Direct vs Indirect Competitors: How to Find Both

Published 2026-09-24

Ask most business owners who their competitors are, and they'll name the businesses that look most like theirs. That's the easy half of the list. The other half — the businesses solving the same problem in a completely different way — is the half that's actually easy to miss, and often the more dangerous one.

The actual difference

A direct competitor sells basically the same thing, to the same customer, in the same way you do. A local coffee shop's direct competitors are the other coffee shops nearby.

An indirect competitor solves the same underlying need through a different product entirely. That same coffee shop's indirect competitors include the office espresso machine, the gas station on the way to work, and honestly, energy drinks. None of them look like a coffee shop, and all of them are taking the same "I need caffeine this morning" decision away from it.

Why the indirect list matters more than people think

Direct competitors are visible — you already know who they are, you've probably looked at their pricing before. Indirect competitors are the ones that quietly shrink your market without ever showing up in a "who competes with us" conversation, because nobody thinks to name them. A business that only tracks direct competitors can have a very accurate picture of a slice of the market that's shrinking for reasons that have nothing to do with any of the competitors it's watching.

How to actually find the indirect ones

The trick is to stop asking "who else sells this" and start asking "what does my customer do instead, if none of us exist." A few ways to get at that:

• Ask recent customers directly what they considered before choosing you — not just which competitors, but which non-obvious alternatives, including doing nothing or doing it themselves.
• Look at adjacent categories that solve a piece of the same problem. A meal-kit service's indirect competition includes grocery delivery apps and restaurant takeout, not just other meal-kit brands.
• Watch where your trial signups and inquiries come from when they say "I was using X before" — X is often not a company you'd have listed as a competitor.

What to do with the list once you have it

You don't need to track indirect competitors as closely as direct ones — a quarterly glance is usually enough. What matters is including them at all in your competitor analysis, so the picture you're working from reflects where customers are actually going, not just the businesses that happen to look like yours.

Doing this in one pass

ScoutBrief looks at both direct and indirect competitors when it builds a report, from a short description of your business, so you're not relying on memory to catch the ones that don't look like competitors at first glance. First report's free, or see a sample report first.