The term “Competitive analysis” probably rings a bell if you have ever attended a business school. Many of us have learned what they are and some of us occasionally do use them in their jobs. In this article, we will look at how useful a competitive analysis can be for brands trying to monitor their e-commerce performance.
What is a Competitive Analysis?
Definition of a Competitive Analysis
A competitive analysis (or competitor analysis) is the process of identifying and evaluating your competitors, understanding their strengths and weaknesses. It helps you have a full picture of your performance in the market, take competitive advantages, identify risks, and measure how this performance evolves over time.
An e-commerce competitive analysis is not fundamentally different. It does, however, requires a different approach to collect and evaluate the data. Brick-and-mortar market research usually involves many store visits and consumer surveys. On the other hand, an e-commerce competitive analysis will take you through online metrics such as real-time price changes, keywords search performance, digital shelf, and online product ratings.
Who conducts the analysis and for whom?
More often than not, the Sales and Marketing departments are in charge of analyzing the market. They usually have a favored position to connect to external sources such as clients, partners, wholesalers, and retailers. It’s good practice to have these teams collect and analyze the data.
The results of a competitive analysis, however, should pay dividends far beyond these two departments: strategy, product development, customer support or advertising (to name a few) all have good reasons to read and learn the conclusions of a thorough competitive analysis.
There are various ways to evaluate and measure the strengths and weaknesses of your brand’s competitors. The final goal of every competitive analysis is to gain a full picture of the market performance so that the brands can better manage business strategy in the short and long-term. We have identified the 4 main components that brands need to consider when conducting a competitive analysis.
The 4 main components in the competitive analysis
General price tiers
Looking at your competitors’ prices has always been a good way to learn about their go-to-market strategy, including the market segments that they are targeting and the brand positioning that they are reaching for. It provides your brand with more context to make better strategic decisions, such as building products that fit left-out segments or modifying your strategy to increase your market share.
What’s different about e-commerce is that pricing is the single most significant contributor to conversion rate. Not only are customers more price sensitive when they shop online, but online retailers amplify this by favoring competitively-priced products in their search results. Owning the entry-level segment online is more important in e-commerce than anywhere else.
Day-to-day price monitoring
Many e-tailers, including Amazon, apply dynamic pricing to make their prices appealing and competitive while capturing as much profit as possible. This makes price monitoring both crucial and tricky as prices change on a daily (or sometimes hourly) basis.
The pricing history of products contains a lot of information about the sales performance. Comparing the evolution of competing products can help you understand which ones are underperforming or approaching end-of-life. Steep discounts are usually a sign that the retailer is concerned about exhausting its inventory, while stable prices are a mark of a tightly controlled (or very successful) distribution.
When evaluating the health of a brand, look for the average online-price-to MSRP delta and the frequency of discounts.
When conducting the competitive analysis, ask the following pricing questions:
- Which market segments are your competitors targeting? What pricing strategy are they using?
- Which brand owns the entry-level segment?
- Which retailers are driving the market up or down?
- How volatile are the prices of each brand?
- What is the average MSRP delta of each brand? (1 – (offered price)/(MSRP))
Search performance and the digital shelf
Shelf space is a key indicator in traditional retail and all brands involved in bricks and mortar distribution usually monitor it closely: the impact of shelf real-estate on sales and brand image is paramount. This stays just as true in e-commerce, where real-life shelves have been replaced by the digital shelf: the position in search results on e-commerce sites.
The first page of results is where all efforts should be concentrated. Just as in the retail world, there is a strong correlation between the share of the brand’s products on the first page of search results and the percentage of sales captured by that brand. Your count should include Sponsored listings (like the ones bought through Amazon Advertising).
The first step to measure your share of the digital shelf is to know where to look. A good place to start is the search results for category-specific keywords for the top e-tailers in your market. For example, if you are in the business of portable Bluetooth speakers, good keywords to lookup may be “portable speaker”, “wireless sound system” or “bluetooth speaker waterproof”.
For each site and each search terms, count the share of each brand and work with averages. A more advanced share of shelf calculations may include looking into the exact position of each result and weighting the averages. The goal is to keep the measuring consistent to be able to monitor the evolution over time.
These are a few critical questions regarding digital shelf performance:
- What are relevant or frequently used search terms for the category?
- How many of your products appear on the first page with high rankings?
- How many results appear on the first page are your competitors?
- Which brands are sponsoring their listings?
- What is the corresponding share of results for each brand?
Products reviews and ratings
It's common to find a best-selling product on Amazon that has plenty of customers reviews and product ratings. A high number of reviews is the most obvious sign of a significant sales volume. Some products with exciting features or strong brand influence can gain a marginally higher number of reviews.
Good online feedback from verified buyers is free marketing. It establishes trust, which is essential in e-commerce. Analyzing products reviews averages of your brand’s products and your competitors’ gives you an overview of the market’s appreciation for each brand.
Additionally, diving into the detail of reviews can reveal which product values are appreciated and which are not. It is a good indicator that contributes to the future product development and products’ communication strategies to the market.
Finally, it is good practice for a brand to answer to product reviews where possible (Amazon for instance). It helps alleviate customer concerns following a bad review, as well as to amplify the reach of positive product reviews.
Some critical questions while analyzing online reviews are:
- How many reviews were posted for each brand?
- What is the average of all ratings per brand?
- What features buyers like/don’t like about your product?
- What are the favorite features that buyers like about your competitors?
- Which brands are doing a good job of addressing reviews (where possible)?
Keeping inventories stocked is obviously crucial in e-commerce. For buyers that are not looking to buy from a specific brand, a product being out-of-stock is the assurance of a sale lost to a competitor. Availability also has an impact on search rankings: the algorithms of some retailers avoid displaying products with low inventories and favor similar results with no risk of shortages. In some cases, past shortages can durably impact the position of a product page in search results.
Monitoring the share of problematic stock statuses (out of stock, limited inventory, shipping at a later date…) for each brand is a good performance indicator to include in your competitive analysis.
Finally, the raw number of retailers that distribute each brand is a factor to take into account: while having an exclusive online distribution may make sense in some specific cases, most brands can profit from being assorted at a large selection of retailers. For each of the products in your analysis, get an estimate of how many e-tailers assort each of them.
While evaluating product availability channels in e-commerce, think of these questions:
- How many e-tailers distribute each product on my market?
- How many stock issues does each product have?
- What was the availability ratio of each brand over the last month?
Staying well aware of the market competition truly matters. We have identified the four main components that brands need to include when conducting a competitive analysis. To gain actionable insights, brands should set a ranking/scoring system for each of these components. The indicators for each component need to be constant, as well as the scope of the analysis (brands and retailers monitored). In addition, the analysis should be done regularly to stay updated with the overall market situation and quickly identify potential opportunities along the way.
Collecting data manually in these four components could be painful. BlueBoard monitors thousands of products at 3000+ online retailers all over the world and can help you gather the data you need in no time! We help you make the best e-commerce decisions.