Many people with a business education have had experience with a SWOT analysis - strengths, weaknesses, opportunities, threats.  Unfortunately, applying these types of analyses tend to go the way of trigonometry – something you learn once and never really use again.  But we shouldn’t lose sight of the benefits of a SWOT analysis: the ability to offer a concrete, realistic audit of a company and a visual representation of its standing among competitors.

Strengths and weaknesses are measured internally and are benchmarked based on pre-determined standards.  Opportunities and threats are external.  Opportunities are calculated based on superior offerings over competing companies.  Threats are direct challenges from competitors.  It is clear just from these brief overviews that these analyses are necessary for a competitive advantage.


SWOT Debrief

The objective of a SWOT analysis is to build on your strengths and minimize your weaknesses.  Implementation from your SWOT analysis will allow you to take advantage of opportunities while also mitigating the threats from competitors.  In an industry as competitive as eCommerce, a thorough SWOT analysis should be done at least annually.

A thorough SWOT analysis can and should take a considerable amount of time.  One of the key factors for a good analysis is an objective view, which is why we suggest bringing in an outside consultant.  Keep in mind that customers are a good source of information for key areas of success for your company and where you have room for improvement. Tapping this valuable information can be as simple as an online survey or as in-depth as a focus group.

When doing a SWOT analysis for an eCommerce company, it is important to remember to include both online and brick-and-mortar retailers as consumers will often use both mediums for purchasing.  This can make your analysis more complicated, but in the end the detail will pay off.

The online marketplace is constantly shifting and evolving, so changes can happen quickly.  What was once an opportunity can quickly become unavailable due to shifts in online platforms or purchasing habits of consumers.  For example, when eCommerce was in its infancy, they were able to offer 24/7 global shipping while brick-and-mortar vendors couldn’t.  Today almost every retailer has an online version of their stores that compete with web-only sellers.


Strengths

What do you do better than others in your industry?

Do you offer a unique comparison method?  Do you have less expensive shipping?  Are you able to offer cheaper products of the same quality as your competitors?  Do you offer niche products that aren’t available elsewhere?  These are your competitive advantages.

A typical eCommerce strength is having lower operational costs than a brick-and-mortar retailer.

Weaknesses

Unlike a typical retail store, eCommerce must take into account shipping times.  Because of this, there is no immediate satisfaction from the customer.  Shipping also creates additional headaches with heavy, perishable and awkward items.

Online payments still cause some hesitation with some customers, so security and fraud concerns may make people reluctant to make purchases.  PayPal is a widely-accepted form of secure online transactions and may help minimize this concern.

A typical eCommerce weakness is the customers’ inability to touch the products.  This can include proper fit for clothing, the functionality of an electronic device, the size of an item, etc.

Opportunities

You should always be asking yourself “What new methods can I utilize to help grow my business and maintain an advantage over my competitors?” and “Where are my competitors vulnerable?”

The rate of change for eCommerce has seen a steady incline over the years.  New technologies and features have made it easier for brick-and-mortar retailers to compete with online-only merchants.  Fortunately for online-only retailers, software improvements have made shopping cart technology faster, more secure, and more user-friendly.  Live chat options for customer service have revolutionized instant-gratification for customer concerns and questions.  Social media now provides a free platform for promotions and advertising and customer relations.

In order to take advantage of these eCommerce opportunities, the online merchant needs to stay current and be willing to adopt new features as they arise.

Threats

Any good business owner knows how important it is to keep up-to-date on industry shifts that may affect growth.  Often we think of these shifts as new technologies, consumer behavior, etc.  What can get overlooked are legal and regulatory changes.  For example, AODA compliance may affect online retailers in Ontario starting in 2014.

The ease with which companies can start an eCommerce site is a constant threat.  People can now sell via Facebook, eBay, Etsy… all without setting up a whole website at all.

The big names in eCommerce like Amazon will always have more room for undercutting their competition on price.  Thankfully, there are up-and-coming technologies that make cheaper shipping and lower costs available for online merchants so they can compete with the big players.  Offering niche products are also a way to diminish the threat from sites like Amazon.


eCommerce SWOT Conclusion

Conducting a SWOT analysis at a minimum of once a year will give you a solid look at trends in eCommerce, show you where you stand among your competition, and provide insight into how you might mitigate your weaknesses by building on your strengths.