How To Do SWOT Analysis For E-сommerce

Aug 12, 2016 by Jesse Ness, Ecwid Team
SWOT analysis
Posted Aug 12, 2016 by Jesse Ness, Ecwid Team

If you’ve ever taken a business class or two, you’re probably familiar with SWOT analysis.

In case you haven’t, SWOT is a method for understanding the internal and external factors that impact a business’ success.

Think of it as a framework for methodically analyzing a business and charting out a long-term strategy.

While originally developed for large businesses, you’ll be surprised to learn that SWOT is equally useful for small businesses in fast-moving industries like e-commerce.

SWOT, which stands for “Strengths, Weaknesses, Opportunities & Threats”, will help you identify your strengths, spot opportunities and counter competition.

In this post, we’ll help you understand SWOT analysis — even if you no business education — and show you how to use it in your E-commerce business.

Why do a SWOT Analysis?

There are dozens of methodologies for analyzing businesses. You might even be familiar with some of these acronyms such as:

  • SOAR (Strengths, Opportunities, Aspirations & Results)
  • SCORE (Strengths, Challenges, Options, Responses, Effectiveness)
  • NOISE (Needs, Opportunities, Improvements, Strengths, Exceptions)

Most, if not all of these are essentially built-up on the SWOT analysis fundamentals. This is one reason why even 50+ years after it was first developed, SWOT analysis is still one of the most popular ways to analyze businesses.

There is another reason for SWOT’s popularity: its simplicity and flexibility.

“Strengths, Weaknesses, Opportunities & Threats” are intuitive categories that anyone can understand, regardless of their business background. These categories are also very flexible — they apply as much to businesses as they apply to non-profit organizations and government bodies.

Beyond the simplicity, SWOT also gives you actionable insight into your business, both in the short-term and long-term. With SWOT you can:

  • Understand current and future plans.
  • Understand the current and future state of your products/services.
  • Know your competitors, customers and market trends better.
  • Chart out exact strategies and tactics to counter threats in the market.

So what exactly is SWOT and how can you apply it to your E-commerce business?

Let’s find out below.

What is a SWOT Analysis?

We don’t really know who came up with the SWOT methodology (though most sources claim it was management consultant Albert Humphrey). What we do know that it was initially based on data collected from Fortune 500 companies.

At its heart, the SWOT method believes that all the factors that affect a business can be divided into four categories:

  • Strengths: Anything the business is currently good at, or that which could be described as its “strength”.
  • Weaknesses: Anything the business currently struggles with.
  • Opportunities: Current opportunities in the market that the business could exploit with its existing resources or skills.
  • Threats: Market forces, such as a competitor or external factors (such as a change in local laws) that could threaten the business.

Of these, “strengths” and “weaknesses” are internal to a business. “Opportunities” and “threats” on the other hand, are external factors.

In traditional SWOT analysis, you’d also classify your strengths and opportunities as “helpful” for your business growth. Weaknesses and threats would be “harmful”.

Based on this, you get a SWOT chart — a four quadrant matrix like this:

a chart four quadrant matrix for SWOT

Any business, regardless of its size of industry, can segregate its success factors into these four categories.

For example, suppose you’re running a watch store, both offline and online. You have an extensive range of budget watches but your luxury brand stock is weak. You also have a deep-pocketed competitor outspending you in local advertising, though you have a strong brand presence online.

Your SWOT analysis might look something like this:

  • Strengths:Extensive range of budget products; strong in-house digital marketing talent.
  • Weaknesses: Poor collection of luxury watches; poor store location.
  • Threats: Online and local watch retailers; younger demographics not buying watches; growth of digital smart watches; general-purpose retailers like Amazon.
  • Opportunities: Existing E-commerce store to tap into online demand; growing sales in budget watch category.

Listing all these factors will help you figure out a strategy to play up your strengths, counter your weaknesses and beat your competition.

How can you perform a similar analysis for your store?

Let’s find out.

SWOT Analysis for E-commerce

Before you jump in and start analyzing your business, you’ll need a few things to run a successful SWOT analysis:

  • Time: Depending on the size of your business, it might take anywhere from a few days to several months to do a complete SWOT analysis. Keep this in mind before you start the analysis.
  • Data (subjective and objective): A competent SWOT analysis requires lots of data. You’ll need objective data like traffic figures, inventory totals, financial details, etc. as well as subjective data like customer interviews, internal audits, etc.
  • Benchmarks:Though not necessary, it’s good to have some industry benchmarks to audit your performance. After all, you can’t claim that traffic generation is your “strength” if you can’t meet industry standards.

Below, we’ll show you all the data you should have and how to use it during analysis.

How to do SWOT Analysis for E-commerce

Follow the steps shown below to analyze your E-commerce business:

Step #1: Gather objective data

Your objective data — stats, traffic figures, sales data, etc. — give you hard numbers on your business’ performance. This will form the foundation of any analysis.

Here’s the data you should have before starting SWOT:

Current website traffic
Dig through your analytics to find:

  • Unique visitors per month
  • Pageviews per month
  • Traffic trends (up/down)
  • % change in traffic MoM and YoY
  • Bounce rate

Conversion rates

Your conversion rate is the percentage of your traffic that turns into paying customers (or leads, subscribers or any other conversion event). That is, if you get 100 visitors daily and of these, 5 end up buying from you, your conversion rate is 5%.

You should have conversion rate data for:

  • Individual products
  • Product categories (such as shoes/bags/accessories)
  • The entire store

Customer loyalty

How likely are your customers to return to your store and shop from you? For this, you can use the following data:

Social media statistics

If social media is a large source of your traffic and customers, you should know the following numbers::

  • Social media followers/likes across social networks
  • Average likes/comments/shares per post (as percentage of total followers/likes)
  • Growth in social media followers/likes MoM and YoY

Shipping statistics

Shipping is critical for the survival of an E-commerce business. Make sure to gather data like:

  • Average shipping time
  • Shipping delay (if any)
  • Shipping cost

Customer LTV and AOV
LTV (Lifetime Value) and AOV (Average Order Value) often determine an E-commerce business’ long-term profitability. AOV is easy enough to calculate — it’s simply your total sales divided by the total number of orders.

To calculate LTV, use this formula:

(Average Order Value) x (Number of Repeat Sales) x (Average Retention Time)

Customer acquisition data

How and where you acquire your customers is an important part of your business’ success. You should have numbers like:

  • Top 5 traffic sources (in absolute numbers)
  • Top 5 traffic sources (in terms of conversion rates)
  • Cost of customer acquisition per channel
  • Discounts/promotions on different channels (such as a Facebook-only coupon code).

SEO data

Social brands might get away with poor SEO, but for most other E-commerce businesses, organic reach is a massive driver of conversions.

Run a quick SEO audit to find data like:

  • Current rankings for target keywords
  • Domain-specific metrics (total number of backlinks, number of linking domains, domain authority, etc.)
  • Number of pages
  • Number of ranking keywords
  • Growth in total backlinks MoM and YoY

Customer service data

Dig through your customer service data to find numbers like:

  • Average number of support tickets per day, week, and month
  • Growth in number of support tickets vs. growth in traffic/customers (drastic increase in support tickets without accompanying growth in customers is a sign of underlying service issues)
  • Number of customer service agents and their performance
  • Average number of support emails vs. on-site messages (via chat)  vs. phone calls

Efficiency metrics

How efficiently can you ship products and resolve customer problems? Pick through your data to find these numbers:

  • Average turnaround time per customer query
  • Average time for packing and shipping individual product(s)

To gather this treasure trove of data, you’ll need to open multiple different tools. But once you have it, you’ll have a lot of insight into the things holding your business back.

Step #2: Gather subjective data

While objective data and numbers are great, they can’t tell you what customers actually feel about your store and your products.

They also don’t tell you anything about your employee morale, their work satisfaction, and any issues holding them back.

In this step, you need to collect data like:
Customer interviews and surveys
Interviews and surveys — on-site, through email or over the phone — are some of your best tools for understanding your customers and what they want.

Ask:

  • What do your customers like about your product(s) and your site?
  • What do your customers NOT like about your product(s) and your site?
  • What improvements do they want to see, if any?

Employee interviews
Your customers are only one half of your business’ success. The other half is a happy, productive team of people behind the scenes.

Interview your employees and managers to figure out:

  • What do they feel about your business and their role(s) in it?
  • What would they like to change?
  • What would they want to remain the same?

Besides the above, you should also audit your internal resources to answer questions like:

  • What skills do you (or your team) specialize in?
  • What skills do you need to hire/outsource for?
  • What skills are not “in your DNA”, i.e. skills you’ll have to bring in outside partners for?

Your goal in any subjective audit is to figure out the “one thing” you do really well (such as product design, customer service, or marketing). At the same time, you also need to find skills and areas you need to drastically improve upon.

Step #3: Competitor analysis

Competitor analysis is the heart of the “Opportunities & Threats” in SWOT. You’ll want to devote a significant amount of time to this.

Start off by listing your major competitors. Then find the following data:

Product range
Dig through your competitor’s website and find answers to questions like:

  • How many products do your biggest competitors sell?
  • What is the overlap between their product range and yours?
  • What new products are they planning to launch?
  • What products have they discontinued recently?

Product pricing
Document the pricing for all their products you are competing against, as well as their shipping costs. Make an Excel sheet with their top selling products (that you compete against) and list their prices.

Current promotions

Are your competitors running any current promotions (such as discount coupons, offers, etc.)?

If yes, how prominently are they advertising these promos (on their site, on their social media channels, in print/digital/TV ads)?

Document all the promotions you can find in a separate document. Also note which products they are promoting heavily — these are either their best converting products or new launches.

SEO

For each competitor, find out their:

  • Domain authority
  • Total backlinks
  • Total ranking keywords
  • Top ranking keywords

Social media presence
Find out the following for each competitor:

  • Top social channels (by total followers/fans)
  • Top social channels (by activity)
  • Average number of updates on each channel
  • Average engagement rate for each post on each channel

Advertising spend

How and where are your competitors advertising their products?

Figure this out by asking questions like:

  • Are your competitors advertising on Google AdWords? If yes, what are their target keywords?
  • Are your competitors promoting themselves through paid social ads? If yes, what are their top social channels — Twitter, Facebook or Instagram?
  • Do your competitors have any video ads?
  • Do your competitors sponsor any contests, podcasts, or email newsletters? If yes, how long have they been doing it (a long-term sponsorship is likely to be profitable)?
  • Do your competitors spend money on media buys?

If possible, also find your competitors’ offline ad spend, including print, radio, billboard and TV advertising.

It’s also a good idea to collect your competitors’ creatives (ad images, copy, videos, etc.). This can be the springboard for new marketing ideas.

Customer service

The quality of customer service often makes or breaks competition. It can be difficult to get this data, but you can get an estimate by sending a support email/call and calculating response quality and time.

In addition, also figure out the number of customer support channels they offer (email, on-site chat, phone, etc.). Which channel do they promote on their site? For example, some businesses display their phone numbers prominently on their site while others focus on email.

Payment methods

What payment methods do your competitors accept? Is there an obvious payment method they are missing (such as Paypal)?

Website Design/Usability issues

This is mostly subjective, but a design and usability audit of your competitors can help you spot opportunities.

Figure out things like:

  • Total number of checkout steps
  • Marketing copy and design, especially above the fold
  • Quality and quantity of product images
  • Quality and depth of product descriptions
  • Average number of reviews for each product

In addition, also note the E-commerce software they use.

Company metrics

Finally, find out some more details about your competitors, including their:

  • Company size (in terms of employees)
  • Annual revenues
  • Growth in revenues YoY
  • Number of monthly visitors and pageviews
  • Years in business

Step #4: Understand market trends

What is the current demand for your product(s)? How is demand expected to grow in the near and far future? Is there any pending legislation that can impact product demand?

Figuring out these trends can be hard since there is often little concrete data available. However, if you’ve been in business for a while, you likely already have a good idea of general trends.

Try to find out things like:

  • Current and projected demand for your product(s)
  • Market trends that can increase demand for your products (example: a famous rapper recently started wearing shoes similar to yours)
  • Market trends that can decrease demand for your products (example: new fashion trends favor monochromatic themes while you sell mostly colorful clothing)
  • Legislation that might impact product demand (example: your local government adding a tax to imported products — such as yours)
  • Market developments that can impact competition (example: new software drastically reduces cost to build conversion-focused E-commerce sites — which is your strength — and thus floods the market with new players)

This will be an open-ended enquiry. You don’t have to have exact numbers for each of the issues above; a general idea of the way the industry is moving and the impact it will have on your business is good enough to start with.

Step #5: Map Our Your SWOT

If you’ve followed the four steps above, you’ll likely have a ton of data about your own business, your competition and your market.

With this data, you can now start answering questions to zero in on your SWOT — Strengths, Weaknesses, Opportunities and Threats.

Strengths

To find your strengths, dig through your data and answer questions like:

  • What do you do better than anyone else in your business?
  • What competitive advantage do you have over your rivals?
  • What is your USP?

Weaknesses

To spot weaknesses, find answers to questions such as:

  • What are my shipping costs? Are my total costs lower than brick and mortar stores?
  • How much do I have to spend on marketing? Does lower marketing spend mean that the barrier to entry is low (and thus, more competition)?
  • What skills does my current team lack? Are these crucial to my business success?

Opportunities

You can narrow down on your opportunities by asking questions like:

  • What market trends can I take advantage of to expand my revenues?
  • What competitor weaknesses can I exploit?
  • What technologies can I use to increase efficiency?

Threats
To narrow down on threats, find answers to questions like these:

  • How big is the barrier to entry? How likely is it for a new startup to tap into my existing market?
  • What are the chances that a bigger rival will move into my segment?
  • Are there any regulatory or legal hurdles that might impede my growth?

These are just a few questions to kickstart your SWOT analysis. As you gather and analyze data, you’ll spot obvious strengths and weaknesses you can exploit to fuel growth.

For example, if your analysis shows that you have strong design talent while your competitors have barely any presence on social media, you can use your design strength to outmarket your competitors on social channels.

Similarly, if you have a strong manufacturing base that can quickly turn prototypes into finished products, you can use it to spot trends and bring new products to market faster than your competitors.

If you do all the five steps above, you’ll be in a much better place to understand your business, your competition and the market forces that affects your success.

Over to You

SWOT analysis isn’t essential to E-commerce success, but it definitely helps. Instead of playing it by the ear, a thorough SWOT analysis will help you chart out a long-term strategy for success. Armed with this document, you’ll be able to spot trends faster than your competitors, mitigate your weaknesses and focus your strengths.

Here’s what you should takeaway from this post:

  • Gather both subjective and objective data about your site and your business before starting any SWOT analysis.
  • Analyze your competitors as rigorously as you analyze your own business and its strengths/weaknesses.
  • Understanding external forces — market trends, legislative issues, etc. — is the crucial for finding opportunities quickly
About The Author
Jesse is the Marketing Manager at Ecwid and has been in e-commerce and internet marketing since 2006. He has experience with PPC, SEO, conversion optimization and loves to work with entrepreneurs to make their dreams a reality.

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