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Z Bone's Rants and Raves

MeSometimes, I've had just about enough about something or everything and need to vent somewhere. I'll try to keep it about LA strip clubs, but who knows. It might turn out to be just good ol' babbling and chanting. Good material for flame mail.

...Must calm down. Damn, this acupuncture treatment.

David vs. Goliath

August 6, 2007

Wal-Mart, Ralphs, Starbucks, Borders, Foot Locker, Home Depot, Toys 'R' Us, Best Buy, Bed Bath & Beyond and McDonald's. What do these retail stores have in common?

They are all mega-retailers that dominate their markets. Moreover, these guys make it very difficult for the little mom and pop stores to stay in business, especially in the same neighborhood. In order to go head to head against any of these retailers, the mom and pop store must not make any mistakes and have something for the consumer that the giants do not offer.

What does this have to do with strip clubs? The Wal-Marts of the strip clubs are making the same moves in the strip club industry. At least they're trying. Is this the end of the "mom and pop" strip clubs?

Let's analyze the differences.

What the chains can do (like large retail chains) is amortize their advertising and when they open a new club (or if one is in trouble), they can send dancers from another club. When a new club opens today, it's very hard to bootstrap because the other clubs have a lock on the best dancers, and unless you have a large advertising budget to start, you won't be able to afford those large ads in the papers or billboards.

But unlike large retail chains, there is no cost savings to the club for buying in volume (except maybe for juice and during construction) since the "inventory" (or asset) is basically the dancers. It's not like the dancers will give you a volume discount.

However, like a large modeling or talent agency, the larger chains can get new talent from referrals by your current talent pool. They can also afford to have booths at the large adult conventions, for recruiting purposes. All the advertising targeted to customers also work for new talent. If an 18 year old new talent decides she wants to dance, the first place she'll try will be one of the heavily advertised chain clubs because of the name recognition. In fact, she probably doesn't even know the other small ones exist unless she happens to live near one.

So, all this means is, it's tough going for the independent clubs, like it is for the mom and pop book stores, record stores, and electronic stores.

But unlike retail stores, individual dancers cannot be replicated. Some dancers have a following and their customers will go to whatever club they go to. In an interview with John Gray (CEO of Spearmint Rhino), I posed this same question to him and his response was that customers will go to a card board box if that club had 20 beautiful dancers on shift all the time.

One other factor that's more important now than it was 15 years ago is the same one for real estate. Just 3 things: Location, location and location. When there were only 20 clubs in all of LA, people were willing to drive many miles for their entertainment. Today, people don't even want to have to take a freeway.

Summary of advantages of the big guys:

  1. Money. They have the money to open a club and stay with it, even if it doesn't start making money right away. They can purchase property that the little guy cannot.  Like any business, money gets the ball rolling.
  2. Advertising. Money buys advertising. Newspapers, magazines, TV, Internet and billboards.
  3. Employees. They can move them around for grand openings (dancers, DJs, managers).  They already have experienced trained employees to get the new club started.
  4. Experience. They've created the game plan and have their employee rule book in hand.  They've made their mistakes in the past and have learned from them.
  5. Lawyers.  Big name lawyers can make even cities shake in their boots, let alone other potential competitors.  Big money allows them to fight cities for years if they have to.
  6. Features. Big money and connections bring features.  Nobody else can afford them.

It's a daunting challenge for the mom and pop one-only strip clubs. What can they do?

  1. Find a niche. It's not enough just to be a generic strip club anymore. They have to stand out in the crowd. If the big chains have the "classy" niche, they'll have to come up with something else.  Will it be the "Amazon big titty" club? How about the "Brazilian big booty" club. Or "Anime Asian girls" club.
  2. Bigger is not always better. Trying to be bigger than the chain is probably not a good idea. A small club with only quality girls might work. If the overhead is low, you don't have to charge an arm and a leg, or force your waitresses to sell 20 drinks per hour.  A relaxed atmosphere creates relaxed girls, which can bring in customers.
  3. Special events and services. The small guys are going to have to get creative here.  If the big chains have features, they're gonna have to have something else. The old "Wet t-shirt contest" isn't cutting it anymore.  Better start thinking out of the box.
  4. Cheers. Why do you go there? Because everyone knows your name. Big chains are less interested in this and managers moving around makes it less likely for long term regular customers to be able to feel at home. The small guy can take advantage of this by making sure the regulars are taken care of properly.

The bottom line is, it ain't gonna be easy. If you have an existing mom and pop club, just sitting on your existing customer base won't work anymore. If you're thinking about opening your first strip club, you'd better think long and hard. Then think again.

Of course, if things don't work out, you can always sell out to one of the big chains.


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