Proximity Of Competitors Not Always Bad For Business

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The sight of a competitor moving in the same street or even next door is a red flag for every business, especially if the primary target audience is local. However, the proximity of competitors is not always bad for business. On the contrary, there is a great chance that everyone will benefit from being close to their direct or indirect rival(s).

Here is how:

Attract more clients

It may be hard to believe but the proximity of competitors may actually help you attract more clients. This is because a higher concentration of similar businesses makes the clients/customers start to associate that area with a particular service/product(s). As a result, the area attracts more people than it would if there were fewer competing businesses. And in the end, there is more business for everyone.

Increase profits

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More clients/customers means higher sales and higher sales mean higher profit. So even if some clients/customers go to the competitors, the business can still count on an increased demand just because the competitors are near. Some of the most commonly cited examples include car dealers, gas stations, retail stores and fast food restaurants, to mention just a few.

Force you to become better

Competition tends to bring out the best in people. The same counts for business. In order to retain the existing clients/customers and hopefully win new ones, businesses that operate near similar businesses are compelled to offer a higher value than their competitors. And to do that, they need to increase productivity, optimise the use of the available staff and equipment, invest in innovation, stimulate creativity, look for new opportunities,… all of which makes them perform better and more resilient to market changes.

Having competitors just around the corner can sometimes have a detrimental effect on the business. The most serious risks associated with proximity of competitors include:

Loss of clients/customers

Most people love to shop around and compare prices, quality and service/products, especially if they don’t have to go far. Although there is usually enough clients/customers for everyone, the presence of strong competitors in the immediate vicinity can lead to a dramatic drop of clients/customers. And if the trend continues, the business may eventually be forced to close its doors.

Loss of staff

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It isn’t just the clients/customer who may decide to go to the competition, but employees too. And to make things worse, it’s the best ones who usually leave first for higher salary, better working conditions, bonuses and other things their current employer is unable to provide. Needless to say, loss of staff can seriously jeopardise the business’s ability not only to remain competitive to its fiercest rivals but to “stay in the game” in the first place.

Lower profits

In order to keep their head above water and at least retain the existing clients, the business may be forced to cut the prices and at the same time, increase the quality of its products/service. This doesn’t automatically translate into lower profits because lower prices and higher quality may attract new clients/customers. But if it doesn’t, decrease of the profit is inevitable.