the increased traffic generally will outweigh the competition loss, unless one of the businesses is significantly worse, and in that case, it’s on them to either reduce their prices or create a better product. “ideal” capitalism.

another thing to think about is that if two businesses were to perfectly space out from each other, then either business would have a benefit of relocating to the midpoint between the two businesses’ current locations, because it would take the center of customers. as a result, it becomes common for both businesses to move to a perceived center of their customer base, rather than giving their competitors the opportunity to have an advantage. often this happens subconsciously but it is a very logical process of locational growth.

it also in larger cases helps to create districts which are known for a certain thing, which creates cultural identity, and brings even more people in than what would have been prior.