Published on August 30, 2013 Understanding competition for an online advantage
Starting a new business? Here is how to cash in when others aren’t.
When selling online there are many factors you need to consider in planning for your business success. A big part of that can be understanding the competition in your industry and how your strengths can be used to take advantage of any opportunities that are available.
What will you need?
No matter what you plan to sell online, if you want to be successful you will need:
- a well chosen market and niche
- a solid marketing plan
- an affordable platform for selling and growing your business
Method – Your Online Selling Plan
Why should you start an online business now? When business confidence is lower than normal, there are opportunities for new businesses to create and establish new market niches or to grow an existing market share into new areas with little direct competition – as others may be hesitant to take risks. It takes good planning and cost-management but with the right marketing approach and affordable marketing tools to support your own good sense of business, the potential rewards are huge.
Specialise for success
Too many businesses start up with the view that they’ll be the next Big W, Target, Deals Direct or Myers. They try to offer every product they can possibly sell and end up with a collection of bits that has no logical grouping or direction. Without the cost structures of these huge companies a business can’t possibly hope to compete. When times are tough you may have a small advantage in that the big retailers are not selling as much or as focussed but you will ultimately lose when the economy picks up and these large retailers start spending again.
Strategy Understand your competitors and your competitive advantage
The solution is to specialise in what you are good at selling. This doesn’t mean you can’t carry a wide range or products, but it does mean that you need to have a clear logical grouping of products. So that customers can understand what makes your selection and product range different from the large retailers that you may be competing against. In business terms this is called choosing a market niche. You need to understand on what basis your competitive advantage lies in relation to others selling the same products as you are now as well as future competitors.
Some possible sources of competitive advantage include:
- Faster delivery – if your competitors all import items directly from overseas and you hold stock, then you can deliver the same products faster
- Time to market – if you develop new products, you might be able to innovate and produce new things faster than your competitors
- Personalisation – this is a great way to build loyalty if your competitors produce a generic product and compete on price. Instead of selling just plain T shirts
- Product range – you may specialise in hard to find products or hard to find sizes that other competitors don’t wish to carry as they don’t move as quickly
- Bundling – you may have a unique way of grouping products together or work in conjunction with an exclusive partner to be able to offer something that adds value to the customer experience in a way that other competitors can’t match.
To give you a long term source of competitive advantage you need to find a competitive edge that gives you a memorable, unique point of difference that will give is hard for others to replicate even with big pockets.
Keeping costs low does not mean spending nothing
One of the biggest costs that small start-up businesses discount is time. If you already have a main job or a family at home to look after, then you won’t have 18 hours a day to devote to setting up and growing your business. When making your start up business decisions you therefore need to consider the actual outlay that you have to pay to get something started and balance this against the time it will take to do. For example, there are plenty of types of shopping cart software that you can download and install for free, but do you have time to install it, set it up, configure it for Australia, learn the design editor, and create professional graphics and banners to reflect your brand before you even get started loading your products?
In all of your startup business decisions you need to balance the spending with the benefit. Spending a little more up front can take some of the time burden away and let you focus more on what you are good at. You don’t have to go to the extent of hiring a dedicated person or company to load all of your products and run the website, but careful planning of who you choose as the provider of your online shopping cart website can take some of the ultimate hassle away from the set up process. Investing a little in the design and set up phase can get you up and running with your shopping cart website faster.
What online cost factors do you need to consider for your online shop?
The cost of doing business online is considerably less than the cost of a bricks and mortar store but there are still many costs to make sure you plan for to ensure there are no surprises when you start running your business, and that you have enough money allocated to the things that are important.
- Costs of advertising.
- Postage and delivery costs.
- Inventory costs.
- Product photography.
- Costs of writing product descriptions (or your time to do it yourself).
- Monthly costs to your shopping cart provider.
- Design fee or the costs of the software to design it yourself (and the time it will take you to learn).
- Payment gateway and merchant bank fees (or PayPal fees).
- Costs of sale to your cart provider (you don’t want your provider to take a cut of your sales as your bank is already doing that!).
- Business overhead – electricity, utilities, stationery, computers, printer paper, transport, etc.
- Cost of your time! (often forgotten).
For a detailed article on some of the things you need to consider, visit our recent article about the costs of starting an online business.
When it comes to your shopping cart, investing in having a base design customized to your business needs is one of the fastest and most affordable ways of getting your online shopping cart website going. It’s a balance between a DIY ecommerce system that you get some base templates and have to do all of the customization yourself, and a custom built shop application which is often quoted on a total per hour basis and can run into the many thousands of dollars.
Where to look for opportunities
If you want to find new opportunities, some of the most important things that you can do are:
- understand your customers
- stay informed
- monitor your competitors – but not so closely you have no time to complete your other tasks.
Everything stems from really understanding your customers and why they buy the products that you are selling. If you don’t know exactly who you are selling to, it’s hard to come up with marketing promotions, identify new products to sell or get your sales pitch right. Many people start up online businesses with an idea of the product to sell but only look at what is happening in the market at the time they start selling it. They don’t understand the reasons why people buy those products so they are not prepare to be able to shift with the market if things change.
Whether you’re selling children’s stationery, pet supplies or software products, ask yourself the following things:
- How much information do customers need to buy this product? Is it something that they will shop around a lot to purchase or something that will be purchased on impulse?
- What problem or need does the product fill?
- How urgently is the product required – how long is there between when someone decides to buy this product and when they make the purchase?
- How many other sellers are there of this product? How do they market those products?
- What can you see as the weaknesses of the current sellers?
- What do you know about the specifics of the people that buy this product? Is it something that is purchased by any retail consumer, or is it something that is part of a particular decision or even process? Is there a particular kind of person that makes the decision to buy this product?
These things will give you an idea of the strengths and weaknesses of your current competition, but also what things drive the buying process and how much a customer would be prepared to pay for it.
Once you understand who you are selling to, you can start researching them. Find the online forums where these types of people discuss what they like and dislike or discuss the products that you sell. Find reviews written by these people of your competitors. Note the weaknesses and positives that they describe. Read the magazines that they read. Read any industry magazines or newsletters from suppliers. Understand as much as you can about your industry.
Keep an eye on your competitors, but don’t obsess with them or else you won’t have time to focus on beating them. Visit their website on a periodic basis, watch to see what they say in social media, read their newsletters, read their blog posts.
Put all of this together with an understanding of your own strategy and provided you understand your costs you will be well placed to grow and succeed with your online store.
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