The Economics of the Cluster

I did piss-poorly in the 3 mandatory levels of economics I had to take in college. One professor, in particular, passed me out of sheer pity. He and I both knew that I hadn't grasped a single concept the entire semester and that a repeat performance would, in all
likelihood, result in the same outcome. Since then, I've picked up some snippets here and there. You know, like how competition works in the marketplace. That differentiation on price, product, location are key drivers for profit. That supply should keep pace with demand and that an identical business opening next door to yours will, in all
likelihood, eat in to your customer base.

So, the Chinese market principles we've seen in Beijing are nothing short of confounding. Yesterday we went to "Glasses City." This is a city block (about 1/8 mile) of 4 story malls containing nothing but glasses shops. As a tourist, wandering around store after store is
amusing and overwhelming. As a shop owner, it must be exhausting. Most of the stores have overlapping merchandise. Without even beginning to bargain, a salesperson might offer 50% off of the listed prices. I guess when you have 300 stores within spitting distance (Don't get me started on the spitting. In restaurants! People just spit on the floor! Like, someone has to mop that up later. Please. Gross.) you do what you have to to make a sale. Ed had an eye exam, frames, and prescription lenses done in 20 minutes for $25.

The overcrowded marketplace isn't limited to the optical business. You see this trend all over Beijing, particularly on the bar streets.  Bar culture in China is only about 30 years old, and is pretty much ring-fenced to certain areas. Wandering down a street or hutong, you aren't going to run into a neighborhood watering hole. But when you go to a bar street and see the fierceness of the competition and the number of choices available to the drinking public, you scratch your head.

About a week ago, we went to Sanlitun bar area (or barea, as we're calling them) with a crew of Dutch girls we met at the Red Lantern and our new friend Scott. The area is close to the business center of BJ, high rent district. Bar after bar after bar after nasty 3rd Eye
Blind-blaring bar line block after block. The drinks are sold at Western prices (40 RMB/6 US) so the crowd is mostly Western & Chinese businessmen and tourists.  As an aside, we saw a totally amazing Phillipine cover band at the maybe-Western themed bar we chose. We fondly referred to the lead singer as Asian Gwen Stefani, although she had braces and sounded much more like Alanis Morisette. Which was confirmed when she opened with "You Oughta Know."

This corny evening also gave us a chance to examine the mating rituals of the not-so-rare species known as Americanus Bloatus Expatria. These multi-chinned, bright polo-clad males could be seen in the bar buying expensive drinks for equally
expensive, gorgeous, young, Chinese girls/escorts.

The Lake district houses a barea called Houhai - same deal here. Everyone is charging ten times as much for beer as in a restaurant or local store (4 RMB/.60 cents) and thus need to employ hawkers/wranglers to stand outside all night shouting/cajoling/begging
customers to enter their establishments. As people who like bars and beers, this begs the question - why compete? Perhaps there is law governing this? Considering that in
some areas you could walk for miles and never see a bar, it seems like there are easier locations to start your business. Maybe someday Ed and I will return to Beijing to start up a biker/beirut/jukebox concept bar and plop it down amidst a knot of hutongs. Someone needs to give these folks some access to decent music. For serious.