Analyzing competition and market demand


My wife has an idea for an ecommerce store. It seems to us that she’s defined a pretty good niche. The niche seems to be emerging and trendy, but not a fad.

We’ve been searching for direct competitors, and there are a bunch. Using, we’ve found that most of these competitors don’t do much traffic, with a few notable exceptions that appear to do quite well.

However, despite this: we’re not sure how to properly assess the market demand. I’ve looked at the google keyword tool and it does seem like there is demand for the niche. Are there any other good ways of determining market demand for an ecommerce store?

But, the main thing we’re worried about is: What if there is too much competition? And how should we assess the level of competition? Like, I said, we’ve done a bunch of googling and looked at alexa/ profiles of these websites, but we’re still not sure.

Any tips on analyzing market demand vs. market competition for an ecommerce store?

Here’s a way to get concrete market
analysis of not only the market but your
ability to tap into the market.

Step 1 - Set a budget for $250 for analysis

Step 2 - Start a FREE blog on blogspot or wordpress, etc.
You only need 2 to 3 articles to start - KISS

Step 3 - Run $250 worth of Google ads to the blog and
see if anyone shows up.

If you can’t get people to a blog, you can’t get them to
an ecommerce store/website either so there’s no use
wasting money on one.

Once you prove that you can get some traffic to your
site, then you can determine if there’s a market for a
store. Keep in mind this is only an initial test. There are
many other things to do but if you can’t BUY traffic,
it’s likely you won’t get it for free either.

No traffic - no business - stop here and hit the reset
button and look for a different path to market other than
a pure play online store.

Keep in mind that we have customers that have a
realy poor web presense but knock it out of the park
with sales …online is only one small marketing path.

I would go to the public who might be interested in it, appeal to the communities, social networking sections, forums, chat-rooms and other places who deal in what your intending to sell. Seek out the people who will end up being your customers and gauge their interest and throw around what you’re thinking of doing, there’s a lot to say for going beyond the numbers and getting actual feedback. Who knows, you may even make some of them your initial customers, get some viral buzz for the product going and perhaps even evolve your idea based on their feedback. Perhaps not what you were after but hope it’s useful! :slight_smile:

Also, you can get a Dun & Bradstreet agency report on your competitors:

I recommend Google Insights for search:

You can compare search volume using it.

It sounds like you’ve looked at the competition but you need to also look at the demand. This is harder to do without research but you can get indicators around the web.

  1. Use google trends to find changes in volume & compare searches versus known ‘large’ terms to see the interest.

  2. Search for open research documents on the category & interest in it.

  3. Perform an analysis of the media of your competition. Are they all surviving on SEO and drop in traffic or is there money to be made from large campaigns (which indicates a larger market).

  4. Look at indexes (comscore, neilsen, hitwise) to see if they have any info on content or ecommerce sites in the category.

  5. Look at the category offline. Are people buying more of this elsewhere? Is there an opportunity to evolve the online offering that may steal store sales (i.e. coming up with the Zappos model for shoes before Zappos).

That’s just a few ideas, but there’s loads of ways to do a SWOT analysis on the market. If you’re really investing consider buying some research or running a panel based survey, focus group or even casual conversation locally to try and gauge the size and potential of the market.

And of course keep in mind that profit margin can be much more important than size. Many people buy pencils but do you want to make $0.005 per sale?