Why imitation is good for business

Somebody establishes a new business in a particular area, perhaps a place that has never had such a business before. It could be a restaurant, a bar, a boutique, a hairdressing salon a motor vehicle garage or any other type of business.

With lots of hard work and a bit of luck, the business attracts customers and grows. Seeing the good fortune of the pioneering entrepreneur, others flock to the area to start the same type of business. Competition becomes stiff as each business tries to woo customers.

It is not only small and micro enterprises that tap into the flow of customers created by established businesses. Large corporate entities do it, too.

You may have noticed that certain streets have a higher concentration of banks than other streets. Some parts of our highways have a very high concentration of petrol stations. Shops selling mobile phones and accessories are often found together rather than scattered in different parts of town. Same case with second-hand clothes dealers, "nyama choma" butcheries and shopping malls.

Are copycat businesses a bad thing? Why do business people prefer setting up outlets in places with many competitors instead of going to a new place with little competition?

Dan Muriuku, a taxi owner-driver in Nairobi's Umoja estate, remembers how it was when he first drove into an open space to start his transport business.

“There were only two or three cars here, and sometimes the grounds would be empty whenever all of us were away," Muriuki says.

Today, the spot has many vehicles as more people seek to make money by turning their cars into taxis. With all that competition, isn't Muriuku missing the days when there were fewer competitors?

“It's actually a good thing that we have more cars here because the site is attracting more customers," Muriuki says.

"Customers come here confident they will find an available vehicle. If we were fewer, customers would not be sure about getting a taxi and they could be going to another place with better chances of a car."

Economists say there are justifiable reasons why businesses dealing with similar products or services bunch together. As any new business wants to gain customers, one way of succeeding is by wooing clients from existing businesses. Being near the competition helps attract the "undecideds"; that is, people who are not yet loyal to a particular retail outlet.

The same principle is at play when manufacturers make goods that closely resemble the competitors' products. That's why smartphones, cars, television screens, shoes and almost everything else look identical to alternative products in the same price range.

In case you are aspiring to start a business but don't know which trade to get into, just follow what everybody else is doing. If you get into a popular type of business, you will find a ready market for your products or services and a variety of suppliers eager to supply you with the goods you need. It is much easier going with the flow than swimming against the tide.