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How To Do SWOT Analysis For E-сommerce

Posted by Jesse Ness, 51Ƶ Team

Ifyou’ve ever taken abusiness class ortwo, you’re probably familiar with SWOT analysis.

Incase you haven’t, SWOT isamethod forunderstanding theinternal Իexternal factors that impact aܲԱ’ success.

Think ofitasaframework formethodically analyzing abusiness Իcharting out along-term strategy.

While originally developed forlarge businesses, you’ll besurprised tolearn that SWOT isequally useful forsmall businesses infast-moving industries like e-commerce.

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

Inthis post, we’ll help you understand SWOT analysis— even ifyou nobusiness education— Իshow you how touse itinyour E-commerce business.

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Why doaSWOT Analysis?

There are dozens ofmethodologies foranalyzing businesses. You might even befamiliar with some ofthese acronyms such as:

Most, ifnot all ofthese are essentially built-up ontheSWOT analysis fundamentals. This isone reason why even 50+ years after itwas first developed, SWOT analysis isstill one ofthemost popular ways toanalyze businesses.

There isanother reason forSWOT’s popularity: its simplicity Իflexibility.

“Strengths, Weaknesses, Opportunities &Threats” are intuitive categories that anyone can understand, regardless oftheir business background. These categories are also very flexible— they apply asmuch tobusinesses asthey apply tonon-profit organizations Իgovernment bodies.

Beyond thesimplicity, SWOT also gives you actionable insight into your business, both intheshort-term Իlong-term. With SWOT you can:

Sowhat exactly isSWOT Իhow can you apply ittoyour E-commerce business?

Let’s find out below.

What isaSWOT Analysis?

Wedon’t really know who came upwith theSWOT methodology (though most sources claim itwas management consultant Albert Humphrey). What wedoknow that itwas initially based ondata collected from Fortune 500companies.

Atits heart, theSWOT method believes that all thefactors that affect abusiness can bedivided into four categories:

Ofthese, “strengths” Ի“weaknesses” are internal toabusiness. “Opportunities” Ի“threats” ontheother hand, are externalڲٴǰ.

Intraditional SWOT analysis, you’d also classify your strengths Իopportunities as“helpful” foryour business growth. Weaknesses Իthreats would be“harmful”.

Based onthis, you get aSWOT chart— afour quadrant matrix like this:

Any business, regardless ofits size ofindustry, can segregate its success factors into these four categories.

For example, suppose you’re running awatch store, both offline Իonline. You have anextensive range ofbudget watches but your luxury brand stock isweak. You also have adeep-pocketed competitor outspending you inlocal advertising, though you have astrong brand presence online.

Your SWOT analysis might look something like this:

Listing all these factors will help you figure out astrategy toplay upyour strengths, counter your weaknesses Իbeat your competition.

How can you perform asimilar analysis foryour store?

Let’s find out.

SWOT Analysis forE-commerce

Before you jump inԻstart analyzing your business, you’llneed afew things torun asuccessful SWOT analysis:

Below, we’ll show you all thedata you should have Իhow touse itduring analysis.

How todoSWOT Analysis forE-commerce

Follow thesteps shown below toanalyze your E-commerce business:

Step #1: Gather objective data

Your objective data— stats, traffic figures, sales data, etc.— give you hard numbers onyour ܲԱ’ performance. This will form thefoundation ofԲԲ.

Here’s thedata you should have before starting SWOT:

Current website traffic

Dig through your analytics tofind:

Conversion rates

Your conversion rate isthepercentage ofyour traffic that turns into paying customers (or leads, subscribers oranyother conversion event). That is, ifyou get 100visitors daily Իofthese, 5end upbuying from you, your conversion rate is5%.

You should have conversion rate data for:

Customer loyalty

How likely are your customers toreturn toyour store Իshop from you? For this, you can use thefollowing data:

Social media statistics

Ifsocial media isalarge source ofyour traffic Իcustomers, you should know thefollowing numbers::

Shipping statistics

Shipping iscritical forthesurvival ofanE-commerce business. Make sure togather data like:

Customer LTV ԻAOV

LTV (Lifetime Value) ԻAOV (Average Order Value) often determine anE-commerce ܲԱ’ long-term profitability. AOV iseasy enough tocalculate— it’s simply your total sales divided bythetotal number oforders.

Tocalculate LTV, use this formula:

(Average Order Value) x(Number ofRepeat Sales) x(Average Retention Time)

Customer acquisition data

How Իwhere you acquire your customers isanimportant part ofyour ܲԱ’ success. You should have numbers like:

SEO data

Social brands might get away with poor SEO, but formost other E-commerce businesses, organic reach isamassive driver ofconversions.

Run aquick SEO audit tofind data like:

Customer service data

Dig through your customer service data tofind numbers like:

Efficiency metrics

How efficiently can you ship products Իresolve customer problems? Pick through your data tofind these numbers:

Togather this treasure trove ofdata, you’ll need toopen multiple different tools. But once you have it, you’ll have alot ofinsight into thethings holding your business back.

Step #2: Gather subjective data

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

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

Inthis step, you need tocollect data like:

Customer interviews Իsurveys
Interviews Իsurveys— on-site, through email orover thephone— are some ofyour best tools forunderstanding your customers Իwhat they want.

Ask:

Employee interviews
Your customers are only one half ofyour ܲԱ’ success. The other half isahappy, productive team ofpeople behind thescenes.

Interview your employees Իmanagers tofigure out:

Besides theabove, you should also audit your internal resources toanswer questions like:

Your goal inanysubjective audit istofigure out the“one thing” you doreally well (such asproduct design, customer service, ormarketing). Atthesame time, you also need tofind skills Իareas you need todrastically improve upon.

Step #3: Competitor analysis

Competitor analysis istheheart ofthe“Opportunities &Threats” inSWOT. You’ll want todevote asignificant amount oftime tothis.

Start off bylisting your major competitors. Then find thefollowing data:

Product range

Dig through your competitor’s website Իfind answers toquestions like:

Product pricing

Document thepricing forall their products you are competing against, aswell astheir shipping costs. Make anExcel sheet with their top selling products (that you compete against) Իlist their prices.

Current promotions

Are your competitors running anycurrent promotions (such asdiscount coupons, offers, etc.)?

Ifyes, how prominently are they advertising these promos (on their site, ontheir social media channels, inprint/digital/TV ads)?

Document all thepromotions you can find inaseparate document. Also note which products they are promoting heavily— these are either their best converting products ornew launches.

SEO

For each competitor, find out their:

Social media presence

Find out thefollowing foreach competitor:

Advertising spend

How Իwhere are your competitors advertising their products?

Figure this out byasking questions like:

Ifpossible, also find your competitors’ offline adspend, including print, radio, billboard ԻTVadvertising.

It’s also agood idea tocollect your competitors’ creatives (ad images, copy, videos, etc.). This can bethespringboard fornew marketing ideas.

Customer service

The quality ofcustomer service often makes orbreaks competition. Itcan bedifficult toget this data, but you can get anestimate bysending asupport email/call Իcalculating response quality Իtime.

Inaddition, also figure out thenumber ofcustomer support channels they offer (email, on-site chat, phone, etc.). Which channel dothey promote ontheir site? For example, some businesses display their phone numbers prominently ontheir site while others focus onemail.

Payment methods

What payment methods doyour competitors accept? Isthere anobvious payment method they are missing (such asPaypal)?

Website Design/Usability issues

This ismostly subjective, but adesign Իusability audit ofyour competitors can help you spot opportunities.

Figure out things like:

Inaddition, also note theE-commerce software they use.

Company metrics

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

Step #4: Understand market trends

What isthecurrent demand foryour product(s)? How isdemand expected togrow inthenear Իfar future? Isthere anypending legislation that can impact product demand?

Figuring out these trends can behard since there isoften little concrete data available. However, ifyou’ve been inbusiness forawhile, you likely already have agood idea ofgeneral trends.

Try tofind out things like:

This will beanopen-ended enquiry. You don’t have tohave exact numbers foreach oftheissues above; ageneral idea oftheway theindustry ismoving Իtheimpact itwill have onyour business isgood enough tostart with.

Step #5: Map Our Your SWOT

Ifyou’ve followed thefour steps above, you’ll likely have aton ofdata about your own business, your competition Իyour market.

With this data, you can now start answering questions tozero inonyour SWOT— Strengths, Weaknesses, Opportunities ԻThreats.

Strengths

Tofind your strengths, dig through your data Իanswer questions like:

Weaknesses

Tospot weaknesses, find answers toquestions such as:

Opportunities

You can narrow down onyour opportunities byasking questions like:

Threats

Tonarrow down onthreats, find answers toquestions like these:

These are just afew questions tokickstart your SWOT analysis. Asyou gather Իanalyze data, you’ll spot obvious strengths Իweaknesses you can exploit tofuel growth.

For example, ifyour analysis shows that you have strong design talent while your competitors have barely anypresence onsocial media, you can use your design strength tooutmarket your competitors onsocial channels.

Similarly, ifyou have astrong manufacturing base that can quickly turn prototypes into finished products, you can use ittospot trends Իbring new products tomarket faster than your competitors.

Ifyou doall thefive steps above, you’ll beinamuch better place tounderstand your business, your competition Իthemarket forces that affects your success.

Over toYou

SWOT analysis isn’t essential toE-commerce success, but itdefinitely helps. Instead ofplaying itbytheear, athorough SWOT analysis will help you chart out along-term strategy forsuccess. Armed with this document, you’ll beable tospot trends faster than your competitors, mitigate your weaknesses Իfocus your strengths.

Here’s what you should takeaway from this post:

About The Author
Jesse is the Marketing Manager at 51Ƶ 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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