How long can your small business go on for without meeting a new competitor across the road?

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English: Fish and Chip shop in Plymouth
English: Fish and Chip shop in Plymouth (Photo credit: Wikipedia)

In our small suburb a cake and pastry shop opened up about five or six years ago. The cake and bakery shop has done well, now even delivering from several delivery vans. It’s interesting that this cake shop business is on the main road where it is visible to passer-by traffic.

I suppose the passer-by traffic works well for attracting customers to the business. In fact, the owner of the business sometimes takes out space on a very big outdoor sign to advertise her cakes.

But the visibility gets other entrepreneurial people thinking. Now, in the past year a similar cake shop has opened up across the road. Interesting isn’t it? So the question is really how long can you continue to operate without a strong competitor entering your market or setting up business across the road?

Competition is a fact of life. Just think about the retail food supermarket business. If you get into your car in most suburbs you have the choice of driving to at least three or four supermarkets outlets belonging to the giant supermarket chains. These supermarket outlets literally fight for business from block to block or street to street. But that does not deter them. Often you will find that they are actually opening new stores left right and centre. The reason – to capture as much of the retail grocery business as they can.

But competition can get out of hand. In one small coastal town a fish and chips business did exceedingly well. It was hard to get hold of a piece of fish on a Friday night with queues streaming outside onto the pavement. Then, a competitor opened up across the road. This business had little differentiation, offering almost exactly what the existing business offered across the road. But the interesting thing is that this second fish shop has continued to do well. A short while later another fish shop opened on the other side of town. But it was on the same main road. The business was previously a coffee shop but that went against the wall and the next offering was a fish and chip shop.

Who knows who will start the fourth fish and chip shop. Another business person might gain the impression that fish and chip sales are doing extremely well in this little coastal town and it’s time to enter to get his or her fair share of the market.

Competition is something you can’t prevent. It’s also generally speaking not something to be feared. Why not? Because you can use differentiation on a number of elements in your business model to compete more effectively, retaining your existing customers and attracting new ones. Of course, some of your customers may be curious and try out the competitor but if you keep your standards high there is a very good chance that they’ll come back to your business.

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