There Are Some Business Models I just Don’t Understand

I am not sure why, but I often think about businesses, business models and profitability.  This inevitably leads me to businesses that perplex me insofar as I can’t figure out how they are profitable.

Three Examples of Business Models I Don’t Understand

Local Bodega, Deli or Coffee Shop in a Large City

A Bodega is like a deli or a corner store and for some reason there is one 2 blocks no matter where you are in New York City and NYC is Expensive.  How many sodas or beers does a business need to sell to be profitable?

I know the mark up is insane but how do they pay rent and still stay in the black?

Porn Websites & Adult Stores

With the rise in popularity of so-called tube sites (think youtube for porn) which illegally stream porn for free how do the legal sites stay in business? Are there really enough people paying a monthly subscription fee as to be able to pay actors/actresses/camera men/video editors/directors etc.?

Movie Business

Forbes just ran an article highlight the performance of Disney’s latest movie they decided to cram down American’s throat, “John Carter”,

‘John Carter’ did a little less than $10 million on Friday night. It’s on track for a less than $30 million weekend. This debacle cost $250 million, plus there’s probably another $100 mil lost somewhere in promotion

It almost seems like a move like Avatar funds 10 terrible movies?

Do you know how any of these businesses work? What business do you not understand?

28 Responses to There Are Some Business Models I just Don’t Understand

  1. When we went to Hawaii for our honeymoon, I was amazed that on just about every corner, there was an ‘ABC Store’ which is basically a convenience/liquor/souvenir store. I couldn’t figure out how so many would stay in business but apparently they do fine!

  2. Great point about the movies. I went to see safe house this weekend (pretty good) and my fiancee and I were the only people in the theater. Always makes me wonder how they can make money

    • The electricity alone had to make the run of that movie a loss, right? The mark up on the $22 soda and popcorn has to be the only thing keeping the movie houses in business.

      With today’s home theaters it is almost hard to justify going to anything but a FANTASTIC movie.

  3. Dollar stores.

    I can kind of understand local dairies and ethnically inclined stores (which I presume are our local versions of your bodegas) because they offer convenience and in the latter case, some items you’d be hard pressed to find otherwise.

    General cheap takeaway shops also seem to survive, but again I guess it’s that convenience factor.

    My fiance sometimes talks about starting a shop in the food/hospo industry, but I don’t think profit margins are that high and who wants to work all hours in a kitchen?

    • Dollar stores! PERFECT EXAMPLE. How large must some of the margins be to be able to afford the rent alone nevertheless all the other things that go into running a business.

      Actually here in the US some of the dollar stores are multi-billion dollar enterprises:

      http://www.google.com/finance?q=NYSE%3AFDO

      6.7 BILLION market cap!

  4. You’d think Youtube would have killed a lot of video based businesses. The internet in general has killed a lot of businesses I think.
    I haven’t visited a library since middle school…

    • I am not sure about whether YouTube has killed businesses but rather like a netflix, who took down the blockbuster GIANT in a matter of years.

  5. Tax preparation places such as Liberty tax. There are so many all over the place but they are only open for a few months out of the year. They still pay rent the rest of the year because they don’t disappear like halloween shops do after halloween. I’ve never seen one with more than 2 or 3 customers inside so it confuses me

    • That is such a good example! THEY ARE EVERYWHERE and have NOTHING to do after April 15th lol

      Plus they charge probably close to what a CPA would charge so why even go?

  6. “John Carter” seemed like a cheap rip off of “Star Wars” so I am not surprised that it did poorly. Nobody has even heard of a John Carter. It is a stupid title for a movie. I hadn’t heard that it cost $250 million. What a waste?

  7. I guess they are not highly in the black. Total return on capital + time is probably similar to or lower than what you’d get by investing the money in an index fund. I have no hard figures to back this up, but in a highly competitive industry like that you won’t get any excess profit, so I’d be surprised if that was not the case.

          • Who cares if I understood it or not? Most of the stuff you talk about is vague, esoteric. It only applies to upper middle class people with huge investments and lots of money to invest and blah blah. You don’t talk about anything that people with less money can relate to.

            Anyway, just because YOU don’t understand a business, or whatever, doesn’t mean that it doesn’t exist for a good reason. Maybe you should try to open your mind and realize that not everyone is obsessed with making as much money as they can. Some want to help people. Others want to create a legacy. Whatever it is, money is not the meaning of everything. Which you seem to think it is.

            • If you don’t like what I write about I implore you…nay I beg you to just stop visiting.

              As to your point (if I may use that word loosely)…I didn’t say that the movies, porn shops or bodegas shouldn’t exist all I said was I didn’t understand how they were profitable. But oh you think those aforementioned businesses are around not to make money, that makes sense too…I know my local bodega which sells fantastic beer is there really to supply jobs while the owners sit in their shack. Idiot.

              • I said some businesses, not necessarily the ones you mentioned. And I didn’t say shouldn’t exist, I said you didn’t understand them. I’m explaining to you, since you seem not to understand.

                Idiot. I see. You’re going to call me an idiot. I can think of a laundry list of profanities that I could call you right this minute, all fitting. But I’m not going to. It’s called being polite, something that seems too challenging for you.

                You really need to work on your anger issues, dude.

                I don’t necessarily like what you write about, but understanding people like you will help me a great deal in this world. I need to know what I’m up against.

  8. “I said some businesses, not necessarily the ones you mentioned. And I didn’t say shouldn’t exist, I said you didn’t understand them. I’m explaining to you, since you seem not to understand.”

    So basically you are adding zero to the conversation other then I don’t understand some businesses. Oh wait that was the point of the post. Fantastic.

    • I am saying there are some serious flaws in your thinking. Your perspective is not one I would choose to view anything through.

      I think what you need to understand is that even if you have millions and millions of dollars, it won’t make you happy. You’re still going to be a man with anger issues who lashes out at complete strangers, calling them idiots and bitches.

      You’ll still be that person, whether you have $1 or $1 million.

      And as much as you think my thinking is warped, consider this: you think a woman living in complete poverty is “spoiled” because she works only two days a week.

      …yeah

      • You always turn my posts into a question of my character and you obviously don’t like me. I am cool with you just not reading my site.

        So if I just say yes you are right about it all will you just go away? lol

        • No, because I’d know you were lying and just wanted me to go away.

          Which brings me back to the fact that you really aren’t willing to consider viewpoints other than your own.

          I’m not really sure how I feel about you, to be honest. I don’t know if the person you are on here represents how you really are. I get that you couldn’t be bothered with being nice to me, which does say a lot about the kind of person you are. Not caring that you insult a real person, even if they are just words on a screen, is insensitive.

          I feel like I need to say these things because a lot of your readers are like you and don’t see what’s wrong with you, because they’re the same way. Sort of how someone who lived in a sewage treatment plant all their life wouldn’t complain if their new apartment smelled like shit.

          Make no mistake. There’s something seriously wrong with the way you think and see the world. I am actually doing you a favor by pointing it out. You complain constantly that I single out white, christian, heterosexual males. That’s because you’re so used to just going through the world with privilege and nobody calling you out on it.

          I’m calling you out. And you don’t like that. Is this a good use of my time, are you going to change? Probably not. But I’m going to say it anyway.

Leave a reply


− 4 = 4