I’m Clarence Cafferty from Long Pine, Nebraska. I’d like to know if we can get another .400 hitter by starting another Borsheims store someplace in this United States. WARREN BUFFETT
Well, it’s an interesting question about both the Borsheims and the [Nebraska Furniture] Mart. I mean, they — and of course, they’re owned — as you probably know — historically, by the same family. I mean, it was Mrs. B.’s sister’s family that bought Borsheims, but, in effect, started it virtually from scratch. And the — both of those institutions offer this incredible selection, low prices brought about by huge volume, low operating costs, and all of that. Operating multiple locations, you would get some benefit, obviously, from the name and the reputation. But you would lose something, in terms of the amount of selection that could be offered. There’s $50 million-plus at retail of jewelry at Borsheims’ one location. Well, when someone wants to buy a ring, or a pearl necklace, or something of the sort, they can see more offerings at a place like that than they possibly could at somebody who is trying to maintain inventory at 20 or 50 locations. Similarly, that gives us a volume out of a given location that results in operating costs that, again, can’t be matched if you have an enormous number of locations. So, I think those businesses tend to be more successful in that particular mode as one-location businesses. Now, a Helzberg’s will be bringing merchandise to people all over the country at malls. And they will do — through that mode of operation, they perform that exceptionally well. But Borsheims can’t be Helzberg’s, and Helzberg’s can’t be Borsheims. They’re both going for two different — in a sense, two different customers, to some degree. Sol Price, Charlie’s friend who started the Price Club, the first big wholesale club, said that part of his success was due to figuring out the customer he didn’t want. I think that’s right, isn’t it, Charlie? CHARLIE MUNGER
Right. WARREN BUFFETT
You have to figure out what you’re good at and who you really can offer something special to. Borsheims offers something very special to people, but in part, it comes about through being at one location. You can see more of almost any kind of jewelry you want there than you’re going to see virtually any place in the world. And that will bring people there, or it will bring male people there. And that gives you operating costs that are many — oh, 20 percentage points — off of what somebody else will be doing without that pulling power. And that, in turn, enables you to offer the lower prices, which keeps the circle going. I mean, it’s very hard to replicate something like that. And trying to do it in 10 spots probably wouldn’t work well. But it’s a question you ask yourself as you go along, obviously, when you — McDonald’s certainly did well by deciding to open a second store. I mean — (Laughter)
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Figure out the customers you didn't want.
If you want to provide a unique experience or offer to your customers, it is easier to build and sustain a moat of that kind with just 1 store. For name and reputation, obviously multiple stores give you the advantage but, you would lose something, in terms of the amount of selection that could be offered.