Competition is the number of listings competing for a keyword. It counts listings, so one shop can have several in the results.
Put the number in context
Search your phrase in Keyword Search and read Competition beside Searches and Engagement.
Fewer competing listings can look appealing, but the phrase may also have fewer shoppers searching for it. A large count doesn't tell you how good those listings are.
Compare a more specific phrase
Try ceramic mug and blue ceramic mug in Compare, or use two phrases for your own product.
Look at the products behind each phrase. Which search would you expect your item to belong in?
There's no magic Competition number. Use it to understand your options, then choose words that accurately describe what you make.