How to Conduct a Retail Competitor Analysis

Understanding the marketplace and effectively positioning your business requires a detailed grasp of the competitive landscape. That doesn’t just come from gut instinct or passive observation. You need to conduct a retail competitor analysis to get the full picture. 

By meticulously examining what your competitors are doing, you can spot industry trends, understand customer preferences and recognize the strengths and weaknesses of your rivals. Ignoring these factors can lead to missed opportunities and strategic missteps.

In this blog, we’ll go over over to conduct a competitor analysis:

• Set objectives
• Identify your competitors
• Gather information about your competitors
• Analyze competitor products
• Evaluate competitor marketing strategies
• Analyze competitor strengths and weaknesses
• Compare competitor financial performance
• Identify market trends
• Develop your action plan

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The importance of a competitive analysis

So why should you do a competitor analysis? 

Competitor analysis exercises are crucial for understanding retail market dynamics and positioning your business strategically. 

By analyzing competitors and identifying industry trends, you can better understand customer preferences and gauge the strengths and weaknesses of rivals. Without a thorough competitor analysis, you may miss critical market shifts or emerging consumer demands. 

Consider, for example, a retailer who missed a competitor’s early adoption of buy now pay later (BNPL) payment options in store. With BNPL exploding in popularity in a short time, that retailer would be left behind by customers who turn to the competitor for their big ticket purchases. Late adoption might not close the gap.  

In contrast, a well-informed competitor analysis could prompt timely adjustments, such as integrating BNPL early, leading to sustained growth and market share.

How to conduct a retail competitor analysis

Not every analysis will look the same—your final document should be tailored to your specific needs—but here are the general steps you should follow.

1. Set objectives

Start by clearly defining the objectives of your competitor analysis study, aligning them with your overall business goals. 

Do you want to expand market share, enhance product offerings or optimize pricing strategies? Setting specific objectives helps direct your research and analysis efforts toward the most impactful areas. This focus ensures that the analysis remains relevant and actionable, guiding your strategic decisions effectively. 

For instance, if your goal is to expand into a new market segment, your competitor analysis should concentrate on: 

• Identifying the key players in that segment: who is leading the market domestically? What about internationally? Any new disruptors causing waves?
• Understanding their strengths and customer appeal: why are they the key players? What specifically brings customers back to them? It might not be their product offering.
• Spotting any gaps in their offerings: when customers leave them, why do they do it? How could your business address those pain points?  

By aligning the analysis with your strategic objectives, you can make informed decisions that drive your business forward, avoiding the pitfalls of broad, unfocused research that may not yield actionable insights.

2. Identify your competitors

With your goals in mind, you can pick which competitors to focus on. Observing their strategies, product launches and customer engagement tactics can provide valuable insights for shaping your own strategies. 

Begin by identifying both direct and indirect competitors. 

Direct competitors are businesses that offer similar products or services within the same market segment. For instance, a local fashion boutique faces direct competition from other nearby boutiques with similar fashion offerings. 

Indirect competitors, on the other hand, include businesses that meet the same customer needs but in different ways. For the same boutique, indirect competitors could be large department stores like Macy’s, which also sell fashion items but with a broader range of products and a different shopping experience. 

Between your direct and indirect competitors, identify the top leaders in your field. These are businesses that set market trends and customer expectations. 

How many competitors should I analyze?

How many competitors you focus on depends on the intended depth of your analysis. Ask yourself:

• How big are you right now? Who do you have the biggest chance of winning against? Should you focus on smaller direct competitors or on bigger national chains? 
• How big is the area you’re selling in? How large is your industry? Do you have scores or competitors, or just a few major players?
• What competitors come up when customers give you reviews?

At minimum, pick two competitors to analyze; at maximum, ten. Five to seven is a good sweet spot. 

3. Gather information about the competitors you identified

Utilizing online resources like company websites, social media platforms and review sites can provide a wealth of information about your competitors’ products, pricing, customer service and brand perception.

By examining Google and Yelp, you can understand customer feedback and sentiment about a competing business, identifying areas where they excel or fall short. To perform this analysis, you could:

• Weigh the number of high and low reviews
• Make notes on what people in good reviews say
• Make notes on what people in bad reviews say
• Analyze the results for anything that pops up across competitors for any trends in what the industry doing good or bad as a whole 

Visiting competitor stores in person is also invaluable. When you’re there, observe: 

• The store layout: what do you immediately see when entering a store? How hard is it to find what you’re looking for?
• The range of products: how wide is their selection? Do they offer customers a large variety, or a carefully curated selection?
• Any promotions or marketing strategies in use: what is enticing you to buy?  
• Your first impression of the staff: are you greeted when entering the store? How?    

Additionally, examine the customer service approaches and any extra services provided. This could include return policies, loyalty programs or personalized shopping experiences. 

Understanding these aspects can help you enhance your own customer service, making your business more attractive to potential buyers. 

4. Analyze competitor products

In the previous step, going to their store helped you analyze their intended and actual in person experience. This step helps you analyze their product, what customers take away from the store. These are two important parts of a whole. 

Start by comparing product lines to see the variety and types of products offered by your competitors. This should involve not just looking at the categories they cover, but also analyzing specific items within those categories. Assess the quality of these products by considering factors such as materials, durability and customer reviews. 

Evaluate the pricing strategies employed by your competitors. Are their products priced higher, lower or similarly to yours, and what does that say about their market positioning?

Understanding these aspects helps you pinpoint where your products stand in comparison. It also reveals potential gaps in the market that you might exploit. For example, if competitors offer a wide range of products but compromise on quality, you might focus on delivering superior quality items within a similar range. 

Alternatively, if your analysis shows that competitors have steep pricing, positioning your products as cost-effective yet high-quality alternatives could attract a broader customer base.

5. Evaluate competitor marketing strategies

Evaluating competitor marketing strategies provides insights into how they attract and retain customers. 

Here are key aspects to consider while writing your competitor analysis:

• Examine branding: look at the consistency of their branding across all platforms. Note the style, tone, and messaging used.
• Assess advertising: identify the types of advertising they use, including print, digital and outdoor. See how they position their products and target specific demographics.
• Analyze promotions: observe any sales, discounts or special events they run. This can show what motivates their customers to buy.
• Review digital presence: check their website for user experience and content quality. Examine their social media for activity levels, engagement rates and the nature of interactions. Look into their email marketing for frequency and content style.

This can reveal what resonates with their audience and help you refine your own marketing strategies.

6: Analyze competitor strengths and weaknesses

At this point, you should have a lot of information about your competitors: their product line, their in-store experience, their financials and how customers feel about them. With all that, you have enough for a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis.

How to conduct a SWOT analysis

• Strengths: identify what the competitor does well. This could include exclusive product lines, strong brand loyalty or superior technology.
• Weaknesses: note areas where the competitor is lacking, such as poor customer service, limited product range or outdated POS technology.
• Opportunities: look for market gaps or areas where your competitor’s weaknesses can be your advantage. This might involve expanding product lines or improving customer service.
• Threats: consider external factors that could benefit your competitor, like emerging technologies or market trends they are well-positioned to exploit. Also consider where they could be a threat to your business. 

Once you’ve done a SWOT for your competitors, do one for your own business. Be brutally honest about your weaknesses and the threats in the industry. This will help you zero in on what parts of the competitors’ SWOTs you need to prioritize acting on. 

For example, you might identify that a competitor’s strength lies in offering exclusive brands, attracting a certain segment of customers looking for luxury goods. Your own business might have less success with these customers and may not even be able to stock those exclusive brands, which means you can’t compete on product offering. 

However, their weakness could be in in-store customer service, which is less responsive or engaging, presenting an opportunity for your store to excel in this area and attract their customers. You could design a new employee training program that focuses on the areas customers have problems with at the competitor, offering a luxury experience to go along with their luxury tastes. 

7. Compare competitor financial performance

In addition to your SWOT, do a financial report on your competitors. This analysis can reveal their economic stability, profitability and growth trends.

When possible, review:

• Public financial records: for publicly traded companies, examine annual reports, quarterly filings and analyst reports to understand revenue, profit margins and investment activities.
• Sales data: look at available sales figures for competitors and flagship competitor products and brands to gauge the volume and trends over time. This can indicate market demand and the effectiveness of their sales strategies.
• Market share: analyze market reports or industry research to compare your market share with that of your competitors. This shows your relative position in the industry.

You might need to lean more on indirect competitors for this step. If you run a toy store, you’d be able to use market reports to compare your annual revenue growth with a major competitor like Toys R Us. Observing their financial trends and market share can help you identify strategies for growth and areas where you can capitalize on their weaknesses.

8. Identify market trends and opportunities

Once you’ve completed your competitor analysis, identifying market trends and opportunities is the next crucial step. 

This involves:

• Observing emerging trends: look for trends that competitors are successfully leveraging. This could include new technologies, consumer preferences or marketing techniques. Understanding these trends can help you adapt and innovate to stay competitive.
• Identifying market gaps: examine areas where competitors may be underperforming or not meeting customer needs. These gaps represent potential opportunities for your business to differentiate itself and attract new customers.
• Monitoring industry developments: stay updated with industry reports and research to anticipate future trends and prepare your business accordingly.

For example, if your competitors in the fitness apparel market are not offering size-inclusive options and customer feedback indicates a demand for such products, it presents an opportunity for your business to introduce a range of sizes, catering to a broader audience and enhancing your market presence.

9. Develop your action plan

After completing your competitor analysis and your SWOT exercises, use the insights gained to develop and refine your business strategy. This involves creating an action plan to implement changes that improve your competitive position.

In your action plan: 

• Prioritize key areas: focus on the most impactful areas based on your analysis, such as product offerings, customer service or marketing strategies.
• Set clear objectives: define specific goals for each area of improvement, ensuring they are measurable and aligned with your overall business objectives.
• Develop strategies: address gaps and leverage opportunities. This might involve introducing new products, enhancing customer experiences or adopting new marketing techniques
• Allocate resources: ensure you have the necessary resources, including budget and personnel, to effectively implement these strategies.
• Monitor and adjust: continuously monitor the impact of these changes and be ready to adjust your approach based on feedback and results.

Keep an eye on your tech

While you’re developing your action plan, make sure to evaluate your tech stack. Do you have a POS platform that can help you implement your strategies, or do you need to make a move? If your competitors can offer experiences and craft marketing campaigns that are a struggle for you, don’t let institutional inertia get in the way—it’s time to make a switch now.

Take Sunmed, Your CBD Store, for example. By switching to Lightspeed for their franchisees, they can now take advantage of the open API and comprehensive, clean data to reach out to customers within 24 hours of a visit, much faster than before. That helps ensure customer loyalty in an increasingly competitive industry.

“Using the Lightspeed API, we’ve been able to get full visibility into what is going on in every one of our Lightspeed locations, right at the transactional level. It allows us to pump that data into our email marketing platform so that we can begin communicating with our consumer right away. The day after they visit our store, they’re receiving the first email communication from us. And it’s so critical for us to have that detailed transactional data in order to be able to engage with the customers at a very individualized level.”

Wilfredo Rodriguez, CFO, Sunmed, Your CBD Store

Scale with a comprehensive competitor analysis

Conducting a retail competitor analysis is an ongoing process that should evolve as the market does. 

The steps outlined here—from setting clear objectives and identifying competitors to evaluating their strategies and your own performance—form the backbone of a robust competitive analysis framework. By continually monitoring and adapting to the market, businesses can maintain relevance and competitiveness. 

Revisit your competitor analysis every year—what more can you do? Where can you pivot? What new retail technology can you implement to get ahead? And how can Lightspeed help with that?

Frequently asked questions about competitive analyses 

What is a competitive analysis?

A competitive analysis is a strategic assessment where a business identifies major competitors and researches their products, sales and marketing strategies. By understanding these elements, businesses can gain insights into market trends, determine competitive advantages and disadvantages and develop strategies to improve their own market position.

What is included in a competitive analysis?

A competitive analysis typically includes:

• Identification of competitors: listing both direct and indirect competitors in the market.
• Assessment of competitors’ products and services: evaluating the quality, range and pricing of competitors’ offerings.
• Market positioning: analyzing how competitors position themselves in the market through branding and marketing strategies.
• Financial analysis: reviewing financial metrics such as sales volumes, profitability and market share.
• SWOT analysis: identifying strengths, weaknesses, opportunities and threats related to competitors.
• Customer feedback: gathering and analyzing customer reviews and feedback on competitors’ performance and customer service.
• Marketing strategies: reviewing competitors’ advertising, promotions and other marketing tactics.

How do I put a retail competitive analysis in a pitch deck?

To incorporate a retail competitive analysis into a pitch deck, make slides on the following:

• Executive summary: start with a brief overview of what the competitive analysis reveals about the market landscape and how it relates to your business.
• Competitor overview: provide a snapshot of key competitors, including their market share, core products and unique selling propositions.
• Comparison charts: use charts and tables to compare your business with competitors on various aspects such as price, quality, market share and product range.
• SWOT analysis: include a SWOT analysis that highlights your competitive advantages and how you plan to leverage these against competitors’ weaknesses.
• Strategic opportunities: identify opportunities based on gaps in competitors’ offerings or weaknesses that your business can exploit.
• Action plan: outline your strategies for competing effectively, including product improvements, marketing strategies and customer engagement plans.
• Financial projections: show how these competitive strategies are expected to improve your financial performance and market position.