eCommerce SWOT Analysis

What is SWOT analysis? – It is a structured planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats in a business. The key to a SWOT analysis is to identify the internal and external factors to achieve a company’s objective. Strengths and Weaknesses are the internal factors that are measured with a comparative benchmark, while Weaknesses and Opportunities are the external factors which are measured with a competitor in the same industry.

Typically, the objectives of a SWOT analysis is to build the company strengths and minimize on weaknesses. In an industry like ecommerce, you will want to take advantage of opportunities quickly so that you can break away from your competitors or other threats before they can neutralize it. A SWOT analysis does not take a small period of time and while you could often do it on your own, it is best to get an outsourced consultant from a better perspective to do it for you. Your customers or clients would also be a source of information for you. They can easily spot weaknesses and perhaps give feedback on areas where improvements are needed.

Strengths – An ecommerce company’s strengths are the unique points that differentiate them from their competitors. It can be a wider selection of products, better customer support, quicker shipping, lower prices, better terms and conditions, etc. These are competitive advantages that can increase a company’s strengths.

Ecommerce vendors also benefit from lower operational costs and a 24-7 shopping experience, compared to a ‘brick and mortar’ business.

Weaknesses – One of the top problems that all ecommerce merchants will face are excessive Chargebacks. With security and fraud lurking in every corner, customers are often reluctant to use their credit cards for online purchases.

Shipping of products is another issue, where heavy, large, and perishable goods are often a pain and very expensive. Shipping duration could also open the customer’s options to purchase the products elsewhere.

Opportunities – Technology is a perfect example to expand a company’s growth and take advantage of areas where the competitor’s vulnerable. In the ecommerce world, changes happens every single day, and technology has help level the industry with traditional retailers.

For example, the online shopping cart softwares has been improved for a smoother, quicker, and more customer-friendly experience. Live customer support chat has increased the level of support the customers need. Social media is an excellent platform for free or low cost promotions to increase product awareness.

Threats – A business must take note of the broad industry shifts that can affect their business and company growth. Legal and regulatory changes for instance, may force all ecommerce businesses to collect sales tax. New laws from card associations may also be a problem, especially for the higher risked industries.

Competition from ecommerce giants like eBay and Amazon often undercut smaller merchants on price. Lower barriers for entry into ecommerce is also a threat, allowing almost anyone to sell via social media without the need of a website or a company.