Who are your competitors?

It seems a simple enough question, although many e commerce are not sure who their real competitors are, making it difficult to manage correctly their pricing strategy. Our first approach could be to think that any e commerce that sells the same products as us is our competitor. In theory it is like this, but not in practice, since sharing a partial product assortment does not imply that the objective public to which both shops are directed is the same. Is a small online market place a competitor of El Corte Inglés? Therefore, how can we determine who are our real competitors?

To analyse this we should firstly identify our target clients, so to later compare ourselves to other e commerce directed at the same public, and with a similar brand, quality and service as ours. More than likely the total number of competitors will be less than 10, whilst highlighting 2 or 3 clear leaders. As a general rule, these retail leaders will mark the price evolution, leading the rest to equalization strategies or price monitoring.

Once we have determined who our real competitors are, and depending on if we are leaders or among the remaining bunch, we can manage our pricing strategies in the direction stated by the company, from matching the lowest price to fixing a certain % above or below the main direct competitors.

In conclusion, we should take into account that not all e commerce that sell the same products online as us, are our competitors, nor are all the merchants that advertise in Marketplaces like Amazon. Try to follow a pricing strategy based on dozens or hundreds of competitors would be complete chaos and would stop us from correctly making decisions on prices due to a great data distortion.