When talking loosely, people sometimes conflate two very different ideas: how much choice is available to consumers versus the extent to which a particular industry is dominated by large players. For an example of an industry that is both highly fragmented and also highly competitive, take a look at the results of this Google Maps search for liquor stores in the DC neighborhood of Shaw. As you can see, if you’re living at 9th and S, you’re very close to one shop, but if you feel that you’re getting a bad deal there, you have options.
It is also the case that every store on this map is independently owned and operated. Not only are they owned and operated independently from each other, they are owned and operated independently from the liquor stores in other parts of the city, and from the stores in other cities across America.
That’s a pretty unusual level of fragmentation in the contemporary United States.
If I were to show you a map of places to get coffee near my house, you’d see a few truly independent shops, like Roasted Boon and Cafe U. But you’d also see Starbucks, a globe-straddling behemoth. And you’d see a couple of outlets of Compass Coffee, a regional chain with 19 outlets, mostly in DC but expanding rapidly into Northern Virginia. You’d also see Coffee Bar and Slipstream, neither of which are chains exactly, but both which have two locations in the city. And then you’d see Blank Street and La Colombe, small chains that operate in multiple regions. There are only 32 La Colombe cafes in the world, but they operate in seven states. Blank Street is, in the scheme of things, still a very small chain, but clearly has ambitions, because in addition to DC, Boston, and New York, they have outposts in London and Manchester in the UK.
The upshot is that both coffee shops and liquor stores offer a lot of choice to consumers in my neighborhood. They are also both highly fragmented industries — it’s not like “the top four coffee chains control 80 percent of America’s coffee shop market.” Starbucks is huge and all the other players are small.
But coffee is certainly less fragmented than booze, both because Starbucks (and, to a lesser extent, Dunkin’) are out there, and also because of the proliferation of smaller chains that run the gamut from secondary players (Peet’s) to multi-outlet small businesses (Coffee Bar) to aspiring high-growth startups like Blank Street. And what I wish more people realized is that in practice, the coffee shop market features more intense competition than the liquor store market, not despite its somewhat greater concentration but precisely because of it.
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