Direct vs. indirect competition

Question

Justin Parker · Accepted Answer

The difference between direct and indirect competition is that direct competition refers to companies that sell similar products or services, while indirect competition refers to companies that don't sell very similar products or services but might have some cross-over in terms of their target consumer bases.

An easy way to understand the difference between direct competition and indirect competition is to use the food industry for illustration. Two different restaurants that sell Italian food would be considered direct competitors.

While two different restaurants sell different types of food, let's say one is Italian and the other is a vegan establishment, these would be considered to be in indirect competition. Indirect competitors also might sell different products or services, but those products or services might represent a similar need in a consumer base.

The dynamics can be more complex depending on what industry the direct and indirect competitors are in, but this is the general premise.