How To Set Yourself Apart From The Competition: Your Guide To Competitor Analysis (Part 1)
Think about your business. Now think of how many competitors you have to compete with. Now, think of what you know about them and their operations. Now, what if we can give you the tools you need to analyse them and see how you stack up against them?
If you've ever been to business school, you've probably heard the term "competitive analysis." Many of us have learnt what they are, and some of us use them on occasion in our employment.
In this post, we'll look at how an analysis of the competition can help brands track their e-commerce performance.
What Is Competitive Analysis?
Every market contains multiple companies marketing identical items or services to the same buyer category. A study of your competition assists in identifying the major market participants, determining their success tactics, and identifying resources your organisation may use to conquer the industry.
There are two main ideas in economics on how businesses gain an advantage:
According to the Market-Based View (MBV) strategy framework, a company's performance is exclusively decided by the industry's structure and competitive dynamics.
Porter's five forces model emerged as a result of this, and it depicts the five key forces that provide competitive pressure to your sector. Analysing these forces can help you identify your target audiences and plan for launch.
High entry barriers indicate lesser inter-industry competition, but they can also indicate a monopoly. A difficult-to-enter industry would most likely have numerous established firms with a substantial market share.
Supplier Power – Top suppliers (merchants) can regulate prices, degrade product quality, and set benchmarks for other participants.
Buyer Power – In the opposite direction, strong buyer demography can influence markets by demanding higher product quality, pushing down prices, or compelling industry players to compete with one another.
Substitution is a real threat. Some items are at risk of becoming obsolete or being replaced by less expensive, more sustainable, or trendier alternatives.
The Resource-Based View (RBV) strategic framework is the second most common theory of competitiveness. This paradigm is more concerned with determining how internal resources may contribute to a company's competitive advantage.
Your goal when conducting competitor research with RBV is to determine how each company uses its resources to secure/improve its market position.
RBV examines two sorts of resources:
1. Tangible Assets
All of the company's tangible assets, such as equipment, money, brick-and-mortar sites, ecommerce website, mobile application, and so on. Because any competitor can purchase equivalent assets, physical assets provide a smaller competitive advantage.
2. Intangible Assets
Intellectual property, brand positioning, customer experience, work culture, and other intangible assets generated by the company through time Intangible resources are more difficult to reproduce (if not impossible). As a result, they offer a long-term competitive edge.
Furthermore, RBV categorises the resources into the following:
Heterogeneous Resources – each company has a unique set of skills, capabilities, and core competencies. Even businesses in the same industry begin with a varied set of resources. As a result, organisations can differentiate themselves by pursuing competitive strategies based on their strengths. According to RBV, heterogeneous resources assist organisations to gain a competitive advantage even when they sell comparable products.
Immobile Resources – In the short term, certain business resources cannot be easily transferred to another organisation. You cannot, for example, "copy" another company’s brand and ecommerce experience and "paste" it into your store to achieve the same results.
The majority of intangible company resources – internal knowledge, the product development process, branding, and so on — are immobile.
As a result, rather than just copying what others are doing, you should analyse how your intangible immovable resources might be used to surpass the competition.
To summarise, competition analysis is a multifaceted process that seeks to investigate:
What are the external and internal forces that shape the competitive landscape?
How they use their assets to make themselves stand out
Which resources do you have (or do you need) to cover those gaps?
Where are the gaps in the capabilities of competitors?
What resources do different players have?
Who are the market's primary movers and shakers?
Why is competitive analysis important?
In 2020, global online retail sales increased by 27.6% to $4.2 trillion, while total global retail sales decreased by 3%.
A pandemic-induced shift to online purchasing among consumers, who previously favoured brick-and-mortar purchases, drove much of the ecommerce market growth. Many retailers were also prompted to create or expand their online presence as a result of the foregoing.
Simultaneously, other retailers were compelled to declare bankruptcy.
Many ecommerce-only enterprises, on the other hand, have witnessed a significant increase in revenue. Businesses selling on Amazon reached $4.8 billion in worldwide sales from Black Friday to Cyber Monday in 2020, an increase of more than 60% over last year.
This is what the data tells us. The retail market saw a significant reshuffling, with a significant portion of revenues going online. It's not clear how long this change will last. However, current market forecasts indicate that the ecommerce market would slow in comparison to 2020, growing by only 14.3% in 2021.
As a result, understanding how to conduct competition analysis becomes critical for effectively entering a rising yet tumultuous and highly competitive market:
Identify market gaps and areas for improvement.
Discover potential dangers and flaws in your marketing strategies.
Determine the cost of entrance into the target market/niche.
Develop your market positioning in terms of value propositions and differentiators.
Determine the basic consumer expectations established by others.
Completing a competitive analysis is only the beginning of your strategy planning. Don't let your efforts go to waste. Use the information you've gathered to help you make smart decisions.
Not sure where to begin? A SWOT analysis, in which you examine your strengths, weaknesses, opportunities, and threats, might be beneficial. This can assist you in sorting through the facts gathered during your competition study and identifying actionable next actions for your company. The good news is that we have that very article in store as a follow-up to this one. Stay tuned for that!
More articles please read Beginner's Marketing Strategy: Everything You Need To Develop Your Own Today