Question

“Tourists traipsing along a half-mile stretch of 23rd Street in New York pass five Starbucks outlets. In Tokyo, 7-Eleven boasts 15 stores within a similar distance of Shinjuku station.”25 Does it make any sense for stores to be clustered in this way?

Answer 1

It totally depends upon the business condition. How much they are selling each day, how many customers come to them and how much profit they are generating. There can two cases:

When they have huge customers base, then there is a point of opening their outlet in clustered manner. Like if they have five outlets numbered 1 2 3 4 5. First customer will either go to 1 or 5 if there is seat vacant, if not they will proceed towards 2 and 4 respectively and finally towards 3. If all the outlets are full, then it is a profitable situation for a firm to open outlets in a clustered manner.

When they have less customer base, then there is no point in opening such stores because as customers will go to 1 or 5, if they are empty, no customer will go to 2 3 4 and the operating cost of them becomes such huge that it is become non profitable to remain open those stores.

Usually if an outlet have such huge demand, they do not open many stores but they forces their customers to wait for their product. Because if an outlet have such a huge demand, they must be providing good products, customers are willing to wait for them. If they do not even have their single outlet full, they do not open second outlet in clustered manner.