# Counter-positioning *The most dangerous competitor is the one you can't copy.* --- You run a general merchandise chain. Homewares, DIY, toys, stationery, decoration. Your stores are well-located, well-staffed, well-stocked. Fifteen thousand SKUs across forty categories. Margins are healthy. The business is stable. A new competitor opens across the road. Their store is basic: cardboard displays, strip lighting, pallets on the floor. Their range is tiny, fewer than two thousand items. But their prices are 50% below yours on every category that overlaps. Customers walk in out of curiosity and walk out with bags full. Within six months, your sales in those overlapping categories are down double digits. --- You could cut prices to match. But your cost structure won't support it. Your stores are larger, your locations more expensive, your staff levels higher, your overhead built for a fifteen-thousand-SKU operation. Their cost per square metre is a fraction of yours. Matching their prices on overlapping lines means selling below cost, and you'd need to fund the losses from categories where they don't compete. Your margins across the whole business compress to pay for a fight in one corner of it. You could reduce your range. Fewer SKUs would mean higher volume per item, lower purchasing costs, simpler operations. But your entire model is built on breadth. Your supplier relationships assume you carry their full lines. Your store layouts assume fifteen thousand items. Your customers visit because you stock everything they need in one trip. Cut to two thousand SKUs and most of them have no reason to walk in. You could go private label. That's how the competitor keeps prices so low: own-brand products, deep manufacturer relationships, no middlemen. But you depend on national brands to drive traffic. Their advertising brings customers to your categories. Switch to ninety percent own-brand and you're doing all your own marketing, for labels nobody recognises, in a market where brand recognition took decades to build. You could open your own discount format. Separate chain, different name, stripped-back stores, limited range. But every customer who walks into your discount store walks out of your main one. You're cannibalising yourself, and running two operating models with two cost structures, neither at the scale needed to make the economics work. You could strip your existing stores back. Fewer staff, simpler displays, lower overhead. But that makes you a worse version of them, not a better version of you. You lose what your existing customers value without gaining what theirs do. --- Each response is rational to reject. You run the numbers and the damage from changing exceeds the damage from holding still. So you hold still. You tell yourself they'll hit a ceiling. --- They don't hit a ceiling. They open another store, then another. Soon they're opening one a day. Every new store feeds the same cycle: more volume per SKU means lower purchasing costs, which means lower prices, which means more customers, which means more stores. They pass the savings to customers rather than keeping them as margin, so the cycle is self-reinforcing. Every year they get cheaper. Every year the gap between your prices and theirs widens. You could have competed when they had two hundred stores and you still had comparable scale. By three thousand stores, with their volume concentrated across a fraction of your range, the purchasing economics have diverged beyond reach. --- That's Action, backed by [[3i]]. Two hundred and fifty stores and €80 million in EBITDA when 3i invested in 2011. Over three thousand stores and more than €2 billion in EBITDA today, opening roughly one new store every day, almost entirely through organic growth. 3i paid £134 million for their stake. It's worth over £21 billion. The model borrows from Aldi and Lidl but applies it to non-food: radical simplicity, cost discipline, and [[Nomad Partnership|scale economies shared]] with customers rather than captured as profit. The [[Retail Disruptors]] playbook, executed in a market where nobody expected it to work. --- Hamilton Helmer calls this counter-positioning in [[7 Powers]]: a newcomer adopts a model the incumbent can't copy without dismantling their own. The barrier is arithmetic, not ignorance. Every element of the challenger's model, adopted individually, destroys more value in your existing business than it creates. And you can't adopt them together, because the model only works as an integrated system. The Dutch general merchandise chains that competed with Action understood exactly what was happening. Several went bankrupt anyway. ---