2 Answers | Add Yours
Let us look at this question more from the point of view of the companies involved in the retailing. From this point of view, there are at least two main advantages to having several retailers in an area that sell the same product.
First, it is good because the concentration of retailers can create a situation that is more convenient for buyers. For example, we often see areas in which there are a number of car dealerships near to one another. This is helpful to the firms because many potential buyers can be brought into a given area. Of course, the firms must compete to attract them, but it is still beneficial to have the customers come into your area in large numbers. It is very possible that each firm will get more customers into their building than they would if they were in a standalone area somewhere.
Second, it can be good because it could make it easier for each company to get service from its wholesalers. If there is a concentration of retailers selling the same thing, the suppliers will be much more likely to be in the area very often. If the retailers were scattered around, it would likely be harder to get prompt service from wholesalers and suppliers at all times.
Of course, the concentration of retailers can be a bad thing. This is mainly because each retailer will face more competition. This means that it is much more likely that some retailers will fail because they will be exposed to so much competition and will not have any sort of a “captive” customer base that has no choice but to shop at that retailer.
Competition helps keep prices low and fair. If only one business offers a product in a given area then they can charge whatever they want because someone who needs it has no choice, but to pay that price. Competition also encourages aggressive marketing strategies that in turn increase demand for a product. This can benefit all retailers selling the product.
The con of course is that if you aren't a strong player in the competition then you lose business to those who are. Being the sole retailer in the area that sells a particular product can be advantageous to your profits, so long as the price that you are selling the product at is fair and reasonable.
We’ve answered 333,946 questions. We can answer yours, too.Ask a question