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.
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.
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.
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.
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.
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.
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.
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.
Start by figuring out who your main competitors are and look for:
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.
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?
Next, evaluate what your competitors do well and where they fall short.
Consider their:
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.
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.
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.
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.
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.
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:
Give yourself a helping hand by working with these analysis and research tools:
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.