4 Types of Business Competitors

Competitors threaten your business from every angle.

Some offer the same products directly to your target audience. Others threaten to steal your organic traffic.

Some are visible to you. Others are lurking in the shadows.

To succeed, you must understand all of your competitors and how they threaten your business.

Analyzing them will help understand what strategies you need to grow your business. But the most difficult part is finding them.

In this post, we explain the four types of competitors in business and how to find them so that you can:

• Avoid losing traffic and online sales
• Create winning strategies for your own business

But first…

What is a business competitor?

A competitor is a business that operates in the same industry or market as yours and strives to solve the same pain points you do. They might compete in different ways, such as price competition, product differentiation, marketing strategies, customer service, innovation, and more.

Understanding and analyzing your competitors is crucial to your big-picture business strategy. What’s more, competitor analysis helps you assess the strengths and weaknesses of your business rivals. This will help you identify opportunities and threats in your market and make informed strategic decisions to strengthen your business’s financial position.

It’s important to understand the different types of business competitors when doing competitor analysis because your competitors threaten your business in more ways than one. Some competitors compete on a product and service level, while others might be stealing your organic traffic.

What are the four types of business competitors?

To understand where your business is vulnerable, you must understand the four competitor types. Each competitor type could affect your business in a unique way, some of which you might not even be aware of.

The four common types of competitors are:

• Direct competitors
• Indirect competitors
• Replacement competitors
• Potential competitors

Let’s understand each one.

What are direct competitors?

Direct business competitors are businesses that offer the same or similar products or services to your target market.

Some well-known direct competitors are:

Nike and Adidas: Nike and Adidas are both major players in the athletic footwear and apparel industry. They compete for consumers interested in sports and fitness-related products, and both companies gain a competitive edge by engaging in marketing and product innovation.

Amazon and Walmart: Amazon and Walmart directly compete in the retail industry, primarily in ecommerce. They both offer a wide range of products and compete for customers looking for online products by offering fast delivery and competitive prices.

Boeing and Airbus: Boeing and Airbus are major competitors in the aerospace and aviation industry. They both manufacture commercial and military aircraft, competing for contracts from airlines and governments worldwide.

Because direct competitors serve the same audience that your business does with the same products or services, they compete in almost all aspects of your business, including marketing, engagement, conversion rates, and customer retention.

What are indirect competitors?

Indirect competitors serve the same target market that your business does — but with a difference.

They provide alternative solutions that fulfill a similar purpose without being a direct substitute for your product or solution. What’s more, they may come from different industries or use different technologies.

In fact, they might not offer any products or services at all but might serve your audience at different stages of your sales process.

For instance, if you are using content marketing to attract top-of-the-funnel traffic, indirect competitors might steal your traffic by publishing competing content.

Some known indirect competitors are:

Coffee Shops (e.g., Starbucks) and Energy Drink Manufacturers (e.g., Red Bull): Both coffee shops and energy drink manufacturers target consumers seeking a beverage for an energy boost. Although they indirectly fulfill the same need for an energy pick-me-up, coffee and energy drinks offer a very different experience.

Smartphones (e.g., Apple iPhone) and Fitness Wearables (e.g., Fitbit): Smartphones and fitness wearables serve different primary purposes. However, fitness wearables indirectly compete with smartphones by providing health and fitness tracking features. They address the broader need for health monitoring and activity tracking.

Fast Food Chains (e.g., McDonald’s) and Meal Kit Delivery Services (e.g., Blue Apron): Fast food chains and meal kit delivery services both cater to individuals seeking convenient meals. While the nature of the offerings is different, they indirectly fulfill the same customer need for quick and easy meals.

What are replacement competitors?

Replacement competitors threaten your business by serving your target audience with products or services that could replace the need for your products or services altogether.

They often come from a completely different industry to yours or might leverage technological innovations that you are not even aware of. This often means that replacement competitors are invisible to businesses.

Some well-known replacement competitors are:

Landline Phones and Mobile Phones: Mobile phones have replaced traditional landline phones for many people. While both serve the communication need, mobile phones offer greater mobility and additional features, making them a replacement competitor to landline phones.

Traditional Television and Streaming Services (e.g., Netflix or Hulu): Streaming services are replacement competitors to traditional television. Although both provide video content, streaming services offer on-demand, digital content delivery as an alternative to scheduled broadcasts.

Physical Retail Stores and Ecommerce Platforms (e.g., Amazon): Ecommerce platforms are replacement competitors to physical retail stores. Although both facilitate the purchase of goods, ecommerce platforms offer the convenience of online shopping and home delivery.

What are potential competitors?

Potential competitors are not currently competing with your business but might enter the market in the near future. They might be new businesses just entering the market or more established businesses that are likely to expand operations and compete directly with your business.

How to identify the four types of competitors in business

Now that you understand the four business competitor types let’s examine some strategies you can use to identify them.

Market Analysis: A snapshot of your market

The first place to start is to look at your market as a whole.

Let’s imagine you’re in the air travel niche, and you want to understand your competitive market. To get started, search for the Air Travel market using the Similarweb Players report. This report will show you a top-level snapshot of all of the main players in the niche.

It will not only reveal direct competitors but also show you how those competitors perform. At this stage, the more data you get, the better you will understand which competitors you actually compete with and which are out of your reach (for now).

For instance, as you can see below, the Market Share tab shows a quick snapshot of the main players in your market based on their Traffic Share.

While looking at your market’s big picture, you can then analyze its key players to see their:

• Audience Growth
• Brand Strength
• Cost Efficiency
• Loyalty & Retention

This will help you to understand the strengths and weaknesses of your direct competitors, and provide strategic insights which you can leverage to grow your business efficiently.

If you feel some of the sites are not relevant to your business, you can filter the results only to show:

• Transactional Websites
• Content Publishing Websites
• Other Websites

At this stage, you should have a list of big players that are directly competing with your site.

It’s now time to expand that list with the Similar Sites report.

Similar Sites Report

The Similar Sites report will show you websites that are similar to your site in terms of:

• Content
• Audience
• Keywords
• Referrals

This will enable you to focus on sites that are more broadly related to your site. This will also help you uncover indirect competitors and potential competitors.

Let’s drop the travel agency site Skyscanner.com into the tool.

If you look at the Industry column in the table above, you’ll notice that some of the results are in the Travel and Tourism – Other market. But Skyscanner is in the Air Travel niche.

This means you have two options when using this report. You can either filter the results to find sites similar to yours, or you can filter the results to see sites from a different industry that share a similar audience that’s closer to yours.

Sites from a different industry are likely to be indirect competitors. Some might even be replacement competitors.

For example, to see competitors in the same niche as Skyscanner, we’ll set the filter to only show sites in the Air Travel category.

On the other hand, below, we’ll set the filter to show sites in the Accommodation and Hotels category.

At this stage, you should have a list of sites that compete with your site either directly or indirectly.

The next step in uncovering your competitors is the Organic Competitors report.

Organic Competitors Report

This report will help you find SEO competitors. This is a great place to expand your list of direct and indirect SEO competitors.

Below, we’re analyzing Skyscanner.com, looking at their organic competitors.

This report has similar filters to the reports above, and you can easily see sites that target similar keywords to you in similar or different niches to your business.

If, on the other hand, you want sites in different niches that are competing on your organic keywords, set the filter to show sites in a different niche.

Also, you can filter the results to show transactional websites or content publishing websites.

It’s important to understand the nature of this filter.

Transactional sites can process payments. This means they are looking to make sales directly. Content publishing sites, on the other hand, generally make money indirectly by means of affiliate links or advertising.

Understanding how sites make money gives you a clear insight into how those sites compete with your business.

For example, looking at sites that compete with Skyscanner, we’ve set the filter to only show transactional sites.

As you can see above, all of the sites offer a similar service to Skyscanner.

Find direct competitors with Google search and keyword research

Often, before a potential customer is ready to make a purchase, they research the product online. This might include searching for reviews as well as comparing similar products.

For instance, if you were looking for a pair of headphones, you might want to compare Bose to JBL.

Understanding this, it stands to reason that finding search terms that include ‘vs.’ (or versus) is a great way to find direct competitors.

You can easily do that by using Google’s Autosuggest. Type your product name and add ‘vs’:  Google will show a list of automatic suggestions.

You can find more competitors by adding a letter to your search.

For instance, in the screenshot below, by adding ‘a’ to the search bar, Google’s Autocomplete presents a list of suggestions that start with the letter ‘a’.

You’ll be surprised how many competitors you can dig up using this method.

Another way you can do the same thing is by searching for your product in a keyword research tool and filtering the results to show keywords that include ‘vs.’

For instance, in the screenshot below, the Similarweb Keyword Generator is displaying ‘bose headphones’ keywords that include ‘vs.’

Interestingly, we now don’t only see which brands are competing with each other — we also see which product models compete with each other.

Using the approaches above, you can find direct, indirect, and potential competitors. The question is, how do you find replacement competitors?

Finding replacement competitors

As we mentioned above, replacement competitors are often born out of technological advances or come from completely unrelated markets. This often makes them invisible.

Case in point, Netflix offered to sell their company to Blockbuster in 2000. At the time, Blockbuster was skeptical about renting DVDs online. When, in 2007, Netflix started a streaming service, Blockbuster was not ready to pivot its strategy to streaming.

Blockbuster filed for bankruptcy in 2010.

To spot replacement competitors, it’s wise to keep your eye on industry trends and emerging technologies.

Here are some ways to do that:

Industry Publications and News: Regularly follow industry publications, news, and blogs to stay updated on the latest developments and innovations. Pay attention to articles or news about disruptive technologies or alternative solutions that could replace existing products or services.

Social media and forums: If your industry has an active presence on social media or has active forums, check in constantly. You can often find industry trends this way.

Pro Tip: Finding potential competitors

Now, you may be wondering how on earth you can spot potential competitors as they have not yet entered the market. Here are some signs you should look out for:

Startups in your industry: Monitor the startup ecosystem within your industry. Keep an eye on new companies that are emerging and securing funding.

Companies in similar Industries: Although they are not directly in your industry, successful businesses tend to adopt a growth mentality — and one easy way for them to grow is to expand into a related industry.

International players expanding locally: Similar to companies in similar industries, big international companies are often looking to expand operations and conquer new markets.

Companies with similar target audiences: A business that targets a similar audience to yours may end up changing focus to become a direct competitor.

Technology disruptors: As we mentioned before, advances in technology often result in replacement competitors.

Keeping an eye on the broader market will help you put strategies in place even before your potential competitors actualize their potential.

FAQs

What’s the difference between indirect and replacement competitors?

Replacement competitors directly aim to replace or substitute a product or service with an alternative solution, often using different technologies or approaches. Indirect competitors, on the other hand, compete for the same customer needs or problems but may do so using different products, services, or business models.

What are some examples of business competitors?

• Tesla and General Motors compete in the auto industry, going head-to-head in both the electric and traditional markets.
• Uber and Lyft compete in the ride-sharing space by providing similar transportation services.
• Amazon and Walmart are major ecommerce and retail competitors.