Before getting started with a new business idea, it’s important to properly identify your competitors. Understanding who they are, what they offer, and how you compare will be crucial information for the success and strategy of your business.
1. Know what you offer
Before looking at competitors it’s imperative to understand exactly what your primary offerings is. Take a stock of your primary products – the key items your business will be built on. You will compete for consumers with other companies on these products. List the products in a column on a spreadsheet and piece of paper. While you may have some tangential products or services that boost your sales, you are not in competition with other companies that sell those.
For example, let’s say you have a shoe company but you also offer socks. Socks are a very small portion of your profits, while shoes is where you you make most of your money. You are not in competition with accessory companies that that specialize in socks, but with other shoe companies instead.
2. Find businesses that sell what you sell
Once you know your primary product offering, find companies that sell that product. There are a variety of ways to find business, but the easily method is to “act like a customer.”
- -Search engines – use a few major search engines to looks for products
- -Online Marketplace – these sites usually offer a variety of brands and products (e.g. Etsy, Ebay, Amazon, Rakuten, etc.)
- -Local Retailers – visit your local mall or shopping plaza to see what brands are represented
- -Social Media – using a hashtag on some social apps like Instagram and Twitter can help you discover potential competitors. You can also search Facebook and check out Pinterest.
During your research, keep track of the names of competing businesses on paper or spreadsheet so that they are easy to manage.
3. Narrow down the competition
Your list might include 10-15 businesses, but more than likely all of these business are not “direct” competitors. Knowing the of product you offer was the start to identifying competitors. Now you can further analyze. This is divided into your industry, market and strategic group, keep in mind that you may have competitors in more than one of these areas.
- -Determine your industry – Your industry is made up of business that offer the same or a similar service. You can determine industry competition based on your service, such as supplying foreign tea imports.
- -Determine your market – Your market is made up of the locations where your product and services can be bought and sold. You can determine your market based on tea sellers in your area.
- -Determine your strategic group – Your strategic group is made up of businesses that share a similar business model with your business. You can determine your strategic groups as all stores offering the same prices and marketing strategies to sell their tea.
- -You should also consider your demographic or geographic market. Your demographic market is made up of people of different ages, socioeconomic classes, and genders. Your geographic market is made up of people from different cities, states, regions, and countries.
4. You vs. Competition
After narrowing down the competition you should be able to organize them in the following categories. Here are some suggestions on what to do next.
- -Direct – these 3-4 companies are your fiercest competitors. When making purchasing decisions, their products always end on your target customer’s short list. Since you are competing for the same dollar, your direct competitors should be the most researched.
- -Indirect – these companies offer alternative products or compete in an alternative market, but aren’t direct competitors. Usually you won’t have to worry about these brands but it’s important to keep an eye out because they can become your direct competitor.
- -Substitutes/New Entrants – this category includes the brands that you will worry about the least. Substitute products deliver same set of benefits but is not a competing entity. Though you cannot predict potential new entrants or technology, it’s important to stay up-to-date on your industry so that you can better predict when tech or a new brand might change your industry completely.
This is just the beginning to thinking strategic about your business. Ultimately, if you are able to properly identify your competitors you can answer “If you weren’t around, who would supply your customers? What would customers buy to solve their problems?” Knowing who your competitors are is the first step into planning competitively in pricing, distribution, marketing, etc.
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