A small store in the centre of a city is not a good idea

People generally believe the centre of a city is the heart of the city and is also the most valuable land in the city. In addition, people believe that having a shop in the centre of the city is going to be profitable, as the total distance from the entire population in the city is likely to be minimized, when the total transportation cost is minimized for individuals to come to shop in the store, more people tend to go to the shop. However, this may be a mistake.

Of course, location is important for shops to earn profits; however, good location also has higher cost. For small shops, they are just impossible to attract the entire population in the city to shop over their places; therefore, their target customers are relatively limited, they have no need to limit the costs for the entire population.

For individuals, the value of the products they want to buy is rightly correlated with the maximum distance they are willing to travel. When individuals only want to buy some products that value low, they definitely do not want to travel long to buy the products. Therefore, locating small shops in the similar population density area can generate similar levels of revenues (if assume there is no competition), the location in the city does not matter. In addition, locating in the centre of a city costs more, which drags down profits.

Overall, choosing a small shop’s location only depends on two things: one is the population density in a very limited area, and the other is the competition in this area.