How to Create a Competitive Analysis (and SWOT) for Your eCommerce & Dropshipping Business

Building a successful eCommerce and dropshipping business is easier said than done. There’s lots to think of—juggling the in’s and out’s of inventory, marketing, logistics, shipping, and customer service can be very overwhelming.

It certainly doesn’t help that the industry is booming, and there is so much competition across seemingly any niche. And as Sun Tzu’s “The Art of War” says—know thy enemy.

This means prioritizing competitive analysis as a critical element of your business success.

Competitive analysis, or competitor analysis, involves collecting and analyzing data about other businesses in your niche. You can use this information to take your business strategy to another level and make the most of emerging opportunities.

Along with detailed market research, you will then be more equipped to make well-informed and evidence-based decisions.

On this page

• Reasons to conduct competitive analysis in eCommerce
• Key elements of competitive analysis
• Tools and techniques for competitive analysis
• Creating a competitive analysis framework
• Common mistakes to avoid in competitive analysis for eCommerce & dropshipping businesses
• Incorporating competitive analysis into dropshipping strategies
• Staying ethical in your practices
• Key Takeaways

Reasons to conduct competitive analysis in eCommerce

There’s no doubt that eCommerce is a thriving niche. In the US alone, the eCommerce sector generated $727 billion in revenue in 2023. There are currently more than 14 million eCommerce websites in various niches, including B2C, B2B, D2C, and C2C models.

To say that eCommerce is a crowded niche would be an understatement. It’s overflowing with go-getter entrepreneurs and business owners all vying to be the next big thing.

Given the sheer number of solopreneurs, startups, and large enterprises in this niche, competitive analysis is imperative for the survival of new and old eCommerce and dropshipping businesses. These days, it is basic due diligence for your eCommerce business plan because it will tell you what you need to do and, more importantly, what not to do for continued success.

Success and viability come to those who perform thorough competitive analysis because it helps you:

1. Understand the market landscape

Competitive analysis includes deep market research. It allows you to study your competitors for the products or services they sell, their business model, and their triumphs and failures.

When you have a holistic overview of the market, you can learn the following:

• What sells
• What does not
• The level of demand for a new product or a feature that you can sell
• What mistakes your less successful competitors are making
• What strategies your successful competitors are using

These key findings can guide your business strategy, fortify it, and ensure it will always be data- and value-driven.

Studying the current market is even more critical if you’re launching a new eCommerce business. You need to know how best to capture your audience and sell your products or services. You can also simplify your internal processes, such as product selection, audience segmentation, etc.

Existing businesses can benefit from continued market research, too—you can tailor your products to suit customer demands, introduce new products, or phase out items that don’t sell.

Most importantly, competitive analysis gives critical insights into how to crack a particular market and grow your business even when you’re selling a novelty product. 

SaleHoo Market Research Lab is an excellent tool that will help you find the most profitable, trendy products to sell to our target market. You will find sales trends, competition stats, and ideas for hot new niches to leverage for continued success. Its trend graphs also identify items whose popularity is waning so you can mitigate the risk of overstock.

2. Uncover your key competitors

Not all eCommerce sellers in the same niche are your competitors. To identify your direct competition and segregate them, you need to perform a competitor analysis.

You will learn about their pricing, shipping, refund policies, tech stacks, social media strategies, and more. These are crucial details that can help you improve your existing internal and external workflows.

In addition, you can identify potential competitors who may give your business a run for your money in the near future.

You might also want to consider doing a SWOT analysis at this point, which in the context of eCommerce, is defined as a store's strengths, weaknesses, opportunities, and threats. It helps online businesses understand what they're good at, what they need to improve, what chances they have to grow, and what challenges they might face. It's like taking a closer look at your online shop to see what's going well and what could be better, so you can make smarter decisions to succeed in the online world.

To create a SWOT analysis for an eCommerce business:

1. Identify strengths: Think about what your online store does really well. This could be things like a user-friendly website, unique products, or excellent customer service.
2. Recognize weaknesses: Consider areas where your business may be lacking. This could include issues like slow website loading times, limited product selection, or difficulties with shipping logistics.
3. Explore opportunities: Look for potential areas of growth or improvement in the market. This might involve expanding into new product categories, targeting specific customer segments, or capitalizing on emerging trends in ecommerce.
4. Assess threats: Evaluate external factors that could negatively impact your business. This could include things like increased competition, changes in consumer behavior, or economic downturns.

By conducting a SWOT analysis, ecommerce businesses can gain valuable insights into their current position in the market and develop strategies to maximize strengths, address weaknesses, seize opportunities, and mitigate threats.

3. Identify market trends, purchasing habits, and more

eCommerce is a dynamic industry where trends and consumer behaviors shift and change seemingly overnight. You need flexible business operations that account for the fast-changing nature of the industry and can accommodate last-minute alterations. But to make this happen, you need to identify current market trends and forecast your customers’ purchase preferences.

By studying historical data, competitive analysis enables you to make near-accurate market predictions. You can customize your sales and marketing strategy according to your findings.

So, it is undeniably a valuable business process.

To sum it up, remember that competitive analysis is much more than a simple scan of your competitor’s website or social media accounts. It’s a strategic process that requires planning and resources to be executed.

Key elements of competitive analysis

Before you create a market research and competitive analysis framework, outline the basic elements that must be a part of your strategy.

These include:

Analyzing competitor product offerings

eCommerce and dropshipping are all about selling products, and they should be at the front and center of your business strategy.

You must take the following into account:

• Product range - The range of products your competitors sell may be directly related to the size of their business and supply chain. It is important to know how many units per item they sell in real time. This will help you optimize your own inventory and rightsize your catalog to keep up.
• Pricing strategies - Various pricing strategies can work for eCommerce, such as introductory, cost-linked, dynamic, and more. Studying your competitor’s pricing strategy will tell you what works best in the market and your niche. This information is especially valuable if you’re new to the game or cannot yet break even.
• Unique selling propositions - If it’s not apparent in their branding, a competitive analysis can help you uncover the USP of other enterprises trading in the same products. You can cross-check whether they are generic or drive tangible value for your shared audience. It can also be a reference point for new eCommerce businesses to position their products more advantageously.

Examining Competitor Marketing Strategies

Another critical factor to consider is your competitor’s marketing and advertising tactics.

Look closely at the following:

• Advertising channels - In the digital age, there are more advertising channels than ever, but not all of them yield the same ROI. Look at where your competitors are most active to streamline your own strategy and optimize your advertising budget.
• Social media presence - Monitor activity on social media to see if they’re running ads, hosting contests or giveaways, and how they are engaging with their followers. Social media is also an excellent source of customer reviews.
• Content marketing - Content marketing is a cornerstone of digital marketing, and studying your competitors will tell you what’s working (or not) for them. You can take care to follow suit or avoid the same mistakes.

Assessing Customer Reviews and Feedback

You simply cannot overlook the importance of data for your business success.

• Gathering insights from customer opinions: Discover how your competitors collect customer reviews. Are they using emails, surveys, or something else? If customers proactively provide feedback, that implies your competitors are doing something right. If not, you have a chance to swoop in and snatch them for your business.
• Identifying strengths and weaknesses: You should also do a SWOT (strengths, weaknesses, opportunities, and threats) analysis of publicly available feedback to understand what they think of your competitor’s products.

Studying Competitor Websites and User Experience

Lastly, analyze your competitor’s website. eCommerce businesses rely entirely on their digital presence, and any flaw in the website could lead to struggles in meeting revenue targets and other business goals.

For a holistic understanding of an eCommerce website, look at the following:

• Website design and functionality: Closely consider the design, branding, user experience, etc. Determine if they used any SaaS solution, like Shopify, or if they developed the site themselves. It could teach important lessons about how to structure your own website or change it for the better.
• User interface and navigation: Is there something your competitors are doing that you can learn from? A successful eCommerce website should have flawless UI/UX that’s easy to use.
• Mobile responsiveness: See if your competitors’ websites are optimized for mobile devices or if they have a dedicated app to make the purchase experience easier for customers. Billions of consumers browse on their smartphones and other mobile devices, so you must prioritize them.

Tools and techniques for competitive analysis

Competitive analysis is an umbrella term that comprises multiple discrete analytical processes for various elements of an eCommerce business. This is why you need to invest in dedicated solutions to help you conduct research and analysis of each of these processes.

Here are some of the solutions you can use:

Utilizing eCommerce and dropshipping analytics platforms

Most eCommerce website builders include built-in analytics features, but these are usually for your own business. To perform a broad spectrum competitive analysis, you will need third-party solutions, such as Google Analytics, Shopify Analytics, SaleHoo Dropshipping Analytics dashboard, etc.

For example, SaleHoo has enterprise search software, a business intelligence toolkit, and drone analytics to study your competitors. The platform also makes it easy to glean insights from its analytics tools through advanced data visualization capabilities.

So, choose a dedicated analytics solution that fits the requirements of your eCommerce or dropshipping business, depending on your budget. Some of these analytics platforms can be used for free, but paid solutions provide more actionable results.

What’s in it for you?

You can extract valuable insights to understand your competitors better. This is the end goal of any competitive analysis process.

Social media monitoring tools

Keep an eye on your competitor’s social media activities if you want to learn about their marketing strategies. Social media monitoring tools let you keep watch of your competitors’ social presence.

Most of these tools crawl platforms like Meta, Instagram, TikTok, etc., for mentions of brand names and identify hashtags, trends, keywords, and URLs that your competitors are using. These tools also analyze engagement metrics like views, comments, shares, etc.

Advanced social media monitoring tools powered by Natural Language Processing (NLP), artificial intelligence (AI), and machine learning (ML) can also perform sentiment analysis.

What’s in it for you?

The data you collect from these tools helps you learn what customers think of your competitors and how other brands engage with them. You can reverse engineer your successful competitors’ strategies if you have a weak social media presence.

SEO analysis tools

These tools analyze SEO performance and identify strengths, weaknesses, and scope for improvement. You can study your competitor’s SERP rankings, their web pages’ performance for common keywords, how search engines view the website, and more.

Instead of targeting the same keywords without a set strategy, you can identify what your competitors are doing and how they maintain their rank to develop strategies to get ahead.

What’s in it for you?

You can work on overall business performance with the help of sound SEO management.

Customer surveys and feedback

Lastly, you can turn to customers to understand their buying preferences, demands, and expectations. There are multiple ways to do this, such as surveys, emails, or forms. You can ask them about which competitor brands they prefer and why.

Dedicated customer feedback solutions, like SurveyMonkey, are linked to an analytics dashboard, and you can study the outcome of your campaign without additional effort.

What’s in it for you?

Understanding customer preferences and expectations is vital to surviving in a competitive eCommerce niche. There’s nothing better than gathering data directly from your own audience and tailoring your strategies with them in mind.

Creating a competitive analysis framework

It is best to start from scratch when doing competitive analysis for the first time. Once the checks and balances are in place, you can use the framework to conduct all your future analyses without wasting time on the groundwork.

Get started with these:

1. Defining your objectives

There are multiple reasons to conduct a competitive analysis, but not all of them may apply to your business. So, set your specific goals from the get-go. It will help you make the best use of your resources and time.

2. Choosing the relevant metrics for analysis

Once you know what you are aiming for, choose the metrics you want to study. For example, if you’re performing a competitive analysis of pricing strategies, take into account historical pricing data, price index, pricing software, etc.

3. Developing a systematic approach to ongoing analysis

Create a standard operating procedure (SOP) for you and your team to follow for competitive analysis. This would include proper resource allocation, defined timelines, the exact flow of processes between different team members, etc.

A systematic approach to competitor analysis will ensure that it will be productive and yield desirable results.

4. Incorporating findings into business strategy and decision-making

Once all the hard work is done, consider how the insights can be incorporated to make your eCommerce business perform better. This may lead to implementing new practices, subscribing to cutting-edge tech stacks, or even hiring third-party experts.

Do what it takes to utilize the data from your competitive analysis. Don’t let it go to waste.

Common mistakes to avoid in competitive analysis for eCommerce & dropshipping businesses

Because the process is complex, it’s also prone to errors. When you’re performing competitive analysis, make sure that you do the following:

1. Don’t overlook emerging competitors: You may think existing competitors are all you need to worry about, but this is not true. Your analysis should take into account your potential competitors, too. If you don’t, you will not get the complete picture of who and what you will be up against moving forward.
2. Don’t skim through the process: As mentioned earlier, competitive analysis is not just a scan of your competitors’ eCommerce site or social media account. Use sophisticated analytical tools and techniques to get the most actionable results.
3. Fail to adapt your learnings: The process of conducting a competitive analysis would be futile if you don’t leverage it for business success. Incorporate the insights into your future strategies and decisions to get the results you’re looking for.

Incorporating competitive analysis into dropshipping strategies

While dropshipping is a comparatively easy and profitable business model, it has its fair share of challenges. You can overcome them with the help of competitive analysis, whether you’re an established business or just dipping your toes in for the first time.

Identifying reliable suppliers

If you have any experience in dropshipping, you’ll agree that sourcing products is one of the biggest pain points. Finding reliable suppliers that you can count on can be challenging. Furthermore, you have to ensure that your suppliers understand your quality requirements and adhere to them.

Competitive analysis can expand your search and give you more options to choose from. And because your competitors already work with these suppliers, you can rest assured that they can be trusted to deliver.

Enhancing product selection based on market trends

Studying the market landscape and consumer purchasing patterns can indicate what kind of products are in demand, what’s already available, and what has the potential to sell in the near future.

So, if you want to rightsize your product catalog, performing competitive analysis can lend a big helping hand. Based on your findings, you can add or remove products from your existing catalog.

Since success in eCommerce and dropshipping revolves around product selection, gaining market insights and business intelligence from your competitors can be very valuable.

Staying ethical in your practices

Now that you know nearly everything there is to competitive analysis, let’s address the elephant in the room. Competitive analysis may feel like you are eavesdropping on your neighbor so that you can safeguard your own house. When done without ethical considerations, the process can feel invasive.

To make sure you’re only performing ethical competitive analysis, you should:

1. Respect your competitors’ intellectual property

While competitive analysis is a common practice in eCommerce, respecting others’ intellectual property is important. Business intelligence and data analysis tools usually work by accessing data banks and shared common resources. This is acceptable and standard corporate behavior.

However, hijacking your competitors’ intellectual property, defaming, or disparaging them is certainly not.

Remember that you’re somebody’s competitor, too, and they might be analyzing you. So don’t do anything that you will not want to be done to you and your business. Play by the rules!

2. Never indulge in black hat processes

Make sure you’re using globally acceptable competitive analysis techniques and publicly available tech stacks to do your research. Don’t indulge in illegal practices—they are unethical and may also affect your brand reputation.

At the end of the day, competitive analysis should be considered a learning opportunity more than anything else.

3. Focus on improving your business

Competitive analysis should not be confused with sabotaging. Businesses do it so that they can improve their existing strategies and processes. It should be the same for you, too.

Don’t lose your perspective. If the analysis does not help you make changes to your business, then it has failed its purpose.

Key Takeaways

Competitive analysis is a cornerstone of any eCommerce and dropshipping business development process. It is especially relevant in 2024 because of how unpredictable the global business landscape is and the challenges this brings in its wake. If you want to ensure eCommerce optimization, don’t overlook competitor analysis.

Make competitive analysis part of your planning and strategy to ensure your business remains profitable and sustainable in the long run. Without regular competitive analysis, no eCommerce business can survive the ever-changing landscape of digital commerce.

If you need help with anything related to eCommerce or dropshipping,  or you need help honing out your competitive analysis for your business, you can contact our 24/7 SaleHoo support staff to hash out your idea!