Experience Manifesto

Category Killers -- Interesting Stat

Here's an interesting stat from the book:

According to a 2004 survey by the American Affluence Research Center, the top eight retailers favored by the wealthiest (average income of $359,000) 10 percent of the U.S. population were (in order): Target, Home Depot, Costco, Nordstrom, Gap, Bed Bath & Beyond and Best Buy.

This is quite a shift in attitude towards discount shopping. There was a time when people in the top 10% wouldn't shop at a discount store, but today that's clearly not the case. It's an interesting point.

Some sixty million households in the United States will shop at a dollar store this year and 28% of American consumers surveyed said that they shop at these variety stores at least once a month, according to A.C. Neilsen.

This creates both a challenge and an opportunity for retailers. Look at the job Target has done in creating a different experience for discount shopping? Why, because there's a much broader audience shopping there today and it has to appeal to all of them.

Category Killers

Welcome to day four of the 6th Business Blog Book Tour. If you'd like to catch up on the conversation so far, Brand Autopsy did a great job yesterday, so make sure you check them out!

I had the chance to spend several hours on the phone with Robert Spector, author of Category Killers: The Retail Revolution and Its Impact on Consumer Culture and a man who knows his retail.

Should you have any questions or comments, please feel free to post them or email me and we'll see if we can get an answer! Remember, we want to hear your thoughts, so don't be shy!

A Penny For...: BBBT - Spector's Bibliography

Robert has written 18 books. He is different than many of today's business book authors. He is a writer and a journalist. He is best know for The Nordstrom Way. He has also written a great book on Amazon.

Link: A Penny For...: BBBT - Spector's Bibliography.

Category Killers -- The Wal-Mart Effect

The book starts out with an excellent and fascinating history of category killers. It's important to remember the cyclical nature of retail and Robert gives a great deal of background and history about categories killers and where they came from.

And the current plight of Toys R Us really brings home of the critical issues facing category killers and, in fact, most retail, today. Charles Lazurus, founder of Toys R Us, is credited with developing what we know today as category killers today. Prior to his opening of the first TRU store in 1957, most toys were sold in department stores and sold mainly over the holiday season. Over the years, TRU was one of the reasons that department stores stopped selling toys and, now, thanks in large part to the new generation of category killers, like Wal-Mart, TRU is now considering leaving the toy business to focus on Babies R Us (Click here to read the story about their announcement last year).

Of course, Wal-Mart is the category killer in so many categories, it's tough to know where it will all end with them. Did you know that Wal-Mart attracts 70 million people a week? Here's something from a recent piece on CNN:

Despite its wobbly performance during the 2004 holiday shopping season, when consumers shunned Wal-Mart for being stingy with discounts, Retail Forward projects that the company is still on track to hit $500 billion in sales by 2010, accounting for a whopping 12 percent of all retail sales in the United States. (Emphasis mine)

Here's some Wal-Mart stats. They represent:

28% of Dial's total sales;

24% of Del Monte Foods total sales;

and 23% of both Clorox and Revlon sales

In addition, Wal-Mart "moves more groceries, dog food, toys, socks, guns, apparel, detergent, jewelry, bedding, diamonds (now, that's a surprise!), furniture, toothpaste, sporting goods, CD's, DVDs, and videogames then any other retailer worldwide. It generates the most revenue for DVD releases of Hollywood movies, develops the most camera film, and fills more eyeglass prescriptions.

Robert predicted a greater range of offerings in Wal-Mart's future and this was in the news today:

But while Skrovan said consumers should expect Wal-Mart to become an even bigger force in areas such as food, beauty, clothes, toys and electronics, watch out for Wal-Mart's footprint to expand outside of retailing.

Aside from banking, she lists travel services, healthcare, fuel refining and publishing as a few of the most appealing new businesses for the retailer although some industry watchers say they're skeptical about those growth areas.

"Wal-Mart already offers travel packages to consumers. It's testing car rental service in a few stores. In 2010, maybe consumers could even fly the friendly skies with Wal-Mart," Skrovan said.

Wal-Mart is already the fourth largest pharmacy in the country. It's not implausible that Wal-Mart would offer in-store eye checks for prescription eyewear and contact lenses, or even dental care.

Added Skrovan: "Wal-Mart already has gas stations at a few of its stores. Maybe it could move upscale into oil refinery." She also sees publishing as a logical new business venture for Wal-Mart.

"From here, we expect Wal-Mart will continue to push the boundaries to meet any consumer need," she said.

Link: A Wal-Mart store, bank and fuel refinery? - Jan. 26, 2005.

So how do you compete with the category killers of today? As Robert says "These merchants understand that in order to compete successfully, they must provide something that customers can't get anywhere else. (Again, emphasis mine) Ironically, John Eyler, CEO of TRU, had this to say -- "All of retail has become more theatrical. It's about making it fun. What's fun about going to a warehouse?"

Robert gives some great examples in his book of retailers who understand this and have created unique experiences that allow them to compete in a category killer world. For example:

Wild Rumpus is a two thousand square feet of bookstore -- and zoo. While borrowing its name from a phrase in Maurice Sendak's book Where the Wild Things Are, the store design was inspired by Anne Mazer's The Salamander Room, in which a boy transfigures his room into a place where his salamander would be comfortable...By creating an inviting place, Morgan has found a way to create traffic and make Wild Rumpus a destination store...where within ten miles, there are six Barnes & Noble stores, three Borders, a Target, and a Musicland.

So take stock of your retail experiences. Are you creating a unique shopping experience within your category? Are you creating something that's unique and interesting, that doesn't just have what everyone else has? Are you delivering something that they can't get anywhere else? Take an inventory and see where your future lies!

To read more about Wild Rumpus, check out the interview with Robert at Learned on Women: Wild Rumpus vs. Goliath.

Experience Manifesto: Our First Blog Book Tour!

Just a reminder that we will be hosting our first Blog Book Tour on January 27th. The book is Catogory Killers by Robert Spector. Stop by our blog throughout the day to read the latest posts on this book, which should be required reading for anyone in the retail business!

Link: Experience Manifesto: Our First Blog Book Tour!.

Brand Autopsy has a great piece about the upcoming BBT as well, including the full schedule and a link to a good article about the book.

Link: Brand Autopsy: Killer Conversation with Robert Spector.

Here's some exceprts from the Seattle Times article that's listed on Brand Autopsy (emphasis mine):

In the beginning, pioneer category killers such as Toys R Us and Home Depot located in undeveloped or underdeveloped areas with plenty of open space for parking. The store interiors were no-frill zones in cookie-cutter, single-floor buildings. In exchange for Spartan surroundings, these retailers offered time-starved shoppers low prices and convenience. The strategy was simple: Pile it high and sell it cheap.

As they fight to ensure their own survival in a world of retail Darwinism, category killers have gone through their own evolution.

What is the future of category killers? Where will they turn up next? And how will they influence — and be influenced by — the changes in America's consumer culture?

What is a category killer?

Also known as "big-box" stores because of their mammoth footprint, they are retailers that specialize in a distinct classification of merchandise, such as toys, office supplies, home improvement, at low prices. They earned the sobriquet "category killer" because their goal is to dominate the category, killing the competition that cannot compete on price and/or selection.

In recent years, the best category killers have become more consumer-centric, adjusting their look and feel to sell. Even the most bare-bones big-box store has had to upgrade signage, product presentation and even (gasp!) customer service. Most have added related product lines, such as Home Depot's move into home appliances.

Many malls that were once enclosed are being converted to open-air formats. These properties are being split up for easier access, adding many more entry points as they combine the outdoor open strip mall with the supercenter concept to produce the feel of a community center. In this type of arrangement, retailers will be able to attract customer traffic from the streets, not just from within the mall.

Faced with the problems of vehicle traffic, air quality and urban sprawl, developers are taking unused or underused parts of their malls and creating mixed-use, pedestrian-friendly spaces that combine residential, office and retail space, as well as a variety of urban services, such as medical care, and libraries, post offices and other government buildings. These properties are attracting people who prefer to live close to where they work and to have all the amenities close by. Some malls are adding hospitals, churches and day-care centers.

Sounds very much like the old Main Street, but with a slightly modern twist.

To the extent that they adapt, they will continue to be important.

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 better understand the current needs of our consumer culture.

Link: The Seattle Times: Make it Count.

Our First Blog Book Tour!

BEL is participating in our first blog book tour on January 27th. The book tour concept is quite simple; the author "moves" from one website to another each day and while visiting, he or she might be interviewed by the site owner. Or they might guest host the site for the day. The possibilities are endless. Want to see what happens during a Blog Book Tour? Click here to see some postings during last years Origins of Brands blog tour.

Our first Blog Book Tour will be for Robert Spector's new book, Category Killers. Simply remember to visit our blog on the 27th to read or participate. Have a question you'd like to ask Robert about his book? Send it to Mitali to have it included on our stop.

Here's a brief description of this book from Amazon.com:

At a time when Wal-Mart and other big retailers are being demonized for allegedly stifling competition and short-changing workers, Spector takes an evenhanded approach, reviewing the criticisms while noting that discount retailers have brought previously expensive goods within reach of average shoppers.

Interestingly, Spector demonstrates that many of the arguments leveled today against Wal-Mart and other superstores resemble those used in the early 19th century against the first department stores and the earliest discounters.

Click here if you'd like to learn more about about the tours or to see an upcoming schedule.