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What Retailers should learn from Porter’s Five forces ?

by Joanna Foyle on 11 Oct 2022
Topics pricechecker Share:

Five forces of competitive analysis is one of the most important strategic theory developed by Michel Porter of Harvard Business school to analyse competitive strength of business entities.

It is impossible to ignore his theoretical framework while implementing any type of decisions irrespective of the industries we belong to.

Retail sector is one of the growing industries that is dynamic and vibrant in nature. If you are into retail business, Porter’s five forces are relevant while making any big decisions for your company.

Let us look at what are the five forces specific to retailers and how Pricechecker champions in making the businesses achieve high competitive advantage in the market.

The theory involves evaluating the market position of the business in the industry.

For example, your competitor might be getting the best deals from a good supplier, or they may be in direct touch with the factory manufacturing the product. Thus, your competitor has eliminated middle-men, and thus, they have been able to reduce the cost. When there is a tool for competitor monitoring you will be able to find out where your brand stands among your competitors.

Porter uses five different parameters in assessing the status of the business. This in the context of decision making is extremely important as we know in a free market economy, competition has to be dealt with better business goals. In short, retail businesses must understand their position and try to increase their bargaining power to not just survive but to emerge as market leaders.

1. Competition in the industry


Among retailers the competition is fierce and intense. As the number of retail and e-commerce stores increase it pushes the competition further. Most retailers react to this competition by cutting down their prices aggressively. This will not allow retailers to make a big profit margin. In specific to the online retail industry the competition has been high since the start. Most of the brands resort to price cutting and making offers & discounts to attract customers.

How pricechecker can help? With rivalry being at its peak, pricechcker is a competitor monitoring software that will help the retail brand identify where exactly they are positioned against the competition. This information will give an advantage to price products better than your competitors. For instance, if you are selling iphones and if your competitors have that product as out of stock. With pricechecker you will get instant information and alerts so you can price your iphone with better profit margin. In the other case, you can quote a lesser price on products to be optimised on google feed basen on your competitors’ pricing.

2. Potential of new entrants into the industry


There is a good potential for new retail businesses to enter the market. Since starting an e-commerce platform does not necessarily require huge investment there is a good chance that new entrants will join the market. However, the question of survival in the long run depends on the profit margin and market share.

With pricechecker you can monitor your top competitors and stay ahead of them while making your pricing decisions.

The excellent features of the software allows you to compare your prices and stock levels with your competitors.

3. Power of customers


The power of customers is very high in the retail industry. Since the customers have multiple options and choices to choose from their bargaining power will be high.

With the digital medium, most customers also compare the prices and make a decision. So setting the right price has become all the more important now.

Pricechecker is an exclusive tool to track your competitors’ price so you can be the brand that your customers choose.

4. Threat of substitute products


With high competition, there is a huge threat of substitute products for the retailers. Loyalty of consumers decline because there are more out-of-stock cases, they are becoming more price sensitive. This poses the biggest threat to the retail business. The only way to deal with this is by offering better than what our substitutes offer.

In the new age retail business, it is becoming more important to be updated with the market.

Pricechecker as a price tracking software provides you insights on what are the substitutes from your competitors. This threat can be made into a strength with the information given by pricechecker.

5. Power of suppliers

Low Medium

Retail industry has low to medium exposure to the power of suppliers. This is because the suppliers are usually wholesalers and distributors. Some of the retail businesses might have suppliers of raw materials.

In short, to gain competitive advantage, retailers especially e-commerce retailers must level up their game.

Usually, they react by price cutting, aggressive promotions, product differentiation etc. However, in the long run- competitor monitoring is the only way to win 4 out of 5 forces mentioned by Porter. When business takes advantage of the markets, the profit margin will automatically increase. In addition pricechecker offers a user-friendly interface for you to match your products against your competitors. Real time updates on stock, price and promotion details. You can also get pricing history and reports regularly to make strategic decisions for your business about the products that will be listed.