Is it smart to move next to your competitor?

So you want to expand your bricks and mortar business. One of the first real issues is to find the best location. Should you set up a shop across the street from your competition? Maybe it is better to choose a location where there is no opposition (and possibly a greater need).

What is your next move?

Clustering, where similar businesses are all located next to each other seems counterintuitive: but, business theories show that it actually works – really well.

But too many entrepreneurs, locating next to a similar business seem antagonistic. Why not open in a more remote place?

Think about it. When you want to go to dinner, is it more interesting to drive to a lone location where there is one restaurant or a location where there is a collection of lively restaurants all clustered together?

Mathematical theories like spatial competition, game theory, and social optimal solution can help explain why most people prefer the option with more restaurants. The concepts basically play out scenarios on finding the best area for a vocation. Once the position has been ascertained, these theories help figure out the optimal distance in which to place the building in relation to the competing locale.

The idea is that the presence of a rival makes better business.

In the United States, there are even antitrust laws that actually encourage companies to compete so that both consumers and trade sectors benefit.

So, how does a small business get the information they need?

George Brezny of GB Marketing Research Solutions, LLC says, “Whether you are looking to open a daycare center, restaurant, dentist office or jewelry store, investors can get a great sense of their specific market. GB has access to an immense library of publications via Statista. Couple that with census data, association, and competitive information and you have a pretty complete picture of conditions in any market.

“We had a customer with a small business that wanted to expand. In this case, it was a Montessori school. They already had two or three businesses in other states and were looking at Florida. They were particularly interested in Orlando,” says Brezny. He identified the new area of interest via zip code and found that there were already five or more private K- to 12- schools within a 50-mile radius.

GB researched the demographics through ESRI giving stats on information such as how many families with young kids were in a specific sector. GB then used Statista to identify that the industry was actually increasing in that area. Brezny could even show traffic patterns between bedroom communities and industrial working zones. He wanted to get an idea of the driving patterns customers take en-route from their domicile to their employment. Such specific information helps narrow down locations that would be convenient for parents to drop off their child, thus, a good location in which to set up a new school.

A similar study reports normally cost between $1,500 and $2,500 and give valuable information to the client.

“It may sound geeky, but I love stats, and I want to see my clients succeed,” says Brezny.
Statista has secondary or desk research for more than 140 industries. Entrepreneurs just don’t have access to the numbers unless they pay for a subscription and know how to run and read the results.

So, did the Montessori school expand to Orlando? Brezny declined to answer on the basis of the customer/client non-disclosure agreement. But, he went on to say that each client has the numbers, historical data and theories presented and with an arsenal of information can then decide what is right for them.

Learn more about demographics concerning the market, trade, and competition at gb-insights.com.

Alice Verberne is a consultant for GB Marketing Research Solutions, a consortium of marketing research subject matter experts with over 30-years of experience in market research programs.