A business that faces both parallel products and substitutes is likely to have a difficult time in the marketplace. Example of businesses that have both parallels and substitutes include grocery stores. Parallels include grocery stores with slightly varying themes, warehouse stores, e.g. Sam’s club and Costco, and natural food stores. Substitutes include specialty food stores, e.g. bakeries, dairy stores, and butcher shops; restaurants; and take-out shops. Not surprisingly grocery store profit margins are low. What other businesses are characterized by competition that includes both parallel product and substitutes? Is the average profit margin for these businesses low, i.e. < 5 per cent of sales?
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