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What advantages and disadvantages are there for retail outlets, selling similar products, to be located close together?

Locating retail outlets with similar products close together may be beneficial to both retailers and customers. For examples, fashion retailers tend to open close together in shopping centres. As mentioned above, reducing the risk of opening a business in the wrong location maybe one of the key benefits. By locating similar retailers close together will also attract more customers to shop in the area. When people shop they prefer to go to places where there is a wide choice options. This also gives the opportunities for draw customers who cannot find the right product from the competitor close by. Another advance brought by the high level of competitions is an improvement in the quality of the products/services; the retailers may also concentrate more on innovation to bring new products to the market. There are also advantages for the customers; the customers can have more choices by looking into different retails with similar products. Also, with being close to competitors, most retailers tend to fall into ‘price wars’ in order to attract customers. This is beneficial for the customers but may lead to disadvantage to the retailers.

As mentioned above, if the retailers with similar products locate close together, ‘price war’ maybe becomes an issue. When a new merchant is entering an established market, it tends to reduce the price to attract the customers. The others will also lower their prices to match. Because the brand differentiation is low, price will be main competing factor. This affects both tangible and intangible products/services suppliers. This may have more impact on businesses where customer generally choses one over another rather than having multiple choices. For example, restaurants with similar type of cuisine locating near

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