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How to Increase Market Share in E-commerce: 4 Effective Strategies Based on Competitor Analysis
One of the key determiners of business success is market share, as online stores that achieve leading positions are significantly more profitable than their competitors.
Therefore, understanding actual market share is crucial for any company. A commercial director who believes based on intuition that their online store controls 20% of the market makes incorrect decisions if, in reality, they only have 5%. As a result, the effectiveness of the department (and the whole company) will suffer.
Tracking and improving market share is one of the key tasks of the commercial department of an online store.
In this article, we discuss the advantages of market share, methods for its calculation, and four ways to increase market share based on competitor analysis.
Market share is the percentage of a company’s sales in the total sales volume of products in the industry.
To calculate a company’s market share, first define the period you want to analyze, which could be a financial quarter, a year, or several years. To calculate market share, use the following formula:
Market Share (%) = (Number of products sold during a specific period / Total market sales for the same period) × 100%
For example, if an online store sold 125,000 laptops last year and the total number of laptops sold in the given market was 500,000 units, then the market share of this online store in the laptops category for the previous year was 25%.
Advantages of a High Market Share for an Online Store
A high market share provides several advantages for a business:
Increased bargaining power: Suppliers and partners often offer better terms, discounts, and exclusive deals to online stores with a significant market share.
Higher profit margins: Online stores with a larger market share can achieve higher profit margins due to lower expenses and higher sales, resulting in a larger gap between income and expenses.
Enhanced investor appeal: Companies with a larger market share are perceived as stable and more resilient to market fluctuations, making them more attractive to investors.
Strengthened competitive advantage: A strong market share can act as a barrier to entry for new market players.
Opportunities for market expansion: Online stores with a strong market share in one segment can leverage their brand recognition and reputation to enter new markets, creating additional revenue streams.
Consequences of Ignoring Market Share
Ignoring this crucial metric can result in inaccurate forecasting, improper procurement and sales processes, and, ultimately, failure to meet business goals.
All of these can lead to long-term negative consequences for online stores, including business stagnation, declining sales and profitability, loss of competitive advantage, reduced growth opportunities, and limited market expansion.
The Impact of Market Share
Increasing market share signifies a strong market presence, while decreasing market share can signal issues such as overall market decline, heightened competition, misalignment between marketing and sales strategies, and consumer expectations.
If your online store aims for leadership and stability, capturing the largest possible market share should become a significant business objective.
How to Increase Market Share
Once you have identified your market share and understood your business’s position in relation to competitors, you can begin developing a sales growth strategy.
Below, we explore four effective methods that will assist you in gaining a larger market share. All of them are based on competitor monitoring, since they play a significant role in influencing your business’s market share.
Method #1: Lower Prices
Price is one of the key factors for customers when it comes to online shopping:
According to Statista, over 82% of customers compare prices for products online before adding them to their cart.
According to Salesforce research, 58% of customers are willing to choose competitors due to lower prices.
By reducing prices, online stores can attract cost-conscious consumers and encourage them to choose their store over competitors.
Note: This approach should be applied thoughtfully, considering your profit margin.
This strategy is suitable if:
Your competitors offer lower prices
You are losing sales (and market share) due to price sensitivity among your target audience
It’s unlikely that competitors will also lower their prices in response: for example, due to the risk of losing product margins
Profit margins for the products you plan to reduce prices on are higher than your business norm, meaning that this strategy won’t present financial risks
You are already a market leader and want to gain a competitive edge
If you can’t afford to set the lowest price in the market, you can at least maintain price parity with your direct competitors. Customers often compare prices, and if your prices are in line with or slightly lower than similar offerings, you position your store as competitive.
To implement price reductions, you need to analyze:
a) Which specific products in your store are priced higher than those of competitors?
b) Which products in your store are priced the same as competitors?
For the first category, you can consider price alignment, while for the second, you can use price reductions.
When it comes to these products, focus on:
Class A products, which generate the highest revenue or have the highest market demand
Class A competitors (direct competitors whose market share you want to take)
With Pricer24’s competitor price monitoring service, you will automatically receive price data for all competitors. You can visualize this data in charts and reports, which is convenient when you need to analyze and compare large datasets.
This way, you’ll be able to see:
Which competitors have the most positions with prices lower than yours. If you see on the dashboard that store X has lower prices than yours on half of the products you’re tracking but you know that your market share is 50% while theirs is 1%, there might be no need to change your prices. Conversely, if store Y has lower prices on most products and controls the largest market share, then you should definitely reconsider your offers.
In which categories do competitors have more positions with lower prices than yours? You can identify problematic categories even before a deep analysis of the product range.
Which brands have the majority of your products priced lower than the market.
For a detailed overview, you can easily create a table with all your positions priced higher than at least one market competitor. In this table, you can instantly see not only the SKU and competitor but also your price and the competitor’s price, the difference between them in absolute and percentage terms, and a link to the competitor’s product page.
You can also analyze products with prices matching those of your competitors. Moving from the general (competitors with more positions at prices equal to yours; categories and brands with more products priced the same as the market) to the specific (a list of products with identical prices), you’ll understand which products need price reductions compared to the market to make your offers more attractive.
By understanding your profit margin, knowing your market share, and analyzing competitors’ prices, you can make informed pricing decisions. This strategy involves reducing prices on Class A products and aligning prices with Class A competitors, which will ultimately lead to increased sales and expansion of your market share.
Method #2: Expand Product Assortment
By analyzing competitors’ current product ranges, category managers can identify segments where competitors fail to meet the audience’s needs. These gaps represent potential growth opportunities. By filling them with your own products, you can attract customers who are looking for specific items. Attracting new customers and encouraging them to make repeat purchases can help increase sales and market share.
To understand which products to add to your assortment, consider the following:
Which competitors offer the most products in a particular category (whether they are in stock or not)?
In which categories is your product availability better or worse than that of your competitors?
Which brands are better or worse represented in your assortment compared to competitors?
Your goal at this stage is to identify leading competitors in product availability and find categories and brands where you can expand your range.
In Pricer24, this process works as follows:
You provide your product catalog and a list of competitors for monitoring.
After comparing, Pricer24 starts collecting all necessary information about products in relevant categories.
Up-to-date data on competitors’ product assortments is displayed in the Assortment Analysis report.
Method #3: Focus on Bestsellers
How can you understand which products are currently selling best? Analyze the product listings of market leaders. The products displayed on the first pages of categories are the bestsellers.
By evaluating the listings of leaders in your industry, you can identify products to add to your catalog to expand your list of bestsellers.
Here’s the action plan:
Analyze the products with top positions in the catalog of the leading competitor in your niche. For example, if you operate in the electronics niche, check which products are on the first page of product listings on Amazon.
Analyze the products with the highest number of reviews and the highest ratings in your competitors’ catalogs.
As a result of this analysis, you can:
A. Identify top-performing products in the market that can become category leaders for your business.
B. Compare them with your bestsellers and refine your strategy by:
maintaining these products in stock to ensure availability
adding or expanding descriptions
including rich content, high-quality photos, and videos
encouraging customer reviews for these items
running promotions while tracking sales
C. Expand your list of bestsellers by adding popular items that were not previously present in your catalog.
In this way, you save time and resources by focusing on products that have already proven their effectiveness. This prevents overstocking slow-moving items and ensures a supply of high-demand products that rotate quickly, ultimately growing your market share.
Method #4: Prevent Competitors from Taking Your Slice of the Pie
Competitors’ promotions can significantly impact your sales dynamics. If a competitor’s promotion applies to products offered by both your store and theirs, it can lead to a decrease in your sales. Customers who had planned to make an order in your store may switch to the competitor for a better offer. Over time, if multiple competitors consistently run successful promotional campaigns, your online store’s market share may decrease. That’s why it’s essential to constantly monitor competitors’ promotions.
Collecting data on competitors’ promotions can also be automated with Pricer24. In the Promo Positions on the Market report, you can see the terms of promotions in different categories and the number of products covered by the promotion for each competitor. You can also display promotional products in a list with active links to product pages for details.
When analyzing competitors’ promotional campaigns, you evaluate how they impact your sales schedule and which have been effective in taking your market share. With this understanding, you can better plan defensive strategies and adapt your own promotions.
If a competitor launches a promotion, your online store should take the following actions:
Assess the potential impact of the advertising campaign on your market share, customer loyalty, and sales.
Review your own advertising strategy and prices to determine if adjustments are necessary.
Consider launching a counter-promotion or special offer to retain customer attention and effectively compete.
Inform customers about your response to the competitor’s promotion and emphasize the value you offer.
Implement lessons learned from the competitor’s promotion into your long-term marketing and pricing strategy.
By analyzing competitors’ promotional campaigns, you can benchmark your advertising activities against the market. Studying the types of promotions, discount levels, and mechanics used by other market players is the best way to understand how competitive your own special offers are.
Be ready to adapt your strategy as the competitive environment changes. Remember that the goal is not only to react to the competitor’s promotion but also to have a strategic response while maintaining focus on long-term objectives.
If your online store aims to achieve leadership in its niche, both the category department and marketing department should:
Monitor market share (both yours and your competitors’)
Work on protecting your market segment through well-planned offensive and defensive actions
To understand which tactics (price reduction or parity, product assortment expansion, focus on top-selling products, launching promotions) to apply and in what combination, category managers need a deep understanding of the current competitive landscape.
Effective market analytics tools will help you handle this task. They save time on collecting competitor data and provide valuable information in a convenient visual format. Thanks to this, you can quickly determine which tactical measures can be implemented to stay ahead of competitors.
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