Competition is a prerequisite in business. Understanding where you stack up against your competitors can help to reveal your brand’s unique value proposition, what your brand is doing right and most importantly, what your brand is doing wrong.
As there is a limited market share that you and likeminded brands will be competing for, it is vital to pinpoint your direct and indirect competitors to identify who poses a real threat to your business.
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Let’s start by understanding the definition of direct and indirect competitors. Direct competitors are the brands that sell similar products in the same category as you. Indirect competitors are brands that offer alternatives which can substitute your products within the same category.
While you may think doing a simple comp shop or perusing a competitor’s website would be enough to gain insights into their products and strategies, you’re likely missing out on important intelligence that would be beneficial to your brand’s growth.
In this article, you’ll learn how to conduct a competitive analysis of direct and indirect competitors in a marketplace, supported by data.
#1 Understand your brand positioning
To understand your brand’s positioning, you must first identify your brand’s biggest strength. This can be uncovered by analysing your brand’s assortment mix to determine top performing categories.
In this example, we will identify the competitors of Topshop in ASOS US. Data from Topshop’s category composition showed Tops made up the majority of its assortment with over 640 SKUs - approximately 16% of its total products. This is followed by Dresses, Outerwear and Jeans.
Being a major fast fashion brand, Topshop is most known for its trendy clothing targeted towards teens and young adults. The most restocked styles at Topshop consisted of printed Tops with sleeves or wrap detailing, priced between USD 26 to USD 42.
#2 Identify brands with similar price points and product offering
Using Topshop’s price range and product mix as the benchmark, we can identify other brands that offer similar products within the same price range.
Insights into the Tops category, priced between USD 26-42 at ASOS US showed ASOS had the highest number of products at 880 SKUs, followed by Topshop and River Island at third with 169 SKUs.
As seen in the image below, ASOS, AsYou and Miss Selfridge had the most similar products that matched Topshop’s aesthetic and price point, making these brands Topshop’s biggest direct competitors.
To monitor these brands closely, you can use Omnilytics’ Saved Products feature to compile and access competing products currently available in the market.
Other brands found on ASOS at a similar price point but differing styles to Topshop include Berghaus, Object, Dickies and JDY. Thus, making them indirect competitors that could serve as an alternative to Topshop’s customers.
#3 Monitor your competitor’s performance and product strategy
Once you have identified your direct and indirect competitors, regular monitoring is required to track their product performance and discover any gaps or opportunities to leverage upon.
In a comparison against Topshop’s three biggest competitors, ASOS, As You and Miss Selfridge, Topshop had the second highest number of products behind ASOS with over 600 SKUs.
However, when compared against ASOS’s sell-out rate at full price, Topshop outperformed ASOS with a difference of 5 percentage points. Topshop and AsYou both achieved a similar total sell-out at full price at 45% but with the latter only having 60 SKUs.
Miss Selfridge had nearly 80% of its assortment sold out through discounts, indicating an aggressive discounting strategy to push its products. ASOS’s sell-out rate was also dependent on promotions as 70% of its sell-out were driven by discounts.
Despite having the second highest number of total SKUs, Topshop registered the lowest sell-out at a discounted price at 59% - well below the total average for all brands at 69%.
Topshop’s high number of total sell-out at full price despite having a median price that is 65% higher than its competitors, proves it has an effective assortment and pricing strategy.
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Conclusion
The competitive nature of a marketplace shows the importance of regular competitor analysis. Using data to analyse your competitors’ performance provides clear benchmarks to help measure your brand’s growth and outperform industry standards.
In turn, this information can be used to improve your product assortment, mitigate potential risks and test new pricing strategies which your competitors have yet to take advantage of. By understanding how you compare against your direct and indirect competitors, you’ll be able to gain deeper insights into customer demand.
About the Author
Sufiana Sharuddin
Sufiana Sharuddin is a published fashion writer, honing her interest in the industry during her time at Condé Nast College of Fashion and Design. She currently covers a variety of topics within the industry including business, technology, trends and current affairs.
