Indirect competitors: examples and why they matter
Indirect competitors meet the same need with a different product. Examples by industry, a direct vs indirect comparison table, and how to keep watch on them.
Indirect competitors are businesses that sell a different product or service which meets the same customer need as yours. A cinema and a streaming service, a restaurant and a supermarket ready meal, an accountant and accounting software: different offers, competing for one decision.
They are easy to dismiss because they do not look like you. That is exactly why they can cost a business more than its direct rivals do.
Direct vs indirect competitors
| Direct competitors | Indirect competitors | |
|---|---|---|
| What they sell | The same kind of product | A different product |
| Need they meet | The same | The same |
| How customers compare you | Feature by feature, price by price | Approach by approach: "should I do it this way at all?" |
| Example, for a gym | Another gym nearby | A home workout app, a running club |
| Example, for a hotel | Another hotel in town | A short-let flat on Airbnb |
| Where you see them | Your search results, your ad auctions | Searches for the problem, forums, lost-deal answers |
| What they cost you | Individual sales, this month | Category size, over years |
| How you answer them | Offer, price, service | Positioning: why your approach suits this customer |
| How often to check | Weekly | Quarterly |
The short version: direct competitors fight you for a share of the market. Indirect competitors decide how big the market is. If you want the deeper treatment of the first column, the direct competitors page covers examples and how to find them.
Indirect competitors examples by industry
Restaurants. Supermarket ready meals, meal kits, and cooking at home. A Friday takeaway order is often decided against the freezer, not against another restaurant.
Hotels. Short-let rentals, staying with friends, and the decision to make it a day trip.
Gyms. Home workout apps, connected exercise bikes, running and cycling clubs, and an old pair of trainers.
Accountants. Accounting software that files returns, a family member who does the books, and the owner's own evenings.
Taxi firms. Buses, bike hire, e-scooters, and walking when the weather is kind.
Marketing agencies. A freelancer, an in-house hire, or the founder doing it with a design tool and a template.
B2B software. The spreadsheet. In many categories it is still what new software has to replace first, and it costs nothing.
Why indirect competitors matter more than people think
They set the reference price. A $90 personal training session is not judged against the trainer down the road at $80. It is judged against a $15 a month app. If your price feels hard to defend, the comparison in the customer's head is probably an indirect one.
They change the size of the category. Blockbuster's rivals for most of its life were other video rental chains. The competitors that mattered were DVDs by post and then streaming, and Blockbuster filed for bankruptcy protection in 2010.
Your usual monitoring misses them. They rarely bid on your keywords, sit in your category on review sites or appear in your search results. You find them by searching the problem, not the product.
Your messaging may be answering the wrong rival. If most prospects are choosing between you and doing it themselves, a homepage that explains why you beat the firm across town is arguing with the wrong person. Your competitive positioning should name the alternative customers actually weigh.
How to watch indirect competitors
Search the problem, not your product. "How to do my own bookkeeping." "Best way to get fit at home." Whoever ranks and advertises for those searches is an indirect competitor, and what they promise is what you are up against.
Read where people compare approaches. Threads asking "should I hire an accountant or just use software?" are a live record of how customers weigh you against the alternative. The guide to Reddit monitoring shows how to follow them without reading Reddit all day.
Ask lost customers what they did instead. In win-loss interviews, "nothing" and "we did it ourselves" are answers, and often the most frequent ones.
Compare search interest over time. Put your category term and the alternative side by side in Google Trends ("personal trainer" against "home workout"). The Google Trends comparison guide covers how to read it without overreacting to seasonality.
Quarterly is enough for all of this. Indirect competitors rarely move week to week. Their effect shows up over years.
Mistakes to avoid
Deciding they are not real competitors. If the customer weighed them, they are.
Fighting them on their terms. A personal trainer cannot beat an app on price. The answer is to be clear about who your approach is better for, and why.
Lumping every alternative together. Substitutes that remove the need altogether, and budget competitors after the same money, behave differently. The types of competitors page separates them.
Questions people ask
Is Netflix an indirect competitor of cinemas?
Yes. Both meet the need for an evening's film with different products, so they compete for the same decision without selling the same thing.
Should I list indirect competitors in a business plan?
Yes. Lenders and investors know customers have other options, and a plan that lists only direct rivals reads as one written without looking. A line on each alternative and why some customers will still choose you is enough.
Can an indirect competitor become a direct one?
Yes, and it is one of the commonest ways markets shift. A software company that adds a done-for-you service, or a supermarket that opens an in-store café, has just walked into someone else's category.
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