Hyperlocal Positioning: A time-tested business strategy or simply not relevant anymore?

‘“Face reality as it is, not as it was or as you wish it to be.”

– Jack Welch

The Global Village…

Scroll down your Facebook feed and chances are you will see at least one post talking about the world becoming a global village.

And the idea here is that since nowadays people are closely connected through the use of social media, other internet-related communication means, and of course trade and travel, the world is gradually transforming into a single community.

But whether you agree with that notion or not, you’ll probably wonder; how is that connected with today’s topic?

The answer? 

Simple. Even though, the conventional wisdom suggests that today’s entrepreneurs should create ‘born global type of companies’ in reality many new founders put that advice to the test rubbish bin…

… and do exactly the opposite – go local!

The ‘Hyperlocal Option’

Before going any further, let’s make sure we’re all on the same page.

Hyperlocal positioning describes the business strategy of starting a business with the primary focus to serve the needs of a well-defined geographical area, “generally on the scale of a street, neighborhood, zip code, or city.”

I know, that’s not really a new concept. In fact, it is probably one of the oldest methods of starting a business.

If you think about it, almost all small retailers (i.e. grocery stores, restaurants, clothing boutiques, pubs, jewelry stores, etc.) operate under this model.

The Historical Case for Going Hyper-Local

Why does this model exist?

In a nutshell, it’s because it serves the time-sensitive and even province-specific needs of the local community. Plus, the convenience factor comes in quite handy!

And also let’s not forget that:

a) Customers tend to trust local shops more than the non-local ones

b) The lifetime-value of each customer is much higher (because people, in general, stick in an area for quite some years and historically the competition in local markets has been lower)

All sounds great so far, right?

I know… so what has changed in the last 20 years or so?

No guesses here – the internet arrived!

As they say, it came into our lives and changed literally everything – how we buy, work, communicate, live, and …

… last but not the least, how we do business!

Yep, today internet-based businesses are not the exception but rather the rule.

Hence, the question automatically becomes: does hyperlocal positioning work – or is it even relevant – for today’s online ventures; or maybe is time to admit it’s dead (as in forever).

Global Or Die

A bit harsh; or perhaps the critics got this right?

Well, before coming up with an answer let’s get to the bottom of this and see the two key arguments behind this claim.

Argument #1: This (business) model is dying everywhere

The claim here is that today even offline local businesses, which structurally are perfect suitors for this strategy, have a constant struggle to keep up with the digital era and as a result are closing their shops one after the other.

And, according to the “global or die” advocates, that’s not the case only because the offline market pie is shrinking dramatically but also due to:

– The arrival of companies of the likes of Amazon Fresh, UberEATS, Deliveroo, and many others that combine the best of both worlds (e-commerce, retail)

– The global franchises that are spreading faster than ever and making the local environment much more competitive

Argument #2: The hyper-local model hinders growth

In case you wonder why here is an explanation from Sean Barkulis, a supporter of this line of thinking:

What’s more difficult than building one successful startup? Try building 50 successful startups. This is essentially what you are doing when you try to launch city-by-city. Just because your app had success in San Francisco within your own network doesn’t necessarily mean it will have success in New York. If your app can’t launch nationwide from day one, you probably won’t have sufficient capital to build it out nationally, city-by-city.”

– Sean Barkulis

Basically Sean’s point is that by hyper-focusing on a local market, you’ll have to tailor your proposition to that local community and therefore, force yourself to try to re-invent the wheel time and time again should you desire to expand your business into a new location.

My take on hyperlocal positioning?

Hyperlocal Positioning is Still Here for a Reason

There, I said it!

But let me explain…

The idea that new entrepreneurs have only one option: either go global or die is superficial and doesn’t stand up to scrutiny.

The fact of the matter is that local businesses’ shrinking market pie is not because they’re inherently vulnerable to international competition but due to their inability or unwillingness to adapt to a) changes in consumer behavior and b) modern business practices of running a business.

As for the applicability of hyperlocal positioning for online ventures, I tend to have mixed feelings.

And I say this because on the one hand segmenting people based on where they live and in general demographics is so old-schooled and on the whole a bad practice but on the flip side creating a product that is also tailored to the local realities/particularities can always be an added benefit.

Plus, I do agree that assuming your target market is big enough in that region to sustain a real business, going hyper-local can help on the branding and marketing side of things (talking from experience, people do trust local companies more).

Putting It All Together

With all that said, let’s put this post to bed with today’s key takeaways…

– The Internet might have changed everything but there is still room for local retailers

– Segmenting people based on just demographics is a bad practice on the whole

– Go global or die is a stupid dilemma coming from people that either don’t know what they are talking about or have a vested interest promoting this flawed notion

***

Ok guys, that’s all from me for today.

If you enjoyed today’s post, check out my kindle book, The Aspiring Entrepreneur Entry Strategy: A practical step-by-step guide for finding a validated, winning business idea that stays true to who you are, that is currently available at Amazon.

I hope to see you soon.

Best,

Andreas

“When you find yourself in a hole, stop digging.”

– Will Rogers

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