Cultural masala

Prior to the passage of the Immigration and Nationality Act in 1965, the quota for Indian immigrants to the United States was fixed at 100 persons per year. This was infinitesimal relative to the populations of both the sending and receiving countries, especially considering that even then India had roughly half a billion people.

The lifting of this restriction unleashed a wave of entrepreneurial immigrants. This group included numerous budding restaurateurs who brought the varied cuisines of their home country to their adopted cities. Most Americans at the time were unfamiliar with Indian cooking, so local support networks and a natural customer base of those from similar backgrounds meant these early establishments were often located near each other.

A curious thing happened starting in the 1970s, as the broader South Asian population grew larger and more restaurants opened. Instead of spreading out across their localities to reach more potential consumers with their curries and dosa, many prospective owners chose locations directly adjacent to the few existing ones. Rather than staking out new territory, these restaurants and related businesses chose to go where the competition was most intense. A dozen eateries featuring comparable Indian or Pakistani or Bangladeshi cuisine could be reached within a few minutes’ walk.

On the surface that appears like a counterintuitive choice: why put yourself in a position where those you serve can easily be drawn away by other options? The menus were often indistinguishable and the price points similar, and even those focusing on niche regional specialties had alternatives nearby offering the same thing.1

Yet the optimal approach was to locate as close as possible to established peers, even if they were literally right next door trying to lure in the same patrons. Although a customer could only eat one meal at a time,2 a sale lost to the vegetarian place around the corner could easily be made up on another night, when that same diner was drawn back to the center of the action.

As a result, places like Devon Avenue in Chicago or Curry Hill in Manhattan filled up with block after block of South Asian restaurants, creating destinations that thrive to this day.3 The hungry diner in search of Indian food in these cities can’t find it on most corners. She must make a special trip somewhere for it, and in many regions one area is most prominent.

The best strategy for these businesses was not to establish clear product differentiation, or target a different customer demographic, or undercut everyone on price. Participating in the building of a thriving ecosystem was better than going it alone, especially when the cuisine was unfamiliar to the broader public. Indian food was shown to be a category where the winner does not take all, and this informal cooperation boosted sales for everyone.

the whole is greater than some of the parts

The sincerest form of flattery

These clusters have other beneficial effects. For example, a Nepali restaurant in a neighborhood that’s full of them is almost certainly going to meet certain standards, because otherwise word would quickly get out and it would be forced to shutter.4 Consciously or not, the average diner assumes that any place surrounded by close alternatives must be at least reasonably worthy. This leveling mechanism helps to keep quality consistent.

These districts are also continuously refreshed by new entrants to the dining scene, allowing it to expand and thrive even when the first players fade away, keeping the overall category viable.5

Clusters are also good for pioneers in new areas, who must communicate to the world what they offer and why it deserves a try. Lone voices can find it harder to be heard. In some segments, the mad scramble to replicate competitors has likely led to faster growth and market adoption.

The power of clustering isn’t limited to literal storefronts, as the world increasingly moves to digitally-enabled products and services:

  • The electric scooters that now dot the sidewalks of millennial-friendly cities around the world are backed by several companies, each trying to quickly establish its presence. This will end badly for those that end up without a chair when the music stops, but in the meantime the industry gets lots of attention.
  • Meal kit services took something done in a routine way for decades—planning, grocery shopping, cooking—and repackaged it into a single subscription delivery service. The proliferation of competitors, each with the requisite cutesy name and saturation levels of media buying, has raised the profile of the concept, to the point that intrigued consumers are likely to at least try one.
  • Pharmacy disrupters are integrating prescribing and filling to provide end-to-end service directly to patients, establishing new ways of servicing selected therapeutic areas and eliminating both doctor’s office visits and trips to the drugstore. Copycats are blooming as the industry develops.

While this behavior leads to an initial boost of publicity for everyone, unlike with restaurants only a few may be profitable when the market stabilizes.

Slow followers

A single curry house or sari shop on an isolated street won’t generate much of a buzz, but several city blocks dedicated to a particular offering can become a beacon, drawing in customers from the region and even neighboring states.

Auto dealerships from direct competitors are frequently side-by-side fronting long stretches of major roads, creating a single destination for anyone in the market for a car regardless of brand.6 This greatly simplifies comparison shopping, which accrues to the benefit of those manufacturers that are confident in the merit of their products.

Several cities have historic jewelry districts, where trading and cutting operations sit side-by-side with public-facing storefronts. Instead of going where the buyers are, these remain centrally located and make the buyers come to them.7

Where the offering is rare, expensive, or unfamiliar, co-locating with others in your field can amplify everyone’s impact, creating a virtuous cycle. Cluster participants can amplify their reach by aligning their offerings, even though someone can only enter one restaurant at a time, or prepare one dinner kit, or ride one snappy scooter at high speeds on urban sidewalks.8 Instead of figuring out ways to capture more of the pie, such clustering can focus on ways to make it bigger.

The best strategy may not involve doing something completely unique or finding an unserved niche in a market. Depending on what you offer, joining with others and building up critical mass can be a better way of demonstrating to the world what you can offer, and why it’s valuable.

What are the natural clusters in your industry, and how durable are they? How can you act to both contribute to and benefit from them?

  1. Despite some common features across regions a monolithic Indian cuisine does not exist, and what is commonly known as Indian food in the West is generally that of a small part of northern India. ↩
  2. Prodigious appetites excepted. ↩
  3. The phenomenon is not exclusively American, with London in particular recognized for the number and quality of its South Asian restaurants, notably the numerous options lined up on Brick Lane. ↩
  4. Doubly true if the clientele has a high percentage of Nepalis, who would know the real deal and quickly shun impostors. ↩
  5. In the category of electric vehicles, some assume that Tesla is the future Ford, while others believe it will fade after performing its thankless pioneering role. Time will tell. ↩
  6. These are sometimes segregated by price point, with the luxury marques off in their own clusters to avoid any association with their plebeian brethren. ↩
  7. An example of Hotelling’s Law. ↩
  8. Which has been known to irk city officials and bewildered pedestrians alike. ↩