Sunday, July 08, 2007

Product Differentiation - No Chain Stores Allowed

One of the characteristics that separates monopolistic competition from perfect competition is a differentiated product or service. In real estate development this first takes the form of location and then branches off into other areas. A developer in Scottsdale is trying to develop another niche - all stores must be unique. Even though chain stores will pay higher rents, none are allowed in the redeveloped complex.

It's a walkable lifestyle center at the seam of Scottsdale Fashion Square and Old Town Scottsdale, where luxury department stores give way to Indian jewelry shops.

What really sets the $41 million project apart is that it will connect the two existing shopping districts with something entirely different: Each if its restaurants and stores must be local and independent.

No chains allowed...

Southbridge's appeal, by design, is supposed to be its uniqueness. Unger believes that bit of character is something a younger generation wants, Unger said.

He is aiming for the younger-than-50 crowd, and anyone who likes film, architecture, modeling and nightclubs.

"These people are not here to play golf or look at a cactus," he said. "They're here for a different reason."

It's an interesting approach. I also suspect that it's fairly risky. Chains exist because they have a proven business method making them much more likely to be able to pay the rent than startups.

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