SmallBusinessNewz

In a recent article, I talked about ways to get customers to come in off the streets, and one of the topics I brushed on was location. I said:

Location is of the utmost importance. An example that immediately comes to mind for me is the Lee's Famous Recipe chicken restaurant down the road from our office. While this falls into the national chain category  rather than small business, it seems to lose a ton of potential customers because it is located right next to a KFC.

While Lee's chicken is delicious in its own right, it is hard to get customers in the door when the much more popular KFC brand sits 20 feet away. If Lee's has the backing of a brand that is a national chain, how well would you expect to have your local "Johnny's Chicken Hut" do operating next to KFC?

The lesson here? If you're going to operate your business near your competitors, you better be able to dominate.

I received a couple of really good comments on the article and one point that was brought up was that often times being next to a competitor can actually work in your favor.

Commenter Philip Franckel says:

In New York City and other large cities, you will find small enclaves with competitors on top of each other, such as the jewelry district on 47th St., the flower district, the curtain district and many, many others.  The second example you can find near you, wherever you are.  You will likely notice that there is an area where you will find several different brands of car dealers within blocks of each other.  Competition brings more business.

In the case of the Lee's chicken example, most people probably aren't going to walk into KFC, check out the menu and then decide to go to Lee's. Although several weeks ago in fact, I did walk into Lee's and saw that their buffet wasn't very fresh looking, which I assume was because the customers weren't in there eating from it, and then I walked out and went to KFC instead, where the buffet was fresh because customers were continually eating from it and it needed to be refilled.

It really depends on whether or not you are running a business where people are most likely going to shop around a bit before reaching a purchasing decision. It seems to me that competition will be more likely to drive customers to your store when the item(s) they are shopping for is more on the expensive side. To me, it turns into a question of price vs. convenience.

Someone is more likely to browse multiple locations when looking for a car than they are buying a screwdriver. They're bound to look at a few places to compare diamond ring prices than prices on bottles of vodka.

If you're running that jewelry store you better have reasons for them to buy your rings instead of your competitors'.

There could be instances where you can take advantage of the success of your competitor, such as absorbing their customer overflow. Let's say you operate a local steakhouse and it is located near an Outback. Some customers could get to Outback and find a 2 hour wait, and decide to instead go to your steakhouse which has a much shorter wait.

Location as related to your competitors can go either way, a point I overlooked last time around. Either way, the subject brings up questions you need to ask yourself when evaluating potential locations for your business.

I want to thank Philip Franckel for bringing up a good point. Everyone, please keep the insightful comments coming.