Ecommerce Budget Planning: How To Conduct In-Depth Ecommerce Competitor Analysis and Market Research

As the saying goes, “Keep your friends close and your enemies closer.” While we’re not talking about enemies here — we’re talking about your competitors — the same rule applies.

By keeping a close eye on where your competitors are excelling, you can pinpoint opportunities in the market and set goals for business success. With this knowledge, you can plan a budget that not only aligns with your business goals but also capitalizes on growth opportunities.

Explore the significance of these insights and discover practical steps for conducting thorough competitor analyses and market research. 

Why Market Research Is the Crux of Budget Planning

Competitor analysis and market research provide the context you need to create a budget that’s strategic, realistic, and aligned with your ecommerce goals and market realities. Without this foundation, you risk misallocating resources and missing out on key growth opportunities.

This kind of in-depth research can help you in several ways.

Understand the Competitive Landscape

Analyzing your competitors gives you valuable insights into their product offerings and pricing strategies, including the digital marketing tactics they’re using successfully and the areas in which they might be falling short.

You might notice, for example, that Instagram posts with user-generated content (UGC) earn your competitors the bulk of their customer engagement. With that knowledge, you can add more UGC to your own social strategy to capture some of that market.

Set Strong Business Goals

By researching your market and competitors, you can benchmark your performance against industry standards and set achievable ecommerce goals for growth and revenue. This helps you avoid overspending in areas where you can’t realistically compete. 

Identify Cost-Effective Strategies

Studying your competitors can reveal the marketing channels that are working well in your industry, pricing strategies that resonate with customers, and technologies and tools worth investing in. These insights enable you to focus your budget — however big or small — on tactics with proven results.

Anticipate Market Trends

In-depth research can uncover emerging trends before they blow up. Staying ahead of the game helps you prepare for potential disruptions, seasonalities, or shifts in customer behavior. Staying at the forefront of the industry offers a whole host of benefits, from launching your brand into viral status or helping you allocate resources to new opportunities.

Optimize Resource Allocation

Understanding your competitive position in the market means you can invest more in your unique strengths and address the weaknesses that are putting you at a disadvantage. Effective resource allocation is key to trimming your margins, so by analyzing your competitive position, you can save money and avoid wasting your budget on strategies that aren’t going to succeed in your market.

How To Conduct an In-Depth Competitor Analysis

Ready to discover what your competitors do well — and, more importantly, what they could do better? Here’s a step-by-step guide to ecommerce competitor analysis. 

1. Identify Your Competitors

Start by figuring out who your main competitors are and look for:

• Direct competitors: Companies that sell the same products or services to the same customers.
• Indirect competitors: Brands that sell different solutions to the same problem. 
• Substitute competitors: Brands that provide alternatives that customers might choose instead of your offerings.

You probably already have some idea about who your main competitors are, but you can also search online, check industry reports, and ask your customers who else they considered buying from.

Think outside the box, too. It's not just about spotting the obvious competitors. 

Let's say you're running a coffee shop. Sure, other local cafes are your direct competitors. But don't forget about Starbucks and the smoothie bar down the street. They're competing for the same "I need a pick-me-up" customer. Think through all the competitor options in your area and on the digital market — even energy drink companies could be considered substitute competitors.

2. Gather Information

After you’ve identified your competitors, it’s time to start collecting information about them. You’ll want to learn about their product offerings, pricing strategies, marketing tactics, and customer reviews and feedback. You can usually get this information from their websites, social media accounts, and customer review profiles.

Consider the coffee company again. What kind of beans are their competitors using? How much are they charging for a latte? Are they all over Instagram with fancy latte art? What are customers saying about their service?

3. Analyze Strengths and Weaknesses

Next, evaluate what your competitors do well and where they fall short.

Consider their:

• Strengths: What advantages do they have? Do they have a strong brand or a particularly loyal customer base?
• Weaknesses: Where do they struggle? Do they have poor customer service or high prices?

This kind of analysis enables you to pinpoint where you can compete more effectively. A large clothing retailer, for example, might offer a wide range of products that attract a broader audience, but they may lack the personal touch in their customer service. 

4. Understand Their Strategies

Look into the strategies your competitors use to attract and retain customers, including their marketing channels (like social media and email), sales tactics, and customer engagement methods. Understanding how they promote their brand and products can help you identify what works and what doesn’t.

For example, you might discover that a close competitor creates valuable content on their blog about skincare routines, ingredient benefits, and tips for different skin types, which not only drives traffic to their website but also positions them as experts in the skincare field. You can replicate this strategy to compete or develop alternative posts to differentiate your brand.

5. Compare Value Propositions

Every business has its unique selling point. Maybe one competitor is all about being eco-friendly, while another focuses on being the cheapest option on the market. Knowing your competitors’ core value propositions helps you carve out your own niche. 

Start by determining how your competitors position themselves in the market. Ask yourself what unique value they’re offering and how they communicate their benefits to customers. Then, use that comparison to refine your own value proposition. 

6. Monitor Market Trends

Keep an eye on industry trends and consumer behavior changes. Specifically, look for new technologies, customer preference shifts, and emerging competitors. Is oat milk suddenly all the rage? Are people going crazy for cold brew? Are customers clamoring for the new s’mores-flavored option? Staying informed about these trends can help you adapt your strategies accordingly. 

7. Review and Update Regularly

Industries change all the time. Maybe that competitor who was struggling last year has upped their game. Or maybe a new player has entered the market. 

Competitor analysis isn’t a one-time task. Instead, you should regularly review and update your analysis to stay informed about market changes so you can remain competitive and adapt quickly to looming challenges.

8 Ways To Conduct In-Depth Market Research

Ecommerce competitor analysis is just one part of market research. It’s crucial to understand not only who you’re batting against but also what’s going on around you.

Here are some steps you can take to do that:

1. Define your business goals: Determine exactly what you want to learn from your market research. Are you looking to launch a new product? Do you want to understand your customers better? Do you want to know more about your competitors? 
2. Identify your target audience: Get clear on who your ideal customers are. Think about their age, gender, interests, and shopping habits. 
3. Analyze market trends: Use tools like Google Trends to see what’s popular in your industry. Are certain products or features becoming more in demand?
4. Conduct keyword research: Use tools like Google Keyword Planner to see what people are searching for related to your products. These insights can give you ideas for new products or help you better describe existing ones.
5. Survey your customers: Launch online survey tools or email questionnaires to ask your existing customers what they like and don’t like about your products or shopping experience.
6. Analyze your website data: Use tools like Google Analytics to see how people are interacting with your site. Which products are they looking at most? Where are they dropping off? 
7. Keep an eye on social media: See what people are saying about your brand and products on platforms like Instagram and TikTok to access real-time feedback on what your customers are talking about and interested in. 
8. Stay up to date with industry reports: Read reports and studies about your industry to understand bigger trends and changes. 

Top Tools for In-Depth Competitor Analysis and Market Research

Give yourself a helping hand by working with these analysis and research tools:

• Analytics tools: Use Google Analytics for detailed data on website traffic, user behavior, and conversions. 
• Keyword research tools: Use Keyword Planner, Semrush, or Ahrefs to find keywords your customers are using and phrases your competitors are ranking for. 
• Social media tools: Use Facebook, TikTok, and Instagram Insights to get metrics on post reach, engagement, and follower growth. 
• Competitor analysis tools: Use SimilarWeb and Alexa to estimate traffic and get audience insights about your competitors. 
• Survey tools: Use SurveyMonkey, Google Forms, and Typeform to create and distribute online surveys to your customers. 
• User testing platforms: Use UserTesting and Hotjar to get heatmaps, recordings, and video feedback from your website visitors. 
• Market research databases: Use Statista to get the latest statistics and market data on various industries. 
• Trend analysis tools: Use Google Trends and Trend Hunter to find trending keywords and get curated reports on emerging topics. 

Competitor Analysis and Budget Planning Go Hand in Hand

Insights from competitor analyses and market research help you identify priority investment areas, set business goals, and optimize spending across your marketing strategy, product development, and operations. With this knowledge, you can make informed decisions about where to put your money, from pricing strategies and inventory management to technology investments and market expansion.

These insights also give you valuable context and performance benchmarks for justifying budget requests. Ultimately, using competitor and marketing insights in the budget-planning process helps you stay agile, responsive to market changes, and well-positioned for success in a highly competitive landscape.