[.ca] Category Killers (ISBN 1578519608)

Natural selection in the retail industry:
In the Introduction, Robert Spector characterizes category killers as "the most disruptive concept in retailing" because "their goal is to dominate the category \oe.g. toys, office supplies, home improvement\c and kill the competition - whether it be mom-and-pop stores, smaller regional chains, or general merchandise stores that cannot compete on price and/or location." Spector notes that category killers "have helped to expand and upscale the 'mass market' by aggressively driving down the prices of goods and services." That was precisely Charles Lazarus' pricing strategy when he adopted the supermarket model and opened the first discount toy store in 1958, offering a wide variety of toys at 20-50% lower prices. Lazarus was the founder of a children's furniture store that became Toys "R" Us and is credited with establishing the first "category killer." Spector carefully organizes his material within three Parts. First, in Chapters 1-3, he provides an "explanation of category killers and where they fit in the evolution of modern retailing." Next, in Chapters 4-7, he explains "how and why these retailers have come to dominate their categories." Finally, in Chapters 8 & 9, he examines the "category killers' need to expand their reach to urban, suburban, and rural areas, and the challenges they face in maintaining their competitive edge, both in their ability to grow and in their dexterity in fending off challengers." Spector acknowledges that a discussion of the transformation of consumer culture would be incomplete without considering the impact of Wal-Mart Stores, Inc. and Costco because "they take huge bites out of category killers." Today, Wal-Mart sells more toys than does Toys "R" Us and Costco sells more books than does Barnes & Noble. One of the several reasons that I think so highly of this book is that Spector provides a context, indeed an historical frame-of-reference, within which be examines with rigor and eloquence a process of natural selection in the retail industry since the 1950s. He helps his reader to understand how category killers such as Toys "R" Us, Korvette, Barnes & Noble, Borders, Home Depot, Lowe's, Staples, Office Depot, PETCO, PETsMART (which "eschews the term `category killer'"), Circuit City, Best Buy, Wal-Mart, K-mart (with the hyphen later dropped), and warehouse clubs (e.g. Price Club, Costco, and Sam's Club) established and then sustained dominance, at least for a period of time, only to find themselves challenged or, in some instances, eliminated by a new generation of competitors. "A constant theme of this book is that retail and consumer culture are always evolving. Retailing in a free market is always fluid. Concepts, locations, population migrations, tastes, brands, pricing, and executive leadership are forever in motion." Spector then goes on to suggest that in retailing, "you get a new report card every day" and "past performance is no guarantee of future success." What is intriguing to me is what all of these (and other) "big box" category killers share in common in terms of pricing, competition, growth, and expansion. All offer self-service, high volume, deep discount pricing, huge inventory, numerous locations, and extensive selection. By intent, members' clubs (especially Sam's) reduced their costs with bare bones facilities. To this last point, Spector shares a joke, popular around Costco circles, that "illustrates the traditional difference between Costco and Sam's: A Costco shopper spots a display of Polo Ralph Lauren shirts, regularly retailing at $60, for $37. 'I'll take four in white and one in blue,' says the customers. A shopper sees the identical display at Sam's Club and declares, 'I don't care how good a shirt it is, I'm not spending that much.'" In Chapter 9, "The Changing Shape of Retail," Spector suggests what the course of natural selection may be for category killers, their victims, and what may well prove to be their predators. Lifestyle centers and other small shopping concepts, for example, are being developed in response to "time-pressed consumers" who are buyers, not shoppers, who want to "drive up to the store, get what they need, and get out. As of when Spector wrote this book (2005), there were more than 100 lifestyle centers in the U.S. and at least 60 new ones were planned for the next two years. He concludes the chapter and his book acknowledging that "category killers are not ensured of another tomorrow. To the extent that they adapt \othere's that word again\c or tweak or fine-tool or reorganize they will continue to be vital and important arbiters of retail survival. Otherwise, like the retail dinosaurs that once ruled the American retail landscape - Montgomery Ward, Kmart, and others - they will slowly fade from the scene, replaced by newcomers who best capture the needs of the consumer cultures." Those needs are certain to change over time. Obviously, the challenge to retailers is to recognize emerging trends before their competition does and then make necessary adjustments of their product selection, pricing, distribution, and marketing strategies (especially positioning) to accommodate whatever the new needs of consumer cultures may be. After I read this book, I doubled back to review the passages I had highlighted along the way and thought about the subtitle, "The Retail Revolution and Its Impact on Consumer Culture." Based on what I have learned from Spector and others who have also written about the retail industry, it seems to me that Starbucks (the only non-big box com\opany Spector dfiscusses), Barnes & Noble/Borders, Home Depot/Lowe's, Staples/Office Depot, PETCO/PETsMART Circuit City/ Best Buy, and Costco/Sam's Club) did not "kill" categories. Rather, they devised a new business model for the merchandising of toys, books, home improvement, office supplies, etc. They realized that, if given the choice, consumers would prefer to have what mom-and-pop stores, smaller regional chains, and general merchandise stores could not offer to them. Just as a liquid almost always assumes the shape of a container, whatever has the greatest appeal to a consumer will almost always generate the most sales....but only so long as that appeal is sustained. To Robert Spector, I offer a grateful "Well done!"