Panic In The Face Of Competition

Taco Truck?, originally uploaded by x_therumor.

Viva la taco truck!

In May of this year Los Angeles County passed an ordinance that taco truck operators must move to another location every hour or risk facing $1,000 fines and possible jail time. While no such tickets were ever handed out, the ordinance was fought in court and a judge sided with the taco truck operators on Friday. The fiasco began when local restaurants began complaining about the taco trucks posting up nearby and drawing business away from them.

We've seen similar situations like this before. A new business comes into town. It's new, it's fresh, and draws the interest of the consumer. Suddenly competing merchants who have been in the area longer become fearful. The potential of losing business to the new kid on the block blinds them. They panic, become desperate, and begin making rash business decisions.

When I was a teenager and in my early 20's I worked for a small town flooring store called, McCall's Floor-Mart. We sold anything you could walk on. It was (and still is) family owned and operated for years and was the primary flooring store in the community.

One day, Lowe's moved into town. As we all know, Lowe's is a box-store that sells flooring and everything in between. The temptation to panic was very real. We even heard rumors from time to time that we were going out of business. Customers asked, "How do you think Lowe's will affect your business?" Our usual answer was that we did not believe it would affect us very much in the long run. We provided superior service, superior knowledge in the world of flooring, and offered high quality products. We made some adjustments, primarily in the area of improving our brand, but for the most part we just kept plugging along. The strategy worked. Some 10 years later, the store still stands and remains a staple in the community. Lowe's on the other hand is, well, the Wal-Mart of the home improvement world. There's not anything remarkable about it.

When competition comes to town, how do you react? Do you panic? Do you radically change your business plan? Do you plan for the long haul or do you produce knee-jerk reactions to the short term hiccups along the way?

Lesser businesses will panic and maybe even try to get ordinances passed to run the new competition out of the neighborhood. That's not a very good long term strategy. It creates bad PR and could drive more customers to the competition. If you are confident in the quality of your brand and you provide excellent customer service, it won't matter how many taco trucks or Lowe's move into town.

Sidenote: Some of the best tacos I've ever had were purchased at a taco truck.