Finding competitors close to a potential new location can initially look like a reason to reconsider it. If another business is already serving the same market, surely it makes more sense to look elsewhere?
Not necessarily.
Competitor locations can provide valuable clues about demand, customer behaviour and the way an area works. In some sectors, businesses deliberately cluster together because customers are already accustomed to visiting that location for a particular product or service.
The challenge is understanding what the competition is telling you rather than simply counting how many rivals are nearby.
Competition can be evidence of demand
An established group of competitors may indicate that an area already attracts the type of customers a business wants to reach. Restaurants gather in dining districts, car dealerships are frequently found close together and retailers selling similar products often occupy the same shopping destinations.
For customers, this can make an area more attractive because they can compare several options in one trip. For a business considering a new location, an existing cluster can therefore provide evidence that the area already has a relevant market.
But that doesn’t automatically make it a good location. The same cluster could be highly competitive, with little room for another operator. Understanding the scale of potential demand is just as important as knowing who is already there.
Look beyond the nearest competitor
Simply plotting the closest rival on a map doesn’t tell you very much. A more useful analysis considers competitors in relation to their catchments, the surrounding population, accessibility and the other businesses or amenities drawing people into the area. Two potential sites might each have three competitors nearby but present completely different opportunities. One could sit within a large catchment with strong customer demand and significant footfall. The other may have a smaller potential market already well served by existing operators.
This is where competitor data becomes more valuable when combined with other forms of Location Intelligence. It provides context for the competition rather than treating proximity alone as either positive or negative.
Understand how much catchments overlap
The effect of a competitor also depends on who each location is capable of serving as travel times, transport links, physical barriers and customer movement can all influence catchment areas. A competitor that looks close geographically may actually serve a different population, while another several miles away could compete much more directly because customers can reach it easily.
For businesses with an existing estate, the same principle applies when considering a new location. The competition isn’t necessarily another brand. A proposed site could also draw customers away from one of your own existing locations. Mapping catchments can help businesses investigate where that overlap is likely to occur and assess potential sites as part of the wider network rather than in isolation.
The business of clusters
Competitor clustering isn’t unusual. In some industries, several similar businesses operating close together can help turn an area into a destination in its own right. Over time, successful clusters may also attract complementary businesses, suppliers, investment and people with relevant skills. What begins as a concentration of competitors can become part of the reason businesses and customers continue to gravitate towards the area.
However, the value of clustering varies considerably by sector. A cluster of restaurants or furniture retailers may encourage comparison and generate additional visits, while another type of business could gain little from being surrounded by direct competitors.
The important question isn’t simply “Are there competitors here?” It is “Why are they here, and what does their presence tell us about this market?”
Competitors are one part of the location decision
Competition should rarely be assessed on its own. A location with relatively few competitors isn’t necessarily an untapped opportunity, just as a location with several rivals isn’t necessarily oversaturated. Population, customer characteristics, footfall, accessibility, surrounding businesses and existing customer behaviour can all change the interpretation.
Periscope® allows competitor locations to be viewed alongside demographic, customer, movement and other location data, helping businesses compare potential sites and understand the wider market around them.
Rather than simply trying to find somewhere the competition isn’t, businesses can make a more informed assessment of where demand exists, how well it is already being served and whether there is room for them within it.
See how Periscope® can help you understand your competitors and make more informed location decisions.
