In this article, we’ll share what a SWOT analysis is, why a marketplace needs it, and how to conduct it in order to objectively assess your capabilities and ensure growth for your business.
What is SWOT analysis?
This is a method of objective assessment that can be applied to any business, any situation, and any person. It includes studying the internal and external environment of your business: its opportunities (prospects) and threats, strengths and weaknesses. The data is entered into a table from which you draw conclusions.
External factors are opportunities and threats. They refer to unavoidable circumstances that you, as the owner of the marketplace, cannot influence. Moreover, they may not happen – it all depends on the situation. For example, opportunities include new trends in the market, and threats involve competitors and unscrupulous suppliers (or even fraudulent customers!).
Internal factors are what is already happening inside your business and controlled by you. For example, your strengths can be a large assortment or excellent logistics. And the weak points are unscrupulous employers or tricky partners.
Why do you need SWOT analysis?
Conducting SWOT analysis has many perks for your business. Here are just some to mention:
- Objectiveness.You look at things objectively. The main principle of the SWOT analysis is honesty with yourself;
- Competent audit of your business. Many entrepreneurs pay business consultants for the audit. You can do SWOT analysis for free;
- Immediate troubleshooting. You identify weaknesses and take measures to eliminate them and then avoid repeating mistakes;
- Clear picture of what’s going on. You find out the motives of those who surround your business – both from the inside and from the outside;
- Competitor knowledge. You know how to stand out from competitors. You study their strengths and weaknesses and retaliate;
- Informed decisions. Your business strategy becomes more conscious as you understand the current environment, your marketplace pros and cons and act respectively.
Principles of SWOT analysis
To have maximum benefit from conducting the SWOT analysis, you should follow some rules:
- Whole or a part? First, decide whether you will conduct a SWOT analysis of your business as a whole or one of its segments. Experts recommend dividing this task into several areas and analyzing each. For example, for a marketplace, you can analyze the product range, customer support, and shipping separately. And then compare the data for each.
- Dynamics. Consider each segment of your online marketplace in dynamics. For example, your strength is impeccable logistics. Ask yourself questions: has it always been like this? What have you done to achieve a high level of logistics? What will you do if the established system fails?
- Honesty. Be honest with yourself: the quality of the analysis and its result depend on it. If you know that you are working with unreliable suppliers and are sometimes forced to sell low-quality products – just write it. No one will see – you make up the analysis for yourself. But you will be able to objectively assess the consequences and understand what can be done with this factor.
- Be an external observer. Assess pros and cons of your marketplace not from the side of the store owner, but as the market sees them: investors, customers, and competitors. For example, you can sell low-quality products without loss and even make a profit. Is it good for you? Definitely. But if competitors or customers find out about this, there will be trouble. So, from the point of view of the market, this factor is your weak side.
- Be attentive. Consider the specifics of your business. Even two completely identical marketplaces will have different SWOT analysis data as there are too many inputs and circumstances to analyze.
How to prepare yourself for a SWOT analysis
It is better to involve all employees in the analysis and listen to their opinions. The essence is simple: you listen to the opinions and ideas of each employee and write down everything that comes to mind. So, draw a table, divide a sheet of paper into four columns: opportunities and threats, strengths and weaknesses. Ask yourself and your employees questions and answer honestly. What questions to ask?
Opportunities and threats
These include questions about supply and demand, major competitors, requirements of search engines and advertising services, distribution and supply, customer interaction channels, shipping, economic and political factors.
Evaluate the dynamics of the prices and the purchase cost: are there any upward trends? Has the crisis hit the pocket of your target audience? Have you noticed a decrease in demand for expensive goods?
How popular are your vendors’ products in the market? You can check this by asking customers on the site or in social networks, as well as by the number of user requests on the Google Analytics service. Does your niche have seasonal sales fluctuations? What are the market trends, what products of your niche will be popular in the near future? What opportunities do these changes give you?
How many competitors do you have? What advantages do their marketplaces have over yours? Is the number of competitors decreasing or increasing? Why did some competitors fail to hold their positions, what were their mistakes? How often do new stores appear on the market? What are the prospects for your online marketplace in the coming years?
How many suppliers do you have, are they reliable? What can be done to improve the quality of the delivered goods?
- ECommerce platform and hosting
Is your site secure? What platform do you use, are you satisfied with its work? Have you contacted technical support?
- Sanctions and blocking
Is your site subject to search engine sanctions? If so, why and what did you do to remedy the situation? Have you faced blocking of the marketplace account in social networks (somebody complained about your group, or you published prohibited or unoriginal content)?
- Traffic channels
What traffic sources do you use? Which ones are planned to be used, which ones to refuse? Which channels bring more traffic, which ones are unprofitable?
How are your products delivered? Are your partners reliable? Which method is the most popular? Which way can you opt out?
So, you answered the questions and recorded each answer in the appropriate column. There can be many options. For example, the marketplace K is doing well with demand (the store sells jewelry and accessories, demand exceeds supply). Delivery channels are established (all orders come to customers on time), but the site is lacking high-quality texts. The owner copies them from competitors. As a result, the webpage failed under sanctions and was downgraded in search results. Accordingly, fewer clients come from the search – something needs to be done urgently!
The N marketplace is fine with the website and its assortment, but there is another problem: unreliable vendors. They offer low prices, but work poorly and miss deadlines. In the meantime, changes are coming to the market: there is an opportunity to expand the range and get ahead of competitors. But as long as N. will work with these vendors, the situation will not change.
Strengthnesses and weaknesses
We have come to the most interesting – internal factors that you can and should influence. This is the cost and range of products, its quality, the work of your employees, the corporate culture, and the reputation in the market.
- Business processes
How streamlined are your business processes? Is there interaction among departments, services and employees? Can you delegate or do you tend to do everything yourself?
What is the annual turnover and revenue of your marketplace? Are you profitable or do you make ends meet? What are the main expenses? Is there a way to optimize them?
How professional are your employees? How complete is your staff, what specialists are missing? Do your employees have decent working conditions? How cohesive is your team? Are employees satisfied with the psychological climate in your team?
Is your marketplace known as reliable? What are you doing to promote the brands, how do you manage your reputation? How often do you face criticism? How did you get out of it?
- Product cost
Do you offer discounts or sales? Is there a loyalty program?
- Product range
What product categories do you have enough, and what – in excess? Does your vendors’ product range meet the needs of users?
- Webpage and social media
Is your site user-friendly? Is the site structure well-organized, is the catalog divided into categories? How convenient is it to place an order, pay for it? What payment methods do customers use most often, and which ones are ignored? Does the site have an responsive design – how convenient is it to access it from different devices? Does your marketplace have groups in social media? How often does the information appear there?
- Customer feedback
What are your customers complaining about? How do you respond to reviews and criticism? Does your site have a chat to deal with customer problems?
What methods do you use to promote the marketplace? What is the share of the advertising budget? How can you cut marketing costs?
Summarize the results and see clearly your strengths and weaknesses. For example, the M. marketplace devotes a lot of time to team building and increasing the personal effectiveness of each employee. The corporate culture is on top – this is its strength. At the same time, management cannot find a contextual advertising specialist in any way and spends a lot of money on advertising campaigns. This is definitely a minus.
Now you are armed with knowledge and can tell exactly what your strengths and weaknesses are. Act respectively: if work with suppliers fails, look for other suppliers. If clients complain about the inconvenient structure of the site – find a specialist and put it in order. If the quality of service leaves much to be desired, send employees to training, where they learn how to communicate with customers correctly.
Let’s look at an example of a real marketplace to clearly show how to analyze and draw conclusions.
Amazon marketplace SWOT analysis
Amazon is the largest company and eCommerce platform in the world. It sells videos, MP3s, audiobooks, software, video games, electronics, clothing, furniture, food, toys, and jewelry. It owns Amazon Publishing, Amazon Studios, and makes home appliances and electronics. The company has branches outside the US: in Brazil, Canada, UK, Germany, Japan, France, Italy, Poland, Spain, India and China. You definitely can learn much from its experience. Let’s study how well they are doing, and what’s wrong with this marketplace.
- The company is considered as a global eCommerce giant, has a strong position and a successful brand image in the market;
- Customer orientation, i.e. the company serves a large number of customers at inexpensive prices on a daily basis, which has made it customer-oriented;
- Innovativeness – Amazon has implemented a system of innovative development, an example of which is drone delivery;
- Minimal cost – Amazon does not spend a budget on the maintenance of physical stores, selling exclusively through the Internet;
- The largest range of products, for example, Amazon sold 562.3 million products on its marketplace in 2018;
- Amazon also has a large number of third-party sellers who join the platform to sell their own products (according to statistics, about 3,500 new sellers joined Amazon daily in 2020);
- “Go Global and Act Local strategy“, a special company strategy when Amazon develops partnerships with local companies in various countries, which helps to effectively compete with other large eCommerce companies, Amazon also promotes depending on “local” needs ” current” services and products;
- Amazon is involved in three of the most relevant and key business areas – Amazon Marketplace, Amazon Web Services (AWS) and Amazon Prime. AWS provides subscribers with virtual servers, storage resources, cloud databases, cloud middleware, cloud-based serverless computing, and development tools. Amazon Marketplace is an eCommerce platform that allows third-party sellers to sell their products. Amazon Prime is a fast delivery program.
- Fair competition. It is harder for large sellers to continue growing, while it is easier for new sellers to start selling on the site: the 850 largest sellers account for 10% of Amazon’s global sales. At the same time, more than 38,000 sellers provide 50% of all sales, and more than 360,000 sellers make 90% of all transactions – these facts attract many people who eventually become “part” of the platform;
- Amazon is one of the first retailers to raise the minimum hourly pay to $15;
- Diversified logistics system – fixed rates for different delivery times, which ensures reliable, safe and fast delivery of products to customers (diversified logistics system);
- Self-driving technology – the company recently acquired a self-driving car startup – it is now possible to use autonomous technologies, so improvements in the delivery network and the emergence of new services from Amazon are possible.
- Free shipping can also be one of the reasons why the company may suffer from losses due to transaction costs in some countries;
- Illegal activity, counterfeiting;
- Limited physical store presence – this fact prevents the company from attracting customers to buy things that are not sold online – loss of potential customers who do not trust online stores;
- Low consumer safety. The more customers, the more difficult to monitor and verify each product production;
- Dependence on the distributor system – reliance on distributors presents Amazon with a wide range of problems (some of them can force the company to revise the conditions);
- Employee strikes that lead to “paralysis” of the company’s work in certain locations (in Germany, employees went on strike in 2020 due to unsafe working conditions, as a result, work was paralyzed in six distribution centers).
- By establishing and expanding physical stores, the company can increase its competitiveness. After lifting of the pandemic limitations, demand for physical stores increased;
- Opportunity to expand in the emerging markets thanks to favorable conditions (Bangladesh and Mexico, for example);
- Back-integration thanks to expanding its own brands, such as Amazon Basics, to differentiate its offerings and increase profits.
- Blow to the reputation: scandals and disputes cause problems with the image of the company. In 2010, Amazon was boycotting for the fact that the book “The Pedophile’s Guide to Love & Pleasure: a Child-Lover’s Code of Conduct” was found on the platform. It was devoted to pedophiles. In addition, there was a scandal about pesticides and working conditions;
- A negative rating among the population of a certain location – in India, Amazon is the second online store after Flipkart;
- Administrative barriers: some government decrees can also threaten business processes. The company does not supply products to North Korea, Iran, and Syria.
- Cybercrime affecting the security of the company;
- “Copying” of the Amazon business model – potential competitors appear.
In general, Amazon should strengthen its major segments, mitigate its weaknesses, propel opportunities, and retaliate threats for future growth.
What can be recommended there:
- Increase marketing activities and highlight competitive advantages
- Deal with the brand image: resolve tax issues and improve its app operation to improve customer loyalty
- Increase the market reach by opening more physical stores outside the U.S.
- Enter emerging markets
- Reduce the gap with major competitors by segments: Netflix, Apple TV+, Disney+ in video streaming, UPS and FedEx – in logistics, Uber, Tesla and Ford – in self driving technology
- Resolve counterfeit and cybercrime issues by upgrading the platform
- Improve network security to protect customer rights
Here we covered the SWOT analysis of an eCommerce business as a whole. You can ask more specific questions, or consider a more specific issue, such as how your store delivers. The main thing you should do after conducting a SWOT analysis is to face the problems honestly and take all possible measures to become better. Turn weaknesses into strengths, seize opportunities, properly assess risks and deal with threats. And if the problem is with the platform itself and hosting, feel free to contact us! We can help with the marketplace site architecture, design, safe hosting and improvement!