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Four key lessons to find your e-Commerce competitive advantage

Close up shot of a set of white chess pieces, with a single black pawn replacing one of the white pawns to show differentiation and distinctiveness

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Why read this? : We share the 4 areas you need to explore to find your e-Commerce competitive advantage. Learn how exploring customer, brand, experience and learning helps you find your point of difference. Read this to learn how to craft a compelling e-Commerce competitive advantage.

Many so-called e-Commerce experts say you don’t really need an online strategy to do e-Commerce. No need for marketing plans either. Or working through the customer experience process. Just sign up for Etsy or Shopify. Bang out a few product pages. And boom, you’re an online retailer. The path to untold riches. 

Yeah, right. 

Most of us know this is total hot air. We’ve ranted before about the sharks who loiter around marketplace and dropshipping forums. They’re only good for learning what NOT to do. So let’s focus more on what you should do to win in e-Commerce.

This article focuses on how you find your e-Commerce competitive advantage. It does this using lessons from strategy buildingmarketing planning, and customer experience development. 

Your e-Commerce competitive advantage

The modern concept of competitive advantage stems from 1980s and 1990s business strategy academic literature and in particular the work of Michael Porter

The thinking is well-known, but it’s rarely top of mind for many business leaders. Especially in e-Commerce. Many e-Commerce stores don’t have a clear competitive position. So it’s OK if you’ve only just started to think about it. Knowing you need it is the first step in building your e-Commerce competitive advantage.

As per our how to start selling online guide, you have to answer 3 key questions to start e-Commerce :-

  • What are you going to sell?
  • Where are you going to sell it?
  • How will you manage payments and deliveries

But, to answer that first question, you also have to answer who’s going to buy what you’re selling? And why would they buy it from you?

As per our marketing guides, you always start with the customer. You start with what customers want and need. So, your first source of e-Commerce competitive advantage comes from understanding customer needs better than anyone else. 

E-Commerce competitive advantage #1 - Know your customers

One of the easiest ways to start learning about e-Commerce AND about your potential competitors (other than checking out their online stores directly), is to join relevant Facebook groups and online forums like this one on Reddit. 

Most are targeted at e-Commerce newcomers. You can learn from the questions they ask, and the store websites they ask for feedback on. 

Because the biggest thing most newcomers get wrong is not thinking about the customer

Blond woman partially hidden behind a leafy bush

You see many people set up an online store in a popular category like fashion or homewares. Then they post on these forums saying they’re getting no sales. And when you look, it’s clear they’ve just copied other sites in the category. Nothing about them stands out. Which is why they have no sales. 

Or they’ve come up with an idea for a product or service. And set up a store to sell it. Again, they post saying no sales. And it’s obvious, they haven’t thought about their customer, and what they actually need. 

Research your customers

E-Commerce newcomers may not have the budget to do formal qualitative or quantitative research. But secondary research is (mostly) free and easy to do. You should start there to try to work out who your customers are, and what they might need. 

Build a profile of your ideal customer segment. Where do they hang out online? Are there specific websites, forums and social media groups that pull in your target audience?  Spend time in the same online spaces your customers do.

Try to find out what these customers need and want. Figure out what they think, what they feel, how they talk, and what they expect of you. The better you can do this, the closer you’ll be to finding your e-Commerce competitive advantage. 

And talking of you.

E-Commerce competitive advantage #2 - Build your brand

To build a brand website or online store in the early days of the Internet, you had to know how to write HTML code, or how to use complex site builder tools. 

But companies like WordPress and Shopify now make it much easier for anyone to build their online presence and experience.

Standardised templates. Easy to use software. Click and drag site building. You no longer need a computer science degree to set up a website. 

Brilliant. 

Screengrab of Three-brains Shop - headline says "merchandise to raise your game"

And yet, while that easy access technology makes your life easier from a technical point of view, it makes your life harder from a competitive point of view. 

Why? Well, easy access technology breaks down barriers to entry. That means more people setting up online stores. More people competing against you and what you have to offer. The online shopping marketplace is very crowded. So, you need to position yourself in a way that stands out from that crowd.

Your e-Commerce brand needs a clear positioning

That position comes from the segmentation, targeting and positioning process. You identify customer segments which share needs. Then, decide which to target. And finally, you craft a positioning that defines how you’ll go after that target. 

The positioning statement defines your target customer, the benefit you’ll offer and why customers should believe your offer.

It also defines your Frame of Reference, the category you’ll play in. That category definition gives you the competitive set you need to find your e-Commerce competitive advantage against.

3 steps of the process - Segmentation - divide the total marketing, targeting - pick the most attractive, positioning - build your brand

Porter’s competitive strategies

While it may seem like there are hundreds of competitive strategies to choose from, Michael Porter‘s work suggests the main choices are :-

  • cost leadership.
  • focus differentiation.
  • niche. 

Cost leadership

Cost leadership is when the business keeps costs and prices low. There’s lots of price discounting. You aim for higher volume sales, so you can save via economies of scale. Or if a service-led business, you automate and scale the processes you need, so the cost per customer interaction stays low. The goal is to be the best value brand on the market. 

Focus differentiation

Next is focus differentiation. Instead of price, you highlight another part of the marketing mix like product, promotion or place. You focus on 1 or 2 specific benefits rather than a wider range of benefits. This can feel like an audacious choice. But there’s a lot of support for the idea that it’s better to “own” one specific benefit than to spread your efforts too thin.

With this approach, your brand goes after customers who highly value your focus benefit. So, your “universe” of customers will be smaller than the mass approach of cost leaders. But, those customers will feel more strongly about your brand’s offer. They’re willing to pay a premium and stay loyal

Niche

Finally, there’s finding a strong niche position.

This is where you find a unique offer no one else can match or copy. It might only appeal to a small number of customers, but it highly appeals to them, because of its uniqueness. You sell fewer units. But each unit sells at a much higher price.

What do Porter’s strategies mean for e-Commerce?

Anyone with a business or marketing degree has probably had to write a long essay on the work of Michael Porter at some point. There’s a lot more in his work than we’ve covered here, but this one’s important. We’ve given you the gist of his most important work on competitive strategy

And the reason we did that, is you can use these strategies to help you find your own e-Commerce competitive advantage. 

For e-Commerce, the cost leadership approach is best suited to “generalist” stores with a wide range of products and the ability to keep costs and prices low. It usually requires a higher level of initial investment to attract a wide range of customers. 

Focus differentiation in e-Commerce means you need to work out exactly what it is you can offer as a specific benefit, ahead of your competitors. 

And niche positioning takes that to another level as you aim to find something unique to offer. Something which can’t be copied by competitors. 

Your choice of e-Commerce channel

This all means connecting your positioning and competitive strategy with your e-Commerce channel options. 

For marketplaces, particularly options like Etsy, niche positions may be your choice of e-Commerce competitive advantage. You can create specific and individual products which are hard to copy. 

For print on demand (POD) though, you only really have control over the design that goes on the products, not the actual products and delivery itself. When you sell via POD, your design and brand identity drive focused differentiation. 

e-commerce 5 key channel options - on a x-y graph against level of complexity and control

With online retailers, you have the option of any of these competitive strategies. But your actual e-Commerce competitive advantage is mostly in the hands of the retailer

Where you actually have the most opportunity is when you set up your own online store. As per our online store benefits article, with your own online store, you have the most control over what you do. You can choose any of these 3 strategies. Which you choose then shapes your online store business model.

Stand out from the crowd

Your brand positioning is a key part of your e-Commerce competitive advantage. To make the biggest impact, it needs to consistently reinforce your brand identity.

Your brand identity is a collection of tangible and intangible brand assets, that define who your brand is, and what it stands for.

For e-Commerce, your brand is how people find you, how they remember you, and what persuades them to buy. That makes it important to help you achieve your e-Commerce objectives. 

Brand identity asset classification examples

As we cover the process of creating brand identity elsewhere, we won’t repeat it here. But for this article, we wanted to call out one specific element of brand identity that’s super important for e-Commerce. And that’s the need to be distinctive

Online selling is very competitive. Only the best brands stand out. As per a previous article, it’s well-known in psychology that people focus on the “odd one out” from any group.

Von Restorff made this point almost 90 years ago. Smart marketing and e-Commerce people understand the value of distinctiveness.

If you want to grab attention online, you can’t be a “Me 2”. That just doesn’t work. You have to make all your customer interactions distinctive.

Red tulip in a field of yellow tulips showing the impact of standing out and looking different

This means your advertising needs to stand out. Your store website might start from a standardised template, but you should look for ways to make it seem more distinctive and stand out. That can be both “front-end” in terms of the design style and tone of voice you use. But it can also be “back-end” e.g. how you manage the order to delivery process.

Your online store brand is what your customers notice and remember. To build your e-Commerce competitive advantage, you need to build a distinct and relevant identity for your brand.  

E-Commerce competitive advantage #3 - Create relevant and inspiring experiences

So, knowing your audience and building your brand are where you start to build your e-Commerce competitive advantage. But where you drive growth is in what you do with that knowledge and those assets. 

One of the big benefits of online selling is you can sell 24-7, 365 days a year. Online stores never close. And that means you need a lot of brand activation. This is what drives people to your store. It’s what engages and influences them when they visit. And it’s what keeps them coming back for more. 

As per our online store strategy guide, a good place to start is to think through all the actions which need to happen to drive an online sale.

For each of those actions, think about what you can do to make your brand stand out from competitors. 

For your advertising, think about how to make your message sound more relevant and compelling to customers. Be audacious and aim to stand out from the competition. 

When customers visit your online store, think about how to make the shopping experience better.

e-commerce planning process - 5 key steps in e-commerce experience

Once an order’s placed, think about what you can do with your order to delivery process to make the “service” feel better than competitors. 

And that’s just the thinking to drive “one” online sale. With e-Commerce, and particularly with your own store, you have great access to online data about your customers. You can combine this insight with marketing technology to set up a CRM system that keeps your shoppers loyal and coming back for more. 

E-Commerce competitive advantage 4 - Keep learning

This brings us to our last source of e-Commerce competitive advantage. Namely, that you can never have enough knowledge about your customers and their needs. There’s always more to learn. You’ll always have new e-Commerce issues to deal with. And you have to learn from your mistakes

The basic processes and techniques we’ve covered above give you a good start. If you use them, you’ll sell more online than if you don’t. But every market, every business, every shopper is different. 

You need to be able to use the data you gather to continually review and re-assess your customer understanding, your brand identity, and the impact of your activities

The more e-Commerce knowledge and capability you build, the better an online seller you’ll be. 

Conclusion - E-Commerce competitive advantage

In most competitions, the “winner” is the one who’s left standing at the end. But, in e-Commerce, the “game” doesn’t have a clear end. It just keeps going. 

And though you might see off some competitors, the ease of entry to online selling means there are always more competitors waiting in the wings. 

But, if you’ve built your audience knowledge, have a strong brand, and create great experiences, then you’re well on the way to playing the e-Commerce game for a long time. 

Close up shot of a set of white chess pieces, with a single black pawn replacing one of the white pawns to show differentiation and distinctiveness

Check out our range of e-Commerce guides for more on how to grow your business online. Or email us, if there’s a specific e-Commerce challenge you need help with. 

Photo credits

Chess board : Photo by Randy Fath on Unsplash

Woman peeking out from bush : Photo by Sharon McCutcheon on Unsplash

Flowers : Photo by Photo by Rupert Britton on Unsplash

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