You know your products and who your customers are, but how do you know what form of marketing will be effective or what pricing strategies you should use for your products or services? What makes your business unique? What is your competitive edge?
It's important for new businesses to complete a competitive analysis during the business planning stage. Competitive intelligence can also be useful for marketing, pricing, managing, and other strategic planning for retailers at any stage of their business. Before you can know your competitive edge, you must know your competitor. Here is what to know about conducting a retail competitor analysis.
Competitive Analysis Questions
The first step in determining your competitive edge is to do an analysis of your competitors. Write down your primary competition and answer these questions for each business:
- Where is your competitor located?
- What are your competitor's strengths?
- What are their weaknesses?
- What are your competitor's annual sales?
- What is the company's product line?
- How do the products compare to yours in terms of quality, appearance, and any other criteria?
- What is their price structure?
- What are the company's marketing activities?
- What are the company's supply sources for products?
- Is the company expanding or cutting back?
- What do they do better than you?
Do Your Research
To answer these questions, retailers need to do some detective work and gather competitive intelligence. Competition research and assessment doesn't need to be complicated. There's no need to hire someone to do what you can do yourself, but consider employing research firms to find information that isn't publicly available. Here are a few tools you can use to acquire competitive intelligence.
- Online searches are a quick method for finding competitive information. However, this search will only provide information that has been made public.
- On-site observations of the competitor's parking lot, customer service, volume and pattern of suppliers' deliveries, etc. can yield useful information about the state of the competitor's business.
- Surveys and interviews can yield plenty of data about competitors and products. Research surveys and focus group interviews generally provide more in-depth perspectives from a limited sample.
- Competitive benchmarking is used to compare the organization's operations against those of its competitors. In making specific comparisons within an industry, an organization gains information about common marketing practices, available workforce, and suppliers.
Put It to Work
The results of your competitive analysis establish the skills necessary to succeed in your retail business and define your distinct competitive advantage. To benefit from your research, take as many weaknesses of your competitors as possible and turn them into potential strengths for your business. Narrow down your list to only those items that will give you a competitive edge. Be sure that your list is:
- Cost-effective and realistic.
- Planned to solve a particular problem or meet a specific need.
- Attractive to a niche market.
If you begin a business without performing a competitive analysis, you run the risk of creating marketing tools and product or service offerings that are way off the mark. This can cost you valuable time and money during the early months which are so critical.
You should also plan to gather competitive intelligence as your business grows. This will help you stay competitive. Competitive analysis is an ongoing process and retailers should always be gathering information about their competitors.