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My Corner Strip Mall… A Microcosm Of What May Lead To The Success (Or Failure) Of A Business

Updated: Sep 28, 2022

Nearly two decades ago my wife & I moved into the Bixby Knolls area of Long Beach, CA. Seven years ago, we moved from our first home to new larger home to accommodate our growing family but still in the same neighborhood. Ever since we’ve been living here, on one corner there has been a tiny retail strip mall with two businesses as occupants. In our early years it was our Friday night go to for entertainment and dinner. That’s right, we were living it up by stopping by Blockbuster for a movie and Papa John’s for a pizza.

Today, we can still get that pizza, but if we are going to frequent the other retailer, it’s not for a movie, but for eye glasses! You see (pun intended), the pizza chain that has had its share of issues (most notably, the original Papa’s social missteps), but it has managed to stay in business, while the lights went out on Blockbuster six years ago. It was replaced by an eye doctor “shop.”

This story has played out throughout history, but it dawned on me that right here, in this little strip mall, we have a great example of why businesses succeed and why they fail. And more importantly, how as investors, we can prosper by both, hitching our wagon to the winners and avoiding the losers. Let’s examine this further…

As investors, it’s always important to know the underlying reason in a particular industry/company that intrigues you in the first place. We call this thematic investing. Quite simply, we look to identify themes that have long-term staying power and preferably growth attributes we can clearly see. In this instance, Papa John’s fits neatly into a theme we’ve always believed in… Everyone has to eat and drink (Simple, I know, but no one ever said investing needed to be complicated). Until someone invents a pill to give you your daily nourishment, this theme will not change. Therefore, the potential customer will always exist for Papa John’s. That is half the battle in finding a good investment.

In regard to Blockbuster, their underlying reason to exist was to provide us entertainment and make it available, quickly. They did this by putting a Blockbuster in every neighborhood it could. It was clear that this was not a business with long-term staying power. Even if the adoption of streaming (or even movies by mail) didn’t take off as it has, the rental of movies is not a long-term sustainable business. So, that in itself is a red flag from an investor standpoint.

After you’ve assessed the underlying “reason for being” of a company, the next attribute to examine is management. For the past decade, company managements have needed to address with technology advancement and how it will affect their enterprise. Needless to say, one company embraced and the other, well… did not! That’s right, the pizza joint has integrated technology into their operation (most noticeable in online ordering), while the movie joint missed the boat entirely and could never catch up to the now entertainment giant, Netflix.

Crazy to think that Papa John’s competing in an age-old industry has continued to thrive (to a certain extent) with multiple competitors, while Blockbuster, with its near monopoly on movie rentals, has been out of business for six years because it totally missed the writing on the wall. The DVD player was the fastest adopted technology in history. Blockbuster should have known this was the beginning of a technological evolution leading to where we are today… streaming.

Needless to say, there are many other factors that go into a decision to make an investment. But, without a solid underlying reason for being and great management a company has a great chance of not existing somewhere down the road. If you don’t believe me head over to the corner of Roosevelt Ave. & Long Beach Blvd. to get a pizza and a movie… but bring your handheld entertainment device if you really want to watch a movie!


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