Volume 33, Number 10, October 1998

 

ISSUE AT HAND

Hanging Around the Block

by Debra Levy

Books and people have at least one thing in common. It’s hard to spend time with an example of either one and not learn something. Good or bad, I always come away from such an encounter with a couple of new ideas and thoughts.

So while I can’t recommend the book I just finished (it really wasn’t all that good), I did want to share what I learned from it in the hope you might find it thought-provoking as well.

The book is called Around the Block: the Business of a Neighborhood. Business author Tom Shachtman chronicles a year in the life of all the businesses on one small, ordinary block in the Chelsea neighborhood of New York City. He follows the block’s three largest tenants and nearly 100 small businesses as they navigate through economic downturns and neighborhood upturns, the effects of increased rents and diverted traffic patterns.

The saddest story is about the aged owner of a downtown lumber yard who commits suicide rather than allowing an inattentive bank to foreclose on his business. In a final twist of irony, his death by his own hand actually saves the business for his son because of a large insurance policy pay-off.

The story of the lumber yard owner was the most poignant, but the most interesting by far was the showdown between the small shop and giant chain store. Shachtman's year-in-the-life also captured the fate of a local video rental shop once Blockbuster moved in across the street. While it makes better reading if David slays the giant, this was not the case. At year’s end, both entities were at a stalemate, with the small video store having exerted tremendous energy to adapt and provide products and services the larger company couldn’t.

An idle comment by the author in this chapter gave me pause. He mentioned that until the video store owner realized what he was selling and to whom he was selling, his business was doomed. Until the shop owner realized that his store and Blockbuster were not really competing, he was frozen in time. Blockbuster uses computers to pick out the top ten movies of the week, has them in stock and needs large amounts of volume to prosper. The small shop owner could never compete on those terms. So what he lacked in quantity, he made up for in service (a staff of true movie buffs who could select alternatives and sell add-ons), in variety and by using his intimate knowledge of the area to his advantage.

Blockbuster is a mass merchandiser, more akin to Wal-Mart than a Family Video. The small video shop is a service company, more closely related to the local dry-cleaner than to Blockbuster.

There are many examples of businesses that do not grasp the nature of their true competitors. For years UPS attempted to gain market share from Fedex by offering better service and lower costs, yet they barely made a dent. Why? Well, UPS thought it was competing against another shipping company. But it wasn’t. Because Fedex had a sophisticated tracking system, if a package got lost or delayed they could find it easily and quickly. UPS may have been in the shipping business, but Fedex was in the information and insurance business.

Just last year, UPS changed its policies to track everything in a manner similar to Fedex. Now both companies compete head-on in the same business.

Knowing your competition is important in business, but recognizing them in the first place is even more imperative. It might be worth thinking about that next time you take a walk around the block. Happy Halloween.

-Deb


USG

Copyright 1998 Key Communications, Inc. All rights reserved. No reproduction of any type without expressed written permission.