Michael Martinez brings up a good point about competitive analysis. He says,
In search optimization your top five competitors are the five sites that appear most often in the same queries that drive traffic to your Website…. You are ONLY competing with other sites that appear in the same queries that drive traffic to your site.
In other words, if you are selling any product online, then chances are you are competing against Amazon, eBay, and Wal-Mart. But you probably think your chief competitor is XYZ, a similarly-sized company in your niche.
Offline competition is completely different than online competition. If you do business in Smalltown, USA and there’s no Wal-Mart, then it’s easy to identify who your top competitors are. They are businesses selling the same products as you to the same geographic demographic. If there is a Wal-Mart in your town, they’re your top competitor because they probably sell something you sell.
Online, the game is different. Those competitors in your home town may or may not be competitors online. If your website ships products through the mail, then your local competition is likely not competition online.
This is an important concept that a lot of business owners find difficult to grasp. Outdoing non-players in SEO is useless. Your job is to increase your search engine rankings, and to do that you have to pass the businesses that have them. In a lot of cases, those businesses are top sellers like Amazon, eBay, and Wal-Mart. You have to be able to put that into perspective.