The Ecwid Blog>How To Do SWOT Analysis For E-сommerce

How To Do SWOT Analysis For E-сommerce

Posted 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.

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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:

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:

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:

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:

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:

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:

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:

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:

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::

Shipping statistics

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

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:

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:

Customer service data

Dig through your customer service data to find numbers like:

Efficiency metrics

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

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:

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:

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

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:

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:

Social media presence

Find out the following for each competitor:

Advertising spend

How and where are your competitors advertising their products?

Figure this out by asking questions like:

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:

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

Company metrics

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

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:

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:

Weaknesses

To spot weaknesses, find answers to questions such as:

Opportunities

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

Threats

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

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:

 

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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