Everyday Moats

And the little businesses in our everyday lives

If you’re not aware of it, I’ve recently been on vacation in Chamonix, a small French town in the Alps right next to Mont Blanc.

Now that I’m back, I’ve had some time to reflect on some of the little moats and competitive advantages that the businesses in this tourist haven have.

Chamonix

If you’re not familiar with the location, Chamonix is a french commune in the department of Haute-Savoye, the home of around 8600 people. Its permanent residents are dwarfed by the 5 million tourists that the town hosts every year.

It is a well known tourism location, popular with skiers and mountain enthusiasts, and it was the site of the first Winter Olympics in 1924.

This tourism boom has made the town very expensive, and highly reliant on tourist revenue to survive.

The town itself is in a small valley and is almost entirely surrounded by high, almost impassable mountains. There is no significant amounts of good agricultural land, little in the way of natural resources, and accesses to the outside are severely limited, even after the construction of one of the longest tunnels in Europe.

In many places the inacessibility is a constraint on the growth and prospects of a business, but at the same time it provides a significant moat to established businesses.

If a market is rich, and easily accessible, new entrants will come in and eat your margins. If it’s poor and difficult to reach, your very existence will dissuade any new entrants from coming in.

The same is happening in Chamonix.

The hard to reach location, small permanent population and existing variety of choice makes it an unattractive prospect for one of the big supermarket chains to come in and do business.

The town does have a number of supermarkets, but they are all expensive, with seemingly high margins.

Survival there relies not on the traditional “locals” but instead on how well these businesses can supply a transient customer base of tourists.

These tourists tend to be less price sensitive, not just due to having higher than normal incomes, but the context of their visit too makes low prices a less compelling advantage in the region.

This means shops, markets, etc… can sustain higher margins than they otherwise would have.

The Refuge

These factors are magnified even more in the Lac Blanc refuge.

At 2352 meters above sea level, this refuge can be accessed in 2 ways:

• By Foot

• By Helicopter

This wonderful private business in the middle of a protected area is the only business within kilometers.

It has the following features:

• No potable running water

• No heating

• No internet

• No choice of food

• No individual rooms

• No way to receive supplies without a helicopter

And yet, exclusively as a result of its isolation and lack of competition it is able to charge 6€ per bottle of water, roughly 3 times the price in Chamonix, and 12 times what you would find in a large city supermarket.

I bought that bottle of water at 6€, and I would have bought it at 20€ too.

What would ordinarily be a terrible business, selling low margin products in a location with huge transportations costs becomes a fantastic business with great margins operating in a location with no competitors by virtue of its isolation.

The question I now have is…

Can I find a publicly traded business with these economics?

I don’t know, but maybe you can point me in the right direction.