continuously evaluate your market space and competitors. You can track all of the changes in brand positioning and online presence that your competition chooses to implement. This will make sure that you stay one step ahead of their changes.
Always use SEO tools and social media to gauge changes before they affect your bottom line. Things like Google Alerts can keep you up to date on brand mentions and influencer trends. You should also leverage tools that track internet traffic volumes and sources.
What to do Next After Your Competitive Analysis
Now that you have learned all about creating the perfect Competitive Analysis for your market and your competitors, you are ready to take the next step! Now that you know what you need to do to create the perfect eCommerce business, it is time for you to move on to Chapter 4: 13 Must-Know Tips For Your Online Business Success. Developing your business is where the fun, creative part of the process comes in, and you are ready to invent the perfect eCommerce business from the ground up!