Sometimes a simple question like this can have a more complex background than it may seem at first glance.
If we ask a big brand, such as Cocacola, it will probably tell us that its main competitor is Pepsi. If we talk to Sportzone, they will no doubt say Decathlon. But what if we ask an Amazon Seller or an ecommerce, do they really know their competitors?
They might say El Corte Inglés and a couple of other ecommerce companies, which of course they already have perfectly “under control”, according to their version. In fact, this is what one of our current clients told us the first day he spoke to us.
The surprise came when we showed him the data and asked him: what if I told you that the total market of sellers of your products is more than 300? Do you know that there are more than 30 ecommerce whose pricing policy has a direct influence on you not selling?
In short.
Do you know who your competition is?
The broad market reality
When making estimates, there can be a big difference between what is predicted and what actually happens. This is no exception in the field of competitors.
Most people believe that their competitors are the big players, the usual small competitors, or that they are those who are giving them a run for their money in certain products.
It is at this point that we come up against a reality that teaches us that sometimes you have to look at the general rather than the particular.
The question is, do you really know the size of the market in which you operate? The answer in most cases is that you do not.
Therefore, a fundamental first step is to get a general knowledge of the competition in the different marketplaces where you offer your products. On the one hand, this allows us to see what our real position in the market is with respect to the rest of the competitors and, on the other hand, it gives us an idea of how far we are from the rest of the sellers in terms of prices.
It also provides us with an important piece of information such as knowing the origin of our competitors: it is not the same if the majority of sellers are from countries other than our own as it is if they are domestic competitors, especially in terms of shipping times.
On the other hand, with this analysis we get a clear picture of who our real competitors are at a global level: those who for our catalogue have a larger quantity of products with a better price than us. At the same time, it shows us the level of competitiveness of our ecommerce, and gives us an idea of all the pricing work that lies ahead.
From general to specific
As useful as it is to have this overview of the market, we cannot rely on it alone to decide our pricing strategy. A good overall position can be turned for the worse by an aggressive strategy from our competitors, and a bad position can be reversed with small tweaks on certain items.
Now is the time to review each product, as each of them is fighting its own price war.
It may be the case that you do not have the best price, but you are only a few cents away from reaching the first position, as it happens in the image above. In this table we are going to assume the role of the ecommerce that is in second position and it would be logical to think that our competitor is the one in first position, by price: Wrong!
We see in the example that we are an ecommerce that sells in FBA and does not have the best price but still has the BuyBox. This shows us that, for this particular case, the price is not the most important thing and it is the ecommerce ratings and shipping time (some of the parameters that influence the BuyBox – for example -), so our real competitor is the one that is just behind us in price.
And this, the third in price, is our real competitor not only because, like us, has its products in FBA, but also because, depending on the valuation it has as a shop, if it lowers its price a few cents or equals ours, it could snatch the BuyBox.
In this situation, a defensive strategy against the third in price, seeing the profit margin we have, would be more appropriate than the option of fighting with the first by price.
Let us now turn to this new example, where we see that competition is stiff for this product with several shops offering it and with only a few cents difference. Here one would think that the real competition is about seven or eight shops because of the tight prices. Again, this would be an erroneous prior assessment.
If we look closely, we can see that who has the BuyBox is MonovarSalud, but Amazon matches the price. Although this makes us think that MonovarSalud is the real competition, after a second analysis we will realize that our competition is Amazon itself. And even when Amazon matches the price we can conclude that they do not have stock of that product, because if they did, they themselves would have the BuyBox.
Here the strategy to follow is to improve the price of who currently has the BuyBox in order to win it, but as soon as Amazon comes back into play, withdraw from the fight for the BuyBox. It is practically impossible to compete against Amazon on price, let alone shipping time. We are better off spending our efforts in the fight against other competitors.
Conclusion
Knowing the competitors for the shop, in general and for each product in particular, is fundamental in any ecommerce. This allows you to draw a real scenario on which to design not only pricing strategies, but also to make marketing and purchasing decisions.
Taking advantage of tools that make this easier is a necessary step for any ecommerce.
And you, do you know who your competition is?
