The battle between Coles and Woolworth in Australia doesn't seem to be over anytime soon. If it happens for you to watch TV and their constant TV commercials, you probably notice they really try to beat each other out by offering the same products at the same (or cheaper) price!
Of course, they use different branding methods like their own tagline, colour etc to make a distinction, but the core of their business is very similar. They have many identical products with very similar suppliers which means they sell relatively the same products in their shops. If you are as huge as Coles or Woolworth, you may survive this, but for small businesses, this means lots of trouble and struggle with competition and no profit.
It is a basic marketing principle developed by Michael Porter about competitive advantage. To be simple it means in order to be competitive, your business must be differentiated from competitors, otherwise, the only tool you have is price. When many businesses offer the exact same product (service), customers choose the cheapest ones, because they don't lose anything, however, they are willing to pay more for items that are better, faster, more efficient, etc, in one word Differentiated!
The lesson for small business owners and start-ups is the key to success is to offer something different than your competitors haven't offered yet. Obviously, they are going to copy you, but it is your job to outsmart them constantly and try to make a unique value proposition that is hard or impossible to copy. Even if you want to offer the lowest price as your differentiation, you must find ways to reduce your costs in your supply chain to be able to make a healthy profit.
Differentiating your business can be challenging and exhausting. The Blue ocean strategy is a great way to make your business distinctive from competitors. If you are interested to differentiate your business from competitors check here.