Pick the Right Sandbox to Play in

Choose Your Market – Choose Your Competition

Is your business a sexy one? Does your market attract a lot of people? Is your industry easy to break into? If so, then be ready for lots of difficult competition. 

I heard a speaker a couple years ago at The Retail Experience, an industry education series put on by Green Profit Magazine (a division of Ball Publishing). He was part of a panel discussion about profitability in the garden centre industry. He mentioned something in passing that really got me thinking. When asked about profitability in the industry, he stated something to the effect that; “Hey, you guys chose the horticulture industry. No one gets rich in horticulture.” 

Interesting. I think his statement was more profound than what he might have realized (certainly what I realized at the time). 

When you think of business, any business, the more successful companies are those who have the fewest competitors. If your industry has a lot of competitors, it’s most likely because of one or both of two reasons.

1. There is a low barrier to entry. That’s why in real estate, there are fewer players. You need a certain amount of wealth to even get started.
2. The industry is born out of passion. People who work in their passion, don’t mind working for little or no profits.  

People can have passion for say real estate, but with the high barrier to entry, you can rest assured that your competitors will be looking for a return on their investment, making them a good competitor to have. If you have a low barrier to entry, but have limited passion for say garbage collection, then maybe you can keep high margins because the industry does not naturally attract a lot of players. 

If your industry has a relatively low barrier to entry and is born out of passion, then you’re going to have an uphill battle making money. A low barrier to entry means that getting into business is relatively easy for most people. An industry born out of passion means that your competitors are going to be the worst kind, ones who don’t care if they make money or not. 

If your competitors are not making money and don’t care about it, then it’s going to be very difficult to build a business that is largely profitable. 

This is where I’m at. Right or wrong, I am in an industry where there are a lot of passionate people about gardening. Luckily the barrier to entry is not really low, but it’s not high either. So it’s not all bad. However I do have my fair share of competitors who don’t make money and don’t seem to care. 

What do we do about it? Well we try to change the rules of the game. We carry a different product mix, superior shopping experiences and we own the market place as the industry experts and the authority in our industry. It’s not easy to do, but we seem to be having some success with it.

This is something to really be conscious of. How are you different from your competition? Especially the ones who aren’t making money and don’t seem to care…