They come at you from every direction. E-commerce companies – from mom and pop websites to goliaths like Amazon – trying to steal away your market share.
But how do you identify who your real e-commerce competitors are amongst all the noise? After all, you can’t follow or match everyone’s prices, and there will always be competitors that may offer a lower price for the same product you’re selling.
Rather than attempt to compete against everyone and lose market share, follow these three steps to identify whom your true competitors are:
- Look for Similar Company Traits: Access competitors that are the most similar to your company in terms of brand recognition, size, reach, or product/service types, etc. These are the companies you need to compete against. For example, there is often no need to follow low prices from a much smaller online competitor who likely doesn’t have much inventory available at the aggressively low price.
- Look for Similar Pricing Strategies and Terms: Determine which competitors have similar overall pricing strategy across the board. Take into consideration company practices such as free shipping and other policies and terms. Also consider other value-adds like rewards programs. Take a deeper look into what your competitors are doing in regards to their pricing strategy before deciding to match their lowest advertised prices. After all, a consumer will ultimately notice the competitor’s strategy and terms as well.
- Look for Similar Pricing Behavior: Since you can’t follow everyone’s prices, determine which competitors have similar pricing behavior. For example, you might not want to spend the time, effort and energy to follow a competitor that changes its prices multiple times per day, particularly for slower-moving items. Some retailers use metrics like a price volatility index, similar to the metrics used to measure the volatility of a particular stock price, to assess their competitors and consider how best to respond to their pricing actions.
Once you’ve identified your key competitors, construct benchmarks to rank your prices against theirs. Then you can track your prices vis-à-vis theirs across a variety of products, and better understand their pricing behavior and pricing strategy over time. Then these benchmarks can inform analytics as to how your demand responds to your price position vs. competitors, and help you to optimize your online pricing against these key competitors.