Situational Analysis is one of the best ways of doing environmental research, by examining external and internal factors which may influence the growth of your business. Originally developed for large businesses, it is also equally useful for small fast-moving brands.
Simple as that, to succeed, you need to find an effective methodology for analyzing the business to form a long-term marketing strategy, by maximizing your strengths and minimizing the weaknesses. SWOT analysis is one of the simplest and most flexible ways to get the insights into your business, whether you’re looking to identify your brand’s positioning on the market or look for the ways of developing your product and services.
SWOT analysis as well as choosing the right creative eCommerce agency is certainly very important in a highly competitive market, where brands keep searching for the ways to differentiate from competitors. In this article, we will discuss how to do a SWOT analysis for your eCommerce business with some real-life examples.
The Basics of SWOT Analysis
SWOT, which stands for Strengths, Weaknesses, Opportunities, and Threats, is a way of identifying the assets of your business, spotting new opportunities for development and analyzing your competition. SWOT believes that all of these factors can affect one company and impact its growth. Strengths and Weaknesses are classified as internal to business and Opportunities and Threats are both external factors. To understand it in more detail, let’s look at these categories:
- Strengths: What is your business currently good at?
- Weaknesses: What does your business currently struggle with?
- Opportunities: What are the current opportunities on the market that your business could invest in with its skills and resources?
- Threats: What are the current competitors and external factors that could threaten your business?
Identifying and listing all of these factors will help you form a strategy that will use your strengths, counter your weaknesses and beat your competitors. A SWOT analysis can be performed at any time, regardless of business’ size and industry, and segregated to these 4 factors. It can help bring new issues and opportunities to the light that were not previously on the company’s radar.
How to Do SWOT Analysis For eCommerce
E-commerce deals with selling and purchasing of goods and services online, can enhance economic growth and increase business opportunities. Situational analysis in eCommerce helps businesses to use market research and other observations to drive the decision-making process and structure a strategic marketing plan.
The key considerations before running a successful SWOT analysis are time, data and benchmarks. Depending on the size of the business, it may take anywhere from a few days to several months to do a complete SWOT analysis. To do so, you will require a lot of data like traffic, inventory details or customer reviews. It is also helpful to have some industry benchmarks in order to meet the standards and understand your performance.
Let’s go over a few steps you should follow when doing a SWOT analysis for your eCommerce business.
1. Objective Data
This is a foundation of any analysis and gives you insights to your business’ performance. What’s the data you should consider when starting your SWOT analysis?
- Website Analytics:
Using tools such as Google Analytics you can find how many people view your site, the unique visitors, what are the monthly changes in the traffic, what pages are the most popular and what is your current bounce rate. You can also understand what your traffic sources in terms of conversion rates are.
- Conversion Rates:
That’s the number of people visiting your store, that convert into paying customers. For instance, if your traffic is 100 visitors a day and 3 ends up spending money on your site, your conversion rate is 3%. Collect data for individual products as well as product categories and the store overall.
- Social Media:
Different platforms can help you reach your target audience, increase sales and drive traffic to your site. You need to analyze social media statistics such as overall followers and likes, average post engagement and monthly growth.
- Shipping Stats:
Fast delivery is something that customers appreciate the most and critical for every eCommerce business. You should gather data like average shipping time, cost and any delays from your side, analyzing customer’s feedback.
- LTC and AOV:
Every eCommerce business should regularly calculate its Lifetime and Average Order Value to understand the profitability. The formulas are pretty easy- to get AOV, grab your total sales and divide it by the number of orders. To calculate LTV, use the following:
Average Order Value x Number of Repeat Sales x Average Retention Time
Good search engine ranking and organic reach is often a driver of conversions. If the customer can find your store easily, they will visit it rather than your competitor’s site. Running an SEO audit includes current rankings for target keywords, number of pages and backlinks as well as domain authority.
- Customer Service:
Having this in hand will help you understand what problems your customers encounter throughout their shopping experience with you. It can be the average number of support emails per day/week/month and its growth or decrease. Analyzing the average answer time will also determine how efficiently your business deals with several queries.
2. Subjective Data
This information will give you the insights of what your shoppers think about your store, products, and services and help you understand what areas you should improve in. You can start with carrying out customer surveys or interviews that can be done either on-site, via email or over the phone.
Their opinion should matter the most because these are the people who bought from you store or stopped buying for a reason. Find out what improvements you should work on and why were they not happy with the previous purchase, if so.
Interviewing your employees is another half of your company’s success. A productive team and satisfied workers are the core values of any well-performing business. Find out if your employees think about the company overall, how they feel about their roles and if there is anything they would like to change.
3. Competitor Analysis
Analyzing different businesses within the same industry and their performance is something that cannot be missed. Begin with listing your major competitors and then collect data from their website.
- Product Range:
The following questions will help you analyze their websites to find all of the answers you need:
What is the number of products they sell? What are their best-selling products? Are there any similarities within theirs and your product range?
- Product Pricing:
List all of the prices and compare with your catalog. You can also analyze the shipping costs which pay a big part in customer satisfaction and eCommerce overall.
What are the current offers and promotions that your competitors have in place? Perhaps they provide with free shipping on spending an x amount of money or maybe they offer 10% off the first purchase? These are crucial marketing tactics to bring more customers on board and encourage them to shop with you.
Apart from on-site offers, it is good to screen any additional advertising activities that have been taken out, from social media to print/digital ads. Analyze if your competitors are investing any paid advertising methods such as social channels, email marketing or Google AdWords.
Just like you should have your metrics in place, you also need to carry out an SEO audit of your competitors’ websites. Compete it against your data in an Excel sheet, to have a better understanding of what sites in your sector perform well.
- Customer care:
Good customer service is often a deal breaker if it goes to online sales. You can measure the time and quality of response by playing your competitor’s customer. Come up with a query and email a few brands to get an estimate, then compare it with your metrics.
Additionally, find out how many support channels they offer, for instance, email, live chat or phone.
- User experience:
Having a responsive and well-designed website is definitely crucial in eCommerce. It should take a user on a wonderful shopping journey, making it easy for them to find what they’re looking for. Analyze your competitor’s website and find out the following:
What is the quality of the images? What platform do they use? How easy is to find information? How many checkout steps do they have? Is the website design appealing?
- General metrics
Get some insights if it goes to their size, annual revenue and its growth, their location or places they deliver to and years in the industry.
4. Market Trends Analysis
After analyzing your business and its competitors, it is the time to figure out whether there is a demand for the product you’re currently selling. Establish how the demand could change in the near future and the factors that could impact these changes.
That may include some technology developments such as artificial intelligence, new eCommerce software, advances in marketing tools or legislation that may impact the product demand. The general idea of what’s happening on the market will help you face some future changes and be up to date with trends in your industry.
Ready, Steady, Go!
You should now have an idea of what SWOT analysis is and what steps you should take to begin with your SWOT mapping. After following these steps, carrying out research and grabbing all of the important data, you can analyze your business from the inside out and compare it with the competition. All of these factors are crucial for creating an effective, long-term marketing strategy and grow your business in many different ways. Let’s go over the key steps you should follow to identify opportunities in eCommerce through situational analysis.
- Objective Data
- Subjective Data
- Competitors Analysis
- Market Trends Analysis
Best of luck!
About The Author: Karolina is a content writer for Appnova, an eCommerce agency based in London that specializes in luxury brands. She loves to write content based on current eCommerce, social media and marketing trends and provide insight into customer care, fashion and the beauty sector.
Image by Mudassar Iqbal from Pixabay.com