Proximity Pays?

Over the years I’ve noticed a curious phenomenon in retail businesses. Often competing businesses are located close to one another. A few examples:

• When I was in grad school, Wegmans opened a supermarket next door to Tops Friendly Market in Ithaca.
• Cell phone service providers can be in nearby buildings or mall kiosks.
• Car dealerships are routinely clustered together. This is probably the oldest example in the list. As consolidation occurs, the effect is even more obvious. Many of the dealerships on a particular stretch may have the same ownership.
• In the new Totem Lake Shopping Center in Kirkland, Whole Foods opened literally next door to Trader Joe’s.

In some cities, this proximity also extends to health care. Three of the largest hospitals in Seattle (Harborview, Swedish, and Virginia Mason) are on First Hill, also known as Pill Hill. There were a couple of other hospitals in the neighborhood, but they were bought out or closed. One has been converted to a same-day surgery center.

The question arises: Who benefits from this? In cell phones and groceries, the consumer is probably the larger beneficiary. If you don’t like the deal one carrier has, you can walk down the street to the next one. If you can’t find arugula in Trader Joe’s, Whole Foods may have it. In the case of cars, the benefit is definitely in the dealer’s corner. (One could say that it’s always in the dealer’s corner.)