In business, location is everything especially if you sell goods directly to consumers through a brick-and-mortar establishment. It can affect several aspects of the business such as operating costs and even sales. Choosing the perfect location is therefore imperative.
Before choosing a location of your retail business, you must consider several factors. These include regional demographics, rent, and nearness to your competitors. In this article, we will discuss how proximity to competitors will affect your business success, and how to choose the right position for your business.
How proximity to competitors is crucial to your business success
This can make or break your business. Generally, if you need a substantial market share, you will want to locate your business where you are the primary supplier for that target market.
If there are too many competitors, you might have to fight for few customers. But again, you don’t want also to locate too far away from your target customers. You want to find the right balance.
If you want to set up a business in a populous area, chances are that the area already has similar businesses. If you sell to a niche market and there are many businesses selling the same product, it may not be advisable to open shop in that location.
When is it beneficial to be close to your competitors?
Sometimes the best place to set up your business could mean being close to your competitors. While setting up a business next to a competitor may be a recipe for unfair business practices, there are exceptions to this. Sometimes, it is beneficial to be close to your competitors, especially if the local infrastructure is designed to meet the unique needs of your retail business. It is also useful if comparison shopping is popular.
For instance, if you are a car dealership or appliances business, it may be beneficial to be close to similar businesses because customers like to compare different models. Likewise, if your offering is unique or is an innovation, you may need an area where there is an existing, ripe market.
If you are sure that your product or services will outsell your competitors, then locating your business near competitors may play in your favor. Sometimes, competition is good. Here are ways you can benefit from proximity from a demographic standpoint.
- Innovation: Healthy competition encourages innovation as businesses try to differentiate themselves. It also breeds more traffic and more business, which is a good thing.
- Education: Having a close competitor may help you gain valuable business insights into the marketplace and know what works and what doesn’t.
- Marketing: In most cases, your competitors, especially bigger businesses with a similar customer base, choose a particular area based on ideal demographics and they will devote significant resources to attracting prospects to the location. This means you don’t have to spend extra resources to attract new customers.
- Collaboration: Setting a business next to competitors can facilitate the sharing of resources and information. If the relationship is healthy, competing businesses could form new partnerships to leverage economies of scale
However, don’t get it wrong. You still need to make your own evaluation because there are many other factors that come into play.
Other factors to consider
There are several pull and push factors that draw businesses away from a location or pull them towards a location. Things such as increased competition, rising cost, a poor public transportation system, or reduction in demand could drive away businesses, while factors such as growing consumer bases, lower labor cost, and better communication and transportation systems could make a location more attractive.
Unfortunately, many retail businesses owners end up locating their businesses with no strategic purpose. Probably, the real estate deal was too good, or the location is near the owner’s residence or other non-strategic reasoning.
It is a good idea to make an all-inclusive evaluation of a particular location or property, even if your rivals seem to be flourishing. Here are other factors to consider if you need to stay ahead of the game and grow your business.
Demographic and accessibility
If your target customers are located in a certain region, it makes sense to take your business to where clients are. If your business appeals to young families, you don’t want to open your business in a place where the average householder is over 50 years old. Also, consider the traffic flow and the accessibility for both employees and customers. Check for some neighborhood traffic generators such as industries, schools, office parks, colleges, and other retailers that draw customers to the area.
If you locate too far away from your target market, prospects may find it hard to get to you. Conversely, if you are within a busy street or city center where it is convenient for most prospects, then they are more inclined to convert. For instance, a gift shop in a popular mall may generate more sales than a similar shop in the dilapidated part of town. You want to be where your audience is, and you want to make it as easy as possible to get to you.
It is crucial to know local business rates before settling on a location. You don’t want a situation where the operating expenses upset your cash flow. Renting a storefront in a popular mall or a highly trafficked street is most likely to be costlier than operating a store in a small commercial district. If you don’t have enough cash up-front, you may need to consider a cheaper area, until your cash flow can cover the expenses required for highly trafficked areas, even if the sales are low. Besides operating costs, state and local laws influence the licenses and permits you need to operate a business in a particular area. This can have a significant impact on your earning.
Potential for Growth
Depending on your business goal, you may need to open your business in a premise where it can accommodate growth. Moving premises can be a big disruption, and it is often time-consuming.
Need professional help?
Finding the right location for your retail business can be a challenge, especially when you don’t know if being close to competitors is beneficial or bad for your business success. If you are looking for a retail, mixed-use, or restaurant space in Buffalo, Upstate New York, and Western Pennsylvania, get in touch with Ellicott Development. Contact us today, and we will help you find your ideal commercial space.