How to analyse the competition in an area

Three cafés in a town of 3,000 people is saturation. Those same three in a busy, densely populated central district of Paris, Milan or Madrid may not be enough. The number of competitors, on its own, tells you nothing: it only makes sense when you cross it with who lives around them. And that principle works the same way in any European city.

Why look at the competition (and why it isn't what you think)

Many people approach this analysis with the wrong idea: to find an area "with no competition". That's almost never the best sign. If nobody is doing what you want to do, it usually means one of two things: either there's no demand, or someone already tried and left. The goal isn't to run away, it's to measure.

The competition gives you three answers in one: whether there's a market (the fact that others make a living from it proves there is), whether it's oversupplied, and where the real gap is.

The 4 steps, in order

1. Locate every competitor on the map

Plot them in the area, one by one: every business that does the same thing as you. A hunch like "I think there are three" doesn't count. In POINOVA, with the Pro plan, they're already loaded from open sources, but the principle is the same however you do it: you need to see them on the map, not in a list.

This shows you something lists hide: the clusters (areas with three or four together) and the gaps (streets with foot traffic and zero supply).

2. Measure saturation per 1,000 inhabitants

The absolute number is misleading. What matters is the ratio:

• Good sign: 1-2 direct competitors per 1,000 inhabitants in an area with income that matches your product.
• Warning: 4-5 per 1,000. The pie is split many ways.
• Saturation: 6 or more. Only go in if you have a clear edge (price, product, brand).

Careful: these ranges shift by sector. A bakery tolerates more neighbours than a premium gym.

3. Spot the real gap (not the apparent one)

A genuine gap has three things at once: enough population, matching purchasing power and zero nearby supply. If one is missing, it isn't a gap, it's a trap. The empty street with no foot traffic isn't an opportunity: it's a place where nobody opens, and there's a reason for that.

4. Cross-reference with the isochrone and demographics

Three businesses 5 minutes' walk away matter more than ten 25 minutes away by car. That's why competition is always assessed within your real catchment area, not in a circle drawn by eye on a map. And you cross it with the demographics published by each country's statistics institutes: five cafés in an area of 50,000 inhabitants with a high income is a different story from the same five in a commuter belt.

An illustrative example: speciality coffee shops

Imagine, purely to illustrate the method, an established central area in any large European city: let's say around 45,000 inhabitants in a little over a square kilometre (very dense), income above the city average and a good share of residents with higher education. A dense, well-educated area with purchasing power. For a speciality coffee shop (with an average ticket of a few euros) it's an ideal profile. The real figures for each area are the ones you provide using the official sources for that city; the numbers here are rounded purely to show the logic.

Compare it with a changing neighbourhood in the same city, with fewer residents but already plenty of local cafés. The changing neighbourhood is more saturated with nearby supply; the central area concentrates more offices and more turnover of people throughout the day. Same product, two different readings.

And if you take the prices of the central area out to a residential outskirts with a much lower income, it's not that there's "little competition" there: it's that your offer doesn't fit who lives there.

Mistakes that cost you dearly

• Counting competitors in absolute numbers. "There are 3" tells you nothing. Without the population behind it, the figure means nothing and leads you to the wrong decisions in large areas.
• Assuming "no competition" is good. If nobody has opened on a street with foot traffic, it's very likely someone already tried and left. The absence of supply is usually a message, not an opportunity.
• Using a circular radius instead of the real area. A river, a motorway or a hill cuts off the flow of people. If you analyse with circles, you overestimate your reach and underestimate the competition that really is 5 minutes' walk away.
• Ignoring indirect competition. If you have a café, the bakeries with coffee to go and the office vending machines steal your customers just the same. Look at who covers the same need, even if they sell something else.

Direct competition, indirect competition and "the moment"

Three layers, not two:

• Direct: identical businesses (another café if you run a café). The one that shows up in any analysis.
• Indirect: other formats that cover the same need (a bakery with coffee, vending machines, petrol stations with a coffee machine). These almost never appear in the listings, and they take more market share than you think.
• By moment of consumption: who you lose at 8am (bakeries), at 11am (Starbucks) and at 5pm (ice cream shops). The same customer switches competitors depending on the time of day.

How much does it cost to do this analysis properly?

Three routes depending on your situation:

• By hand (DIY): €0, 8-12 hours. Google Maps + lists by hand + Excel. It works if you have patience and the area is small. Typical mistakes: you miss the indirect competition and you measure by radius.
• Local consultancy: €800-2,500, 2-4 weeks. They give you a PDF report with a good snapshot, but dated the day they hand it over. Useful once; expensive to repeat.
• A tool like POINOVA: free for the area's basic demographics, with competition from the Pro plan upwards. 2-5 minutes per area: you cross-reference competition + demographics + isochrone on the same map and repeat for each candidate at no extra cost.