[michael_dorfman]

What's the problem, exactly? It's a rare (and usually unprofitable) niche that has no competition, and if you don't have competition when you start, you'll likely run into it later.

You already say that your solution will be a better fit for your customers; if that's the case, it should be simple for you to draw up a mental list of differentiators that can constitute your "unique value proposition", and pull these out when a prospect asks why they should choose you. (Hint: price is not always a great differentiator.)

If you run into prospects who are already using the competing solution, ask them how it's working out for them, and what kind of things they wish it did differently.

[leanstartupnoob]

I'm actually happy to find this competitor because it validates a lot of my thinking and confirms that a market exists for this type of service.

At this time the other company has a more "feature rich" solution already built which is very similar to what I would provide. My product is basically vaporware today.

I'm wondering how to approach my customers about this other site without pushing them to that solution. Sounds like you are suggesting to use a strong list of differentiators. That seems like a good idea.

Talking to some of the other guy's customers sounds good too.

[evanwillms]

For many customers the issue is not features, it's pain avoidance. If you do just one thing, but better/easier/faster than the established competitor then you can approach customers on that basis. Bonus points if it allows them to save money, especially via employee effort, compared to the "feature rich" competitor.

One awesome book that's helped me with this is "Spin Selling" by Neil Rackham. It's a straightforward method to having productive sales discussions and is based on a quantitative grounding. Their approach is discussion based and a co-exploration, so you're just talking to uncover needs instead of pushing your product. Go check it out.