I’m sure you strive to do your best with your online shop every single day, but…
Do you know the factors that are driving the success of your business and which could hinder its development?
When you rely on your online shop to earn a living, you simply can’t make decisions based on intuition alone.
To find out where your e-commerce stands, what you’re doing well, and what you could improve on, you need a SWOT analysis.
You have no clue what that is, right?
Not to worry – grab a pen and a piece of paper and get ready to learn more about one of the best and most accessible analysis techniques at the moment.
👉 What is a SWOT analysis?
If you’ve ever attended a business class, the term “SWOT analysis” might ring a bell. Here’s a definition for you:
A SWOT analysis is a technique to find out the internal and external factors that make a company successful or not.
In other words, it’s a tool to analyze in detail how your online shop is doing so as to design a long-term strategy.
The term “SWOT” is an acronym:
You can see it more clearly in the figure below:
Don’t forget that:
- Strengths and weaknesses are internal factors and, therefore, depend exclusively on you.
- Threats and opportunities are external factors that you can’t do much about apart from bearing them in mind.
Having explained this, we’ll now tell you why it’s such an important concept.
👉 Why your e-commerce needs a SWOT analysis
If you take some time to carry out a SWOT analysis of your business and the competition, you’ll be able to come up with a strategy to set you apart from the rest of the shops in your market niche.
But there’s more to SWOT than just that. You can also:
- Spot opportunities to give your business a boost in the right time by making optimal decisions.
- Identify your own weaknesses before they jeopardize the profitability of your business.
- Locate threats in order to minimize or even neutralize them.
Even though you’ll most frequently do a SWOT analysis for your company as a whole, you can also do it for:
- A particular project.
- A specific marketing campaign.
- The development of a certain product.
Let’s move on to the lowdown on how to design a good SWOT analysis.
👉 Necessary background info to properly do a SWOT analysis of your e-commerce
Before you get ahead of yourself and start filling out charts on a piece of paper, you’ll need to do some research in order to gather all the necessary information to carry out a useful and realistic analysis.
To perform your SWOT analysis, you need:
- Time: Depending on the size of your business, it might take days or even months.
- Data: Information that’s both objective (financial details, traffic and sales metrics, etc.) and subjective (customer satisfaction, value proposition, unique resources, research on your competition, etc.).
It’s crucial to do the analysis correctly and to plan a strategy in accordance with the results you obtain.
👉 Breaking down the parts of your SWOT analysis
After doing all the background research, you’ll have loads of information about your own business, sector, and competitors.
That means it’s time to enter all that data into a SWOT matrix so you can make strategic decisions to improve your business.
And to do that, you’ll need to know what to include in each quadrant of the SWOT matrix:
✅ 1. Strengths
As we’ve said, strengths are internal factors within your business.
They are your strongest points – the things you’re really good at that give you a leg up over the rest of the online shops in your sector.
They’re not always easy to spot since you must take into account not only your own perspective, but also your customers’ opinions.
Sound too complicated?
Here’s a little trick: Write down a list of the defining features of your company and then think about whether they can be considered strengths. You can do it quite easily by comparing yourself with the competition.
For example, if most companies in your sector offer high-quality products just like you, that’s not a strength of your business – rather, it’s a necessity generated by the market.
However, if the others sell lower-quality items, it is indeed one of the strengths of your e-commerce.
Other aspects we can consider to be strengths are:
- Product selection: Whether it’s wider than the others or more specific for a particular niche (here’s a post on how to select a product and another one showing the 6 best-sellers on the Internet).
- Shipping: You can make it faster, safer, or cheaper than the rest (click here to read a post on logistics that should give you a hand with this).
- Return policy: Tailor it to your clients’ needs and keep it simple and clear (here’s a post on how to create your return policy).
Once you’ve figured out what your strongest points are, it’ll be easier to focus on them to drive better results from your e-commerce.
✅ 2. Weaknesses
This point is harder to tackle because you have to be realistic and may face some unpleasant circumstances you didn’t anticipate.
Your focus should be on finding whatever is hindering your business or what your competitors are doing better than you.
Some of the most common weaknesses for online shops are:
- Financial resources: Does your budget make it hard to invest in your business?
- Shipments: If, for example, you sell perishable or bulky products, shipping is more expensive, which reduces the profitability of your sales.
- Payment distrust: Some clients are still reluctant to buy online, which is why it’s important to have different payment methods).
- Lack of a clear value proposition: This means that you don’t clearly differentiate yourself from the competition.
Despite being an internal factor, having an external opinion is also advisable.
For example, you can ask your customers if they think there’s something you could improve upon. That’s another way of discovering weaknesses you may have never considered.
✅ 3. Opportunities
These refer to any given scenarios that might come up in the market that your shop can take advantage of to improve its position with the resources it already has available.
Opportunities may come in different shapes:
- Increase in a product’s demand: For example, anything worn by influencers at popular events usually sells out in online clothes shops within hours. (Want to work with influencers? Check out this post!)
- Technological improvements: The use of productivity tools can improve your production process and reduce costs.
- Innovative niches: If you detect an underexploited niche, then that’s a great opportunity to widen your potential market.
- Changes to legislation: For example, they may pass a law affecting your sector that makes your clients more willing to make a purchase (to learn how to get started, this post breaks down the legal requirements of launching an online shop in Spain).
Focusing on your strengths may even lead to detecting and generating more opportunities.
Likewise, you can generate more opportunities by neutralizing some of your weaknesses.
✅ 4. Threats
Threats are external factors to your company.
They refer to potential changes within your sector or country that might directly affect business growth.
One example is a change to your country’s legislation that directly affects your products.
In order to identify threats, it’s essential to ask yourself some questions, however unlikely they seem at first:
- Are there any legal hurdles that could slow down your company’s growth?
- Could my market niche be attractive to a bigger company?
- Are my competitors growing rapidly?
That is to say, ask yourself about anything posing a possible a risk to the company or its growth prospects.
👉 Right, so what do I do with my SWOT analysis now?
Once you’ve carried out your SWOT analysis, you’ll have created a nice overall view of your company’s situation.
You can implement several actions after analyzing the results:
- Boost strengths: Keep doing what you’re already doing well and try to improve even more.
- Deal with weaknesses: Neutralize or fix as many as possible.
- Minimize threats: Mitigate as many as you can while bearing in mind that you can’t control all of them (but you can be better prepared to face them).
- Make the most of the opportunities you get: Identify potential opportunities in order to set new goals for your business.
By following this strategy, you will not only avoid risks and pitfalls, but also propel your business in an effective way. And that’s what really matters to you at the end of the day.
👉 Where are you going to start gathering information for your SWOT analysis?
This matrix is a powerful tool that also happens to be relatively easy to use.
By applying the SWOT method to your e-commerce, you’ll be able to:
- Detect trends before your competitors do.
- Minimize your weaknesses.
- Focus on your strengths.
In sum, it’ll let you design a long-term strategy to ensure success in your online shop.