Assessing the market demand/competition ratio for an ecommerce store

[Eric]

Hi!

As I mentioned in another thread, my wife has an idea for an ecommerce store. It seems to us that she's found a pretty good niche. The niche seems to be emerging and trendy, but not a fad.

It seems to me that there are two aspects to identifying a profitable opportunity: market demand and market competition.

In order to assess demand, I've looked at the google keyword tool and there does seem to be plenty of searches. Are there any other good ways of determining market demand for an ecommerce store?

In order to assess competition, we've been googling to find competitors and there are a bunch. Then I've been using alexa/compete.com (flawed, I know) to see what kind of traffic these sites get. It appears that with a few notable exceptions, most of our competitors do pretty low traffic. Of course, I'm under no illusions that we've found all of our competitors either. I would also note that the google keyword tool indicates a high level of competition for most of the keyword terms.

Does anyone have any other suggestions for determining the level of competition?

The third remaining problem, is that I don't know how to compare the market demand to the market competition. We're just not sure if the demand / competition ratio is high enough to pursue this further. I just can't think of a good quantitative way of measuring the demand / competition ratio.

Any tips on analyzing market demand / market competition ratio for an ecommerce store?

I posted this question on 2 ecommerce forums, but haven't got much of an answer. One person suggested doing a ppc campaign with an affiliate storefront - which makes sense to some degree - although I would have to think that conversions from an affiliate site must be pretty low, which would seem to be an expensive exercise. In addition, this would mainly help in assessing demand, not competition.

I guess it all boils down to: We believe there to be significant demand, how do we know whether or not there is TOO much competition?

[Clinton]

Then I've been using alexa/compete.com (flawed, I know) to see what kind of traffic these sites get.

Have you tried the Alexa similar site function?

There's also Wordtracker that provides what it calls KEI (competition search). I haven't used it for a while so don't know if it's still any good.

What about marketsamurai?

[Eric]

Yes, I looked at the Alexa similar site function and came up with a few more competitors. Although, most of them were either from unrelated industries, loose matches (not direct competitors) or had ugly websites that looked several years old. I didn't find any other major competitors through the related site function, which I suppose is good.

I couldn't find the wordtracker KEI... I don't have a wordtracker paid account though... Is it free?

I downloaded market samurai. I had used it before, back in January so I was a little familiar with it. I found that the SEO competition for the major keywords is stiff in terms of backlinks, but weak in terms of webpage meta data.

[Clinton]

Yes, that's a paid service at Wordtracker. I'm sure I read somewhere that a similar facility was available for free but I can't remember where that was.

had ugly websites that looked several years old

Such sites are sometimes available for purchase and can make great feeder sites as they lend themselves well to SEO.