Do you think we get better deals when competing establishments such as shops and restaurants are located nearby one another? Since they are in direct competition, don't they always need to make sure that their prices are the lowest or their deals are the best? Do they just make up for it in volume or what? I don't really understand why they'd want to be so close to a direct competitor. For example, a new fast food pizza place is going to open in the near future and it's going to be within walking distance to Pizza Hut. I don't frequent either of these restaurants, but I find it curious. I imagine people who enjoy eating in these places will also enjoy the benefit of competitive pricing though.
Businesses do this so they get passing trade from the other places. It cuts down on advertising, and if the place is full, people tend to go to the nearest place instead. That's the logic, and also people will walk past and may see the specials and choose to go there if there is a better deal.
Personally, let us say that those two places are a Pizza Hut and a Pappa John's. I personally do not care for Pizza Hut, but would be thrilled for Pappa John's to pop up in the vicinity because I would then actually have a pizza option available to me. It may be a similar situation for businesses. They see a market for the goods they have to offer, and if it is just different enough, the marketing team can go to work to make their business stand out to people who would already prefer their product, or sway others over if choice one is having a busy night or had a bad experience. Options are always better for the consumer.
Well it certainly depends on the business and the local economy and things of that nature. Sometime, though, I bet that there are really no other options. I know that we have a street here that used to be all restaurants, so they are just built like that, so all that ever moves in there are other restaurants. In that case it might work for them, all being in one area, but it varies with every town or community of course. Interesting to think about, though, and thanks for sharing.
I think that Thea is right that people will go to the other one closeby if the first one looks too busy. It can also be for other reasons. I remember one place where there was a Pizza Hut, and almost across the street , was a Godfather's Pizza. They both had lunch buffets; but I really like the Pizza Hut creamy Italian dressing, and usually went there if I were stopping at one of them for the lunch buffet. However, Pizza Hut lunch only went from 11-1; annd if you were even a few minutes after that, you could not get the buffet, even though people were still allowed to finish until around 1:30. Across the street, Godfather's was having their lunch buffet 11-2; so when I missed the buffet at Pizza Hut, I could go right across the street and eat there.
I worked at a clerk in a tool store once, and they loved it because every one of their stores near Home Depot did well. It was the traffic in general. The store management thought that once people were in the mind set to look for something, they stayed in the neighborhood and compared. It ended up a big plus for my store. I would guess it is the same effect for other types.
Yes, it does help with the advertising cost and people do go to the nearest place if it's full on the other one. It's a big plus for the new store if it has lower prices than the other big shot. We had this small coffee shop that we opened near a branded coffee shop. And customers do go in our shop to check out the new place. We had trouble keeping the customers because we were always full though we just opened for around a week. A big plus that we had was the other shop's coffee costs around $4 while our coffee with the same size costs $1.8.
That competing neighbor is a business strategy that is proven effective. Let's take for example some fastfood chains that have outlets in one commercial center. Isn't it a good idea to visit that commercial center where there are lots of competing food outlets than going to one mini mall where there is only one food outlet? And that cut-throat competition is for the benefit of the customer since there is a lot of choice so the store should be on their toes regarding quality and prices.
Certainly having a competitor in a business is a good thing. However, you want to make sure that you are keeping up with the trend or else you'll lose the business. The best thing about this is that with competition you are making sure that your business doesn't get stuck with what you normally have, most of the time you have to innovate and be creative. People love creativity and variations so having a competitor beside you is fun and healthy.
