Why would you want to lose R1 million in Cape Town?

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Table Mountain seen from Cape Town harbour's jetty
Table Mountain seen from Cape Town harbour’s jetty (Photo credit: Wikipedia)

I was sitting outside with the proprietor of an Italian restaurant in an up-market suburb in Johannesburg. We were talking about the specials on the menu. These included rabbit and goats. Her son was telling us how he sources the goat meat from the Northern Cape and the rabbit meat from a special supplier in Botswana. I’m not quite sure why the proprietor mentioned it but in her thick Italian accent she said people ask her to start the same restaurant in Cape Town but she doesn’t want to go there and lose R1 million.

Would you invest R1 million opening a business in Cape Town?

It depends. Each market is different. The Cape Town market has its own characteristics. And each suburb in Cape Town is different. Being successful in any business in Cape Town depends on your position or location as well as your positioning. The same positioning that is used in an upmarket Italian restaurant in Johannesburg can’t be replicated in Cape Town unless perhaps at a non-competitive spot at the waterfront.

Location is important for any retail business. Take, for example, a Macdonald’s franchise I saw recently in a suburb in Johannesburg. It is strange that a Macdonald’s outlet would be located in an area where there is hardly any customer flow. And, the store is located in a shaded area which means that it never gets any sun. The most cars that I’ve seen in the parking area in front of the franchise outlet is two.

Here’s another example: a nursery is located in the East Rand in a shopping mall where the predicted customer traffic flows did not materialise. This is a nursery that is in the wrong place. It also sells a product range that is more upmarket than the customers who patronise the shopping centre.

The Italian restaurant owner is right about business owners who want to migrate their business concept straight from Johannesburg to Cape Town. If you make a mistake with the market’s needs, you could lose R1 million. However, many business people have opened up in Cape Town and have run successful stores because their positioning has been correct as well as their location.

Here are some key pointers when it comes to positioning businesses in different markets:

1 Make sure that you do a thorough feasibility study. You need to know the demographics and psychographic of the market before you tailor your offering to the particular market.
2 Find the location that will have the highest volumes of customer traffic for your business. Location is extremely important for any sort of retail business. Don’t just listen to the promises of the shopping centre owners. Do your own homework and observation of traffic flows.
3 Product offerings must meet the needs of the local customer profile. It’s no use offering a high-end product range to a low income market. It sounds obvious but a lot of business owners make this mistake.
4 Pricing is critical. An owner of a flame-grilled chicken outlet recently established itself in a low to middle income suburb in Cape Town. They have sharpened their pricing to such an extent that customers can’t buy flame-grilled chicken anywhere at the prices they offer.
5. Work on your unique selling proposition (USP). Very few markets today are uncontested. Offering a unique value proposition to customers is an important way to differentiate yourself from competitive offerings.

Listening to customer feedback is key to your success. Closely monitor customer feedback and make adjustments that will bring in new customers and help to make those that have bought from you loyal fans of your business.

A proven formula may work extremely well in one market where the customer demographics and psychographic are aligned to the product offering. But if you’re going into a new market your product offering must be in line with what customers want and can afford.

Exporting a retail concept lock stock and barrel from Johannesburg into the Cape Town market is certainly foolhardy as the Italian restaurant proprietor suggested. But with the right location and positioning in harmony with the distinctive customer profile, you can win the minds, hearts and wallets of customers.

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