I work primarily with small, local businesses who have traditionally sold to local customers, so they have always viewed their competition as the other stores in their town. Because they look for competition locally, they see what other stores sell and try to position their products in a superior way.
With Social Media, it has become almost second nature to find substitute products from other retailers, now from anywhere in the world. This forces retailers to compete at a national level to make sure they keep having customers buy from them.
There is also a flipside to this, because if you leverage social media correct, you can position your business as a top competitor and you can open your business up to a national or global audience, instead of just a local audience.
This ties in well with my last post about adding value, because now instead of having to add value locally, you have to add value globally.