Tips on Analysing Competition

Analysing competition is an important step when assessing a startup idea. Competition prevents a product from realizing it’s true value.

There are broadly 2 areas we should focus on while analyzing competition.

Current Competition – This includes all startups which are doing the exact thing you are looking to do. A Flipkart and an Amazon are direct and current competitors as they are both horizontal ecommerce marketplaces.

Potential Competition – Here we need to assess how easy it is for a current startup to do what you intend to do. Thinking through this helps a startup assess and identify an advantage which will make it sustainable in the long term. For example in Beveragewala, we were building an ecommerce store for teas and coffees. We realized that for horizontal players like Amazon, entering this space was very easy and doable. 

The Odds are not in your Favour

When starting a business, we need to be very clear that no matter how carefully we plan our venture, the odds are not in our favour. A general statistic we mention often is that 90% of new ventures fail (with upto 50% failing within the first 5 years of commencement). Wrong business models, high competition, lack of funding etc. are typical reasons why we fail.

Despite this, a true entrepreneur will always keep trying. An entrepreneur is one who will not get deterred by these numbers and with a belief in his/her idea and with a vision in his/her eyes will keep moving forward!

Competition is Good!

This may sound adsurd but believe me, entering a competitive market can be good.

A competitive market implies that a market exists and this fact already been proven by the players which exist before you. A competitive market must also imply that the market size is big as a lot of players exist in it. The biggest businesses cater to the biggest and most competitive markets. Also competition will always keep you on your toes, thereby making your startup lean and efficient.

If you look at the biggest internet space in India at the moment, it has to be the horizontal e-commerce space. Despite having the bigger players like Flipkart, Amazon & Snapdeal, you are still seeing a plethora of new startups entering the space (like Paytm, Shopclues etc.) and are scaling fast. This is because the market is big enough and growing at a rapid pace. The key to succeeding in such a market is by offering a superior experience and creating a distinctive differentiation for your brand.

Analyse competition well...

When you think of a need of a particular set of users, it is important to analyse how those users are managing now. We should assess all companies who are currently satisfying or come close to satisfying the need and analyse how we intend to offer something different and incremental to their products. This step is extremely crucial as at times, we tend to not consider all the competitors and this may result in us making a product which is similar to one existing now and hence having no sustainable advantage going forward.

This happened to me in Beveragewala. We were creating an 'Amazon for Beverages' without realising till very late that Amazon had also started selling beverages :(. At that point, we had already burnt a lot of money and had no significant competitive edge and had to close down.