How to Competitor Benchmark to Identify Opportunities

How to Competitor Benchmark to Identify Opportunities

Written by Leong KexinOctober 5, 2020

How to Competitor Benchmark to Identify Opportunities

In an increasingly competitive landscape, brands and retailers must competitor benchmark to stay ahead of the game.

E-commerce continues to scale and push the boundaries of profit and opportunities worldwide. While this has been true for years, the Covid-19 pandemic further amplified the phenomenon.

Online shopping surged by 30% in the span of three months amid lockdowns and travel bans. The Asia Pacific region is central to this growth as e-commerce adoption has been rapidly growing here. In Southeast Asia, e-commerce is expected to exceed US$150 billion by 2025

While this creates an abundance of opportunities, the stakes are much higher as more brands and retailers scramble to grab market share. Gaining as much edge as possible over your competitors is critical at this time.

What is Competitor Benchmarking?

Competitor benchmarking is a methodology in keeping tabs on your competition.

Buyers and merchandisers typically competitor benchmark on regular intervals to stay in the loop of the changes in competitors’ strategies.

Competitor benchmarking entails looking at the overall performance of your competitors at a high level or drilling down to monitor each competitor’s assortment, pricing, discounting, distribution and marketing strategies.

This way, retailers can better grasp consumer demand – the key categories, optimal price points and effective promotional tactics that drive profit.

How to Competitor Benchmark Effectively?

To illustrate how to competitor benchmark, we take a look at two independent e-commerce retailers from Singapore, MDSCollections and The Closet Lover to understand their strategies and their performances.

From reviewing the last six months’ launches, we conclude that both brands adopted very different strategies in assortment, pricing and discounting.

 1. Comparing Brand Performance to See Where You Stand in the Market

MDSCollections currently has an assortment size of 3,080 products, a larger online offering than The Closet Lover’s 2,355 products.

Competitor benchmark: Analysing trade analysis
MDSCollections and The Closet Lover’s trade analysis. Source: Omnilytics Dashboard

MDSCollections and The Closet Lover achieved high full price sell-outs at over 50%. High full price sell-out rates demonstrate a strong grasp of consumer demand for both brands.

That said, most of The Closet Lover’s sell-outs came from discounted products. In this situation, retailers should revisit their pricing strategies to ensure that products are not priced too high for their perceived value.

Consistent launches maintain newness and engage consumers. Over the last six months, MDSCollections has been actively launching new products – with a 10% higher new-in rate than The Closet Lover.

The Closet Lover’s lower newness rate hints at a tighter assortment strategy than MDSCollections. However, the retailer compensates for this by replenishing its assortment more frequently.

MDSCollections’ high replenishment coupled with its strong new-in rate suggests that the brand maximises its best-sellers by re-stocking frequently while maintaining a steady stream of new launches to meet the demand of consumers.

2. How to Compare Assortment Strategies?

The right assortment mix is important for brands to maximise selling opportunities. While not all product categories perform equally well, betting on the right assortment mix can significantly improve sales.

For example, whilst the Pants and Leggings category may not always be the best performer, it is still essential to consider stocking a limited assortment to complement an outfit. Competitor benchmarking helps brands spot gaps in the market and adjust their assortment mix accordingly.

MDSCollections and The Closet Lover’s category contribution. Source: Omnilytics Dashboard

The above chart lists the top categories within MDSCollections and The Closet Lover, showing their sell-out rates against the overall stock count for each category.

The Dresses category leads the assortment for MDSCollections. With both the highest product count and category sell-out rate of 59%, the brand consistently met growing demands for this category.

On the other hand, The Closet Lover had fewer contributions for its Tops category, despite amassing the highest sell-out rate.

Pants & Leggings are strong sellers for both retailers. High sell-out rates in low contributing categories suggest a possible gap in the market for retailers to fill. 

Conversely, categories with low sell-out rates indicate low demand. This raises a red flag for brands to revisit their assortment and consider discounting slow-sellers to minimise risk.

3. How to Compare Pricing Strategies?

The pricing strategy for both brands varies. MDSCollections has a wider price spread compared to The Closet Lover, with a higher entry point at USD17.

MDSCollections and The Closet Lover's price summary
MDSCollections and The Closet Lover’s price summary. Source: Omnilytics Dashboard

The retailers also differ in the prices they invested in. MDSCollections had contributions in most price brackets, with the highest concentration in the USD15-25 range.

Meanwhile, The Closer Lover invested most heavily in the USD10-20 price brackets. The retailer has minimal products above USD35 in contrast to MDSCollections.

A higher entry point allows brands more room for discounting and maximises margins – but also runs the risk of driving consumers to their competitors with more accessible prices.

MDSCollections and The Closet Lover's price breakdown
MDSCollections and The Closet Lover’s price breakdown. Source: Omnilytics Dashboard

In the end, it all falls back on the brand’s DNA. If the brand started at a lower entry point, a gradual scale is best to encourage consumers to increase their expenditures.

4. How to Compare Discounting Strategies?

Timing, depth of discounts and promotional tactics all play an important part in an effective markdown strategy.

MDSCollections and The Closet Lover's discount breakdown
MDSCollections and The Closet Lover’s discount breakdown. Source: Omnilytics Dashboard

MDSCollections currently has 52% of its assortment on discount, exceeding The Closet Lover at 43%. MDSCollections also employs deeper discounts, which are met with high sell-out.

In comparison, The Closet Lover’s has more products in the shallow discount bracket, which have been effective at driving sales.

In general, MDSCollections amassed low sell-outs for its discounted products. This indicates that their online consumers are less price-sensitive and discount centric. In a similar situation, brands can look into stocking at multi-label discounting sites or sell offline as an alternative markdown strategy.

On the other hand, discounts are an effective strategy for The Closet Lover to minimise inventory risk. An already compact assortment strategy can be made even more robust with frequent promotion to ensure healthy flow.

Summary

Brands and retailers should competitor benchmark for a clearer understanding of the retail landscape and how to leverage the findings to build impactful strategies.

MDSCollections and The Closet Lover have very distinct strategies. The former moves quickly in terms of new launches and is able to drive full price sell-out with the right prices.

The Closet Lover, on the other hand, boasts more accessible prices and compensates for its smaller assortment with high replenishment.

Focusing on key strength is by no means a business mistake, but proper assortment planning with both internal and external data is a crucial step to avoid overstocking and identify opportunities.

Competitor benchmarking allows you to:

  • Spot gaps in the market.
  • Understand your competitors’ grasp of their consumer demand.
  • Observe critical success factors.
  • Identify distribution opportunities to expand market reach.
  • Map where your brand stands amongst the competition.
  • Leverage competitors’ past data to formulate growth strategies.

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