Wal-Mart, Category Killers and Dodo Birds

Aug 27, 2004

By George Anderson

Charles Darwin, no doubt, never envisioned his theories on evolution being extended to retailing in 20th and 21st century America.

Bill Virgin, columnist with the Seattle Post-Intelligencer points out, however, that the history of the industry strictly adheres to the Darwinian model: evolve and survive, don’t and die.

Not long ago category killers were considered the new species threatening more established formats, writes Mr. Virgin, but now some of these such as Toys ‘R’ Us appear to be on the endangered list themselves. The chain recently announced it was considering selling off its toy business largely because it has been unable to find a means in which to compete with Wal-Mart.

While Toys ‘R’ Us appears to be teetering on the brink, not all category killers seem destined to the fate of the dodo bird. Home Depot, Lowe’s, Linens & Things, and Bed Bath and Beyond compete in categories that require much broader selections than a Wal-Mart can offer.

Wal-Mart has been successful in categories such as toys and consumer electronics because it keyed on a limited range of popular items and offered pricing below top competitors.

There’s no doubt that Wal-Mart is currently at the top of the retail evolutionary scale, but if Darwin’s theory hold true than even this will be temporary. On this eventuality, Raymond Zimmerman, founder of Service Merchandise and 99 Cent Stuff stores, said, “Somebody will catch them down the road or they’ll screw themselves up.”

Moderator’s Comment: Are the periods of time between when a company rises to dominance and then falls getting shorter? Can you identify evolutionary
(or more dramatic) changes taking place in retail businesses today that will have a bearing on which companies survive or perish in the future?

The one thing we’re struck by when looking back on retail history is the speed of change. Charles Lazarus opened what Toys R Us calls the first toy supermarket
in 1957. Twenty-one years later when the company went public it was the largest seller of toys in the country. Twenty-six years after that it announces it may be getting out of
the toy business altogether.

George Anderson – Moderator

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