Columbus, Ohio was once the home and headquarters of Sun TV. This company had the products and format of what today might be Best Buy. If you needed a TV, dishwasher, washing machine or some other appliance, many people in the Columbus market thought Sun TV and bought at Sun TV.
Macy Block started Sun TV and I had the opportunity of spending some time with him as part of a consulting engagement. He told me he would not let a similar format competitor in the market. Macy would strategically locate stores that were easy to get to then he consistently promoted low price for select name brands in print and on television. Sun TV owned the market. Many competitors tried to enter that market and in a short time they were out of business.
What happened? We all get older and Macy did as well. He accepted an offer from an investment bank and he sold half the company. Several years later the investment bank took the company public. By that time there was a new CEO and Macy was able to sit back and enjoy the monetary rewards of what he built.
The new management team had new ideas about how Sun TV should be run and did not stick with the “let no competitors into the market strategy”. Rather than cut prices so deep that a competitor could not make money like Macy did, the new team maintained margins so they would have good reports for their shareholders. They also invested heavily in non retail-store assets that contributed nothing to sales and profits.
Sun TV is out of business today. Liquidation resulted from competitors doing a better job of store site selection, product offering, service and price. They never would have had that opportunity under Macy’s watch.
What reminded me of this story was a recent article in the Tampa Bay Business Journal titled “Bank Enlarges Footprint To Steer Competition Away.” The story is about Bank America’s strategy in certain parts of Florida to use location plus hour of service as a competitive advantage.
Time will tell if this strategy will work. It appears to have a lot of things going for it. The Bank America story also is a good reminder of the opportunities in what appear to be crowded markets. Sometimes companies have a tendency to think they must expand into another part of the country to succeed. That may be an appropriate part of a long term growth strategy, but if you are a retailer or some other business that is dependent on “foot traffic” you should be addressing the opportunities of market dominance from multiple locations strategically selected.
I don’t know about your market but in Tampa Bay and many other markets in Florida, the drugstore closest to your home or place of work gets your business. You will find a Walgreens, CVS or both near every major intersection. Do these companies make money? Just look at their annual reports and you will see that they make money. Does every store make money? Probably not but they contribute to a market dominance position plus they gain tremendous advertising dollar leverage of the advertising when there are multiple locations.
If your business depends on customers walking through the door, then you will be well served by having a clearly defined real estate strategy as part of your profit optimization mission. There is a lot more to it than merely finding or building a building. Demographics, traffic flow, market trends, competitive analysis all play a part. Work with a commercial real estate expert and an expert business consultant who will objectively evaluate the information and return on investment estimates.