How Porter’s Five Forces helps in E-commerce Business Analysis?

What do you mean by e-commerce analysis?

E-commerce analysis is considered a process in which all the factors are monitored that affect the business because of the changes in customer behavior or any online shopping trends.

Porter’s Five Forces

Porter’s Five Forces analysis is a framework for assessing the level of competition within a certain industry. This model is useful for evaluating an industry’s weaknesses and strengths by identifying and analyzing five competitive forces that shape every industry.

According to this framework, competitiveness does not come solely from competitors. Instead, the state of competition in a given industry is determined by five fundamental forces:

  1. Competitive rivalry
  2. Threat of new entrants
  3. Bargaining power of customer
  4. Bargaining power of supplier
  5. Threat of substitute products

Understanding Shein Porter’s Five Forces and how they apply to a particular industry can help a brand adjust its business strategy accordingly. For example, you could take full advantage of a strong market position or strengthen a weak one, all while avoiding future mistakes.

Steps involved in performing an industry analysis

  • Understand your marketplace.
  • Recognize the industries involved.
  • identify the strengths
  • Assess the structure of the industry.
  • Analyze the competitive forces.
  • Look over the factors that you could manage.

Criticism of the Five Forces


Porter's model brought about a change in the thought process of running the competition between suppliers and consumers. As every model has drawbacks, it too has some of them. It focuses on the entire group of industries rather than giving attention to the required and specific organizational strategy. Industries that deal with rapid changes in technologies or consumer preferences won't be able to deal with this model for long. Moreover, it has a common goal and strategy for every market rather than figuring out some unique strategies.

Key Takeaways

  • Porter’s Five Forces is a framework for analyzing the competitive environment of a brand in a specific industry
  • A brand’s profitability is influenced by the number and power of its competitive rivals, potential new market entrants, suppliers, customers, and substitute products
  • To gain a competitive advantage, a Five Forces analysis can be used to guide business strategy.

SWOT Analysis Vs. Porter’s Five Forces

Both Porter’s five forces and SWOT analysis are analytical techniques used by brands to make strategic business decisions.

Although both of these models define a brand’s position in the market, the key difference is that the five forces model focuses on external factors, whereas SWOT analysis is more focused on the internal conditions of the organization.

Quick Tip – When taken in conjunction with a SWOT analysis, Porter’s Five Forces can help you understand where your brand or business fits into the industry landscape.  

To read further about How Return to Origin (RTO) Is Impacting Profitability of E-commerce Businesses you can read this article.

Understanding Porter’s Five Forces

Competitive Rivalry

The number of competitors and their ability to undercut a brand comes under the first of the five forces. Higher the competition in an industry, the lesser the power of the brand. If a brand’s competition offers better deals or lower product prices, suppliers and buyers seek them out.

Conversely, when the competition is low in an industry, a brand has more power to charge higher prices and set the terms of deals to increase sales and profits.

For example, In the e-commerce industry, competition among major players is very high, as there is no switching cost for customers. The players are constantly competing on the basis of price and factors that influence buyers’ choices such as quick delivery, discounts, and offers, variety, customer service, and much more.

The Threat of New Entrants

It is not only existing rivals that pose a threat to firms in an industry; the possibility of new entries in the industry also affects competition. The less time and money a brand’s competitor takes to enter the market and become viable, the more vulnerable an established brand’s position becomes.

The severity of this threat is determined by the entry barriers into a particular industry. The greater these barriers to entry, the lower the threat for existing players.

For example, The threat of new entrants in the e-commerce industry is high, as there is very little cost involved in setting up an e-commerce website.

Bargaining Power of Customers

The ability of customers to drive prices down or their level of bargaining power is one of the five forces. Customers have a lot of power when there aren’t many of them and they have a multitude of choices to buy from. Moreover, switching from one company to another should be easy for them.

However, buying power is low when customers purchase products in small amounts, act independently and when the seller’s product is very different from its competitors.

For example, the Bargaining power of customers is very high as there are many players in the market with similar products and there is no switching cost. Buyers prefer the brand that offers the best price among other factors such as product quality and delivery time.

Must Read : 7 Hooks from Ramayana to Vitalize Business

Bargaining Power of Suppliers

This force examines how much power and control a brand’s supplier has over the ability to raise prices or lower the quality of purchased goods or services, which in turn would lower an industry’s profitability potential.

The important factors that determine supplier power are the availability of substitute suppliers and the concentration of suppliers. When a company has a large number of suppliers, it is in a better position.

For example, the bargaining power of suppliers is low as there are many suppliers in the market, and therefore the e-commerce brands have the power to choose their suppliers.

The Threat of Substitute Products or Services

The Threat of Substitutes formulates the fifth and final force. This force investigates how easy it is for customers to switch from a brand’s product or service to another.

It looks at the number of competitors, how their prices and quality compare to the business under consideration, and how much profit those competitors make, in order to see if they can cut costs even further. Switching costs, both immediate and long-term, as well as consumers’ willingness to change, inform the threat of substitutes.

For example, the threat of substitutes is very high as there are a lot of sellers with similar products and services, and there is no switching cost for customers.

It is not mandatory for e-commerce brands to conduct a Porter Five Forces analysis, but it is clear that it aids in the future of the business. It will point your business team in the right direction by minimizing threats and weaknesses while maximizing strengths.

How Can ANS Commerce Help You?

When it comes to running an e-commerce business, there are multiple obstacles to overcome. At ANS Commerce, we provide full-stack e-commerce solutions to our clients so that they can focus on their brand and product rather than worrying about the challenges in the industry.

To connect with our team of professionals, you can request your free DEMO today.

FAQS

What are the 5 forces of porter's model in e-commerce?

The five forces of Porter's model are:

  • Competitive Rivals: This force acts as a competitor against the existing industry. It includes the organizations that are already competing for market share, resources, and customers.
  • Threat of New Entrants: This force looks after the new competitors that are entering the industry.
  • Supplier Power: Supplier power holds the force for the bargaining power of suppliers, as in which products are more expensive and which can influence profitability. 
  • Buyer Power: This force analyzes the buying power of the customer and their capacity and requirements for the product to be purchased.
  • Threat of Substitutes: This force focuses on the substitute's product's availability, as it can limit the share of the market and mold the price.

Name the elements in Porter's five forces.

The elements in Porter's Five Forces, as mentioned in the provided content, are:

  • Competitive Rivals
  • Threat of New Entrants
  • Supplier Power
  • Customer Power
  • Threat of Substitutes

What makes SWOT Analysis different from Porter's Five Forces?

Porter's model in e-commerce focuses on analyzing the competitive dynamics taking place within the industry. It also looks after factors such as rivalry between the existing competitors and its other forces like the threat of new entrants, bargaining power of suppliers and buyers, and the threat of substitutes.

Similarly, on the other hand, SWOT analysis focuses on analyzing the internal and external strengths and weaknesses. It also focuses on the opportunities and threats by giving a vast view of the market.

What do you understand by the five forces of Porter's energy?

If we look at Porter's five forces, they look at the competition taking place within an industry:

  • The competition affects profits as it deals with the rivalry among existing competitors.
  • Proceeding with the other force, it deals with the threats of the new entrants as it stops the entry of new firms entering the industry. 
  • It also deals with the suppliers to look after the terms and prices that need to be monitored.
  • For the bargaining power of customers, this force helps in understanding the behavior of customers towards prices and quality. 
  • The last but not least force of Porter is the threat of substitutes; it looks after the industry profits impacted by the alternatives chosen by the people as a substitute.

How Porter’s Five Forces helps in E-commerce Business Analysis?

Written by
Pratyush
Category
Warehousing
Published on
Sep 17, 2021
Written by
Pratyush
Category
Warehousing
Published on
May 15, 2024

What do you mean by e-commerce analysis?

E-commerce analysis is considered a process in which all the factors are monitored that affect the business because of the changes in customer behavior or any online shopping trends.

Porter’s Five Forces

Porter’s Five Forces analysis is a framework for assessing the level of competition within a certain industry. This model is useful for evaluating an industry’s weaknesses and strengths by identifying and analyzing five competitive forces that shape every industry.

According to this framework, competitiveness does not come solely from competitors. Instead, the state of competition in a given industry is determined by five fundamental forces:

  1. Competitive rivalry
  2. Threat of new entrants
  3. Bargaining power of customer
  4. Bargaining power of supplier
  5. Threat of substitute products

Understanding Shein Porter’s Five Forces and how they apply to a particular industry can help a brand adjust its business strategy accordingly. For example, you could take full advantage of a strong market position or strengthen a weak one, all while avoiding future mistakes.

Steps involved in performing an industry analysis

  • Understand your marketplace.
  • Recognize the industries involved.
  • identify the strengths
  • Assess the structure of the industry.
  • Analyze the competitive forces.
  • Look over the factors that you could manage.

Criticism of the Five Forces


Porter's model brought about a change in the thought process of running the competition between suppliers and consumers. As every model has drawbacks, it too has some of them. It focuses on the entire group of industries rather than giving attention to the required and specific organizational strategy. Industries that deal with rapid changes in technologies or consumer preferences won't be able to deal with this model for long. Moreover, it has a common goal and strategy for every market rather than figuring out some unique strategies.

Key Takeaways

  • Porter’s Five Forces is a framework for analyzing the competitive environment of a brand in a specific industry
  • A brand’s profitability is influenced by the number and power of its competitive rivals, potential new market entrants, suppliers, customers, and substitute products
  • To gain a competitive advantage, a Five Forces analysis can be used to guide business strategy.

SWOT Analysis Vs. Porter’s Five Forces

Both Porter’s five forces and SWOT analysis are analytical techniques used by brands to make strategic business decisions.

Although both of these models define a brand’s position in the market, the key difference is that the five forces model focuses on external factors, whereas SWOT analysis is more focused on the internal conditions of the organization.

Quick Tip – When taken in conjunction with a SWOT analysis, Porter’s Five Forces can help you understand where your brand or business fits into the industry landscape.  

To read further about How Return to Origin (RTO) Is Impacting Profitability of E-commerce Businesses you can read this article.

Understanding Porter’s Five Forces

Competitive Rivalry

The number of competitors and their ability to undercut a brand comes under the first of the five forces. Higher the competition in an industry, the lesser the power of the brand. If a brand’s competition offers better deals or lower product prices, suppliers and buyers seek them out.

Conversely, when the competition is low in an industry, a brand has more power to charge higher prices and set the terms of deals to increase sales and profits.

For example, In the e-commerce industry, competition among major players is very high, as there is no switching cost for customers. The players are constantly competing on the basis of price and factors that influence buyers’ choices such as quick delivery, discounts, and offers, variety, customer service, and much more.

The Threat of New Entrants

It is not only existing rivals that pose a threat to firms in an industry; the possibility of new entries in the industry also affects competition. The less time and money a brand’s competitor takes to enter the market and become viable, the more vulnerable an established brand’s position becomes.

The severity of this threat is determined by the entry barriers into a particular industry. The greater these barriers to entry, the lower the threat for existing players.

For example, The threat of new entrants in the e-commerce industry is high, as there is very little cost involved in setting up an e-commerce website.

Bargaining Power of Customers

The ability of customers to drive prices down or their level of bargaining power is one of the five forces. Customers have a lot of power when there aren’t many of them and they have a multitude of choices to buy from. Moreover, switching from one company to another should be easy for them.

However, buying power is low when customers purchase products in small amounts, act independently and when the seller’s product is very different from its competitors.

For example, the Bargaining power of customers is very high as there are many players in the market with similar products and there is no switching cost. Buyers prefer the brand that offers the best price among other factors such as product quality and delivery time.

Must Read : 7 Hooks from Ramayana to Vitalize Business

Bargaining Power of Suppliers

This force examines how much power and control a brand’s supplier has over the ability to raise prices or lower the quality of purchased goods or services, which in turn would lower an industry’s profitability potential.

The important factors that determine supplier power are the availability of substitute suppliers and the concentration of suppliers. When a company has a large number of suppliers, it is in a better position.

For example, the bargaining power of suppliers is low as there are many suppliers in the market, and therefore the e-commerce brands have the power to choose their suppliers.

The Threat of Substitute Products or Services

The Threat of Substitutes formulates the fifth and final force. This force investigates how easy it is for customers to switch from a brand’s product or service to another.

It looks at the number of competitors, how their prices and quality compare to the business under consideration, and how much profit those competitors make, in order to see if they can cut costs even further. Switching costs, both immediate and long-term, as well as consumers’ willingness to change, inform the threat of substitutes.

For example, the threat of substitutes is very high as there are a lot of sellers with similar products and services, and there is no switching cost for customers.

It is not mandatory for e-commerce brands to conduct a Porter Five Forces analysis, but it is clear that it aids in the future of the business. It will point your business team in the right direction by minimizing threats and weaknesses while maximizing strengths.

How Can ANS Commerce Help You?

When it comes to running an e-commerce business, there are multiple obstacles to overcome. At ANS Commerce, we provide full-stack e-commerce solutions to our clients so that they can focus on their brand and product rather than worrying about the challenges in the industry.

To connect with our team of professionals, you can request your free DEMO today.

FAQS

What are the 5 forces of porter's model in e-commerce?

The five forces of Porter's model are:

  • Competitive Rivals: This force acts as a competitor against the existing industry. It includes the organizations that are already competing for market share, resources, and customers.
  • Threat of New Entrants: This force looks after the new competitors that are entering the industry.
  • Supplier Power: Supplier power holds the force for the bargaining power of suppliers, as in which products are more expensive and which can influence profitability. 
  • Buyer Power: This force analyzes the buying power of the customer and their capacity and requirements for the product to be purchased.
  • Threat of Substitutes: This force focuses on the substitute's product's availability, as it can limit the share of the market and mold the price.

Name the elements in Porter's five forces.

The elements in Porter's Five Forces, as mentioned in the provided content, are:

  • Competitive Rivals
  • Threat of New Entrants
  • Supplier Power
  • Customer Power
  • Threat of Substitutes

What makes SWOT Analysis different from Porter's Five Forces?

Porter's model in e-commerce focuses on analyzing the competitive dynamics taking place within the industry. It also looks after factors such as rivalry between the existing competitors and its other forces like the threat of new entrants, bargaining power of suppliers and buyers, and the threat of substitutes.

Similarly, on the other hand, SWOT analysis focuses on analyzing the internal and external strengths and weaknesses. It also focuses on the opportunities and threats by giving a vast view of the market.

What do you understand by the five forces of Porter's energy?

If we look at Porter's five forces, they look at the competition taking place within an industry:

  • The competition affects profits as it deals with the rivalry among existing competitors.
  • Proceeding with the other force, it deals with the threats of the new entrants as it stops the entry of new firms entering the industry. 
  • It also deals with the suppliers to look after the terms and prices that need to be monitored.
  • For the bargaining power of customers, this force helps in understanding the behavior of customers towards prices and quality. 
  • The last but not least force of Porter is the threat of substitutes; it looks after the industry profits impacted by the alternatives chosen by the people as a substitute.