E-Commerce

Competitor analysis: How to analyze your competition and find your competitive strategy

Fatih-Kağan Taşkoparan

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Competition stimulates business, as the hackneyed phrase goes. In fact, a competitive situation on the market is not necessarily a bad thing for you, because where there are competitors, there seems to be demand - and therefore the potential to earn money.

But too many competitors spoil sales. In order for you to secure any market share at all, especially as a newcomer to the niche, the market segment in question should not already be completely overcrowded. An in-depth competitor analysis is therefore an essential measure to find out what the competitive situation is like and how to find your clientele.

You can also find your place in the market in competitive niches. But the more competition there is, the harder you have to work on a unique competitive strategy to set yourself apart from your competitors. You can find out how to do this here.

What is a competitor analysis and what are its objectives?

Competitor analysis is not a standardized procedure, although there is a vast amount of standard literature on the subject. Business students all over the world are familiar with Porter's Five Forces model, for example, which breaks down the competitive situation based on five influencing factors:

  • existing rivalry
  • new competitors
  • Supplier:inside
  • Customers
  • Substitute products

Even if the model certainly seems a little dry, it quickly sharpens the awareness that a competitor analysis should not only deal with direct competitors. The aspect of substitute products in particular is often forgotten. Innovative start-ups often occupy a niche, but ignore the fact that their product can easily be substituted by existing solutions.

A holistic competitor analysis must take these subtleties into account. Above all, do not lose sight of these key questions and objectives:

  • Who are my (biggest) competitors?
  • What other factors influence the market?
  • Where is the niche that I can occupy?

When asking about competitors, depending on the market segment, you usually cannot list all the companies you are competing with. Therefore, limit yourself to identifying different types of competing companies.

In addition, the goal of your competitor analysis should be to determine the other factors that have a significant influence on your success in addition to the actual internal rivalry in your industry. These are suppliers in particular, but also customers.

Finally, you need to work out which niche you can occupy with your business. Even in highly competitive sectors, there is often a gap that can be filled with a smart approach. This can go hand in hand with a "pointed positioning", i.e. focusing your store on a specific target group with highly specialized needs instead of addressing a broad audience.

What are the differences between market, competition and competitor analysis?

The terms competitive analysis and competitor analysis can be understood as synonyms. Sometimes specialist literature and wikis treat competitor analysis as a sub-area of competitive analysis.

In both disciplines, the aim is to identify the most important directly and indirectly competing companies (competitor analysis) and to work out other factors influencing competition (competitive analysis).

The competitive analysis can be subordinated to the market analysis. In the course of a market analysis, in addition to examining the competitive situation, you also look more closely at the special features of a market. Such market peculiarities can relate to demographic aspects or current trends, for example. You will also examine personas and target groups and carry out sales and distribution analyses.

When founding a company and afterwards: Why regular competitor analyses are so important

Some entrepreneurs develop a good idea, come up with an apt name and are already working on the website design in their minds. But such castles in the air quickly collapse if they underestimate the competitive situation.

If you want to become active in a certain market segment, you should therefore not start with an already finished idea and try to force it into a competitive analysis. The result could be that you want to implement your idea exactly as planned and overlook important obstacles and risks.

However, the need for a competitor analysis is not limited to the period before the company was founded. Even if you have been running your store or service successfully for years, it is always worth carrying out a competitor analysis so as not to miss out on changing conditions and transformation processes.

In dynamic e-commerce in particular, it is not only new competition that is growing rapidly, some of it international. Trends in brand communication can also suddenly have a massive impact on your company's success - see, for example, the rise of the TikTok marketing.

Of course, you don't have to chase after every hype, especially if certain developments don't suit your business model or your clientele. But a precise analysis of the situation is always important so that you can adjust the direction of your business accordingly and are not flying blind.

What sources can you use to gather information for your competitor analysis?

You can easily start your search for competitors on Google. However, instead of searching for "well-known companies in industry XY", you should make search queries that are as precise as possible, such as those your customers would enter:

  • "Buy XY (online)"
  • "XY online store"
  • "XY Comparison"

This allows you to quickly find companies and stores that are vying for the same customers. Please note, however, that this is an SEO competitor analysis that does not reflect the entire market spectrum. You will only find competitors that are ranked in the SERPs on Google. In e-commerce, however, these are usually the most important players.

You also need to think outside the box and get a little creative when looking for substitute products.

Find out as much information as possible about your competitors in the following areas:

  • Pricing strategy (low vs. high)
  • Design of the products (simple vs. unusual)
  • Sales strategy (own store vs. wholesale)
  • User-friendliness & service (low vs. high)

Much of this is to a certain extent subjective in nature and cannot be 100% determined. At the same time, you should refrain from estimating sales figures based on public balance sheets or editorial reports. This usually leads to data that is of little use and will hardly help you to correctly assess your competitive situation.

You can find out how to proceed step-by-step in our competitor analysis checklist.

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