Although geographical concentrations of retail firms facilitate search, such concentrations also increase wasteful travel by consumers. An elementary example shows that (i) it may be impossible for a planner to achieve the first best level of surplus by simply assigning firms to locations, and (ii) market forces may necessarily lead to clustering when this is even worse than the planner's solution. A modification of the example shows that market forces can result in firms' always locating apart when clustering is the most efficient configuration of firms.