Category killer
Encyclopedia
Category killer is a term used in marketing
and strategic management
to describe a product
, service, brand
, or company
that has such a distinct sustainable competitive advantage that competing firms
find it almost impossible to operate profitably in that industry (or in the same local area). The existence of a category killer eliminates almost all market entities, whether real or virtual. Many existing firms leave the industry, thereby increasing the industry's concentration ratio
.
The definition most often associated with the term is a big-box retail chain (such as Home Depot, Best Buy
or Toys "R" Us) that is focused on one or few categories of merchandise and offers a wide selection of merchandise in these categories at relatively low prices. The emergence of such stores has taken a toll on specialised local stores in the same market (such as toys), but also affected many larger department store
s.
An example of a category killer business is eBay
. The online auction site has a near-monopoly
because buyers and sellers naturally gravitate to the largest, most liquid market. As a result, the site has almost no competition and has forced similar auction sites (like those run by Yahoo!
) into a very small portion of the market. Jupiter Communications has estimated that eBay earned 90% of all revenues in the consumer-to-consumer auction market in the year 2000.
Marketing
Marketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...
and strategic management
Strategic management
Strategic management is a field that deals with the major intended and emergent initiatives taken by general managers on behalf of owners, involving utilization of resources, to enhance the performance of firms in their external environments...
to describe a product
Product (business)
In general, the product is defined as a "thing produced by labor or effort" or the "result of an act or a process", and stems from the verb produce, from the Latin prōdūce ' lead or bring forth'. Since 1575, the word "product" has referred to anything produced...
, service, brand
Brand
The American Marketing Association defines a brand as a "Name, term, design, symbol, or any other feature that identifies one seller's good or service as distinct from those of other sellers."...
, or company
Company
A company is a form of business organization. It is an association or collection of individual real persons and/or other companies, who each provide some form of capital. This group has a common purpose or focus and an aim of gaining profits. This collection, group or association of persons can be...
that has such a distinct sustainable competitive advantage that competing firms
Competition
Competition is a contest between individuals, groups, animals, etc. for territory, a niche, or a location of resources. It arises whenever two and only two strive for a goal which cannot be shared. Competition occurs naturally between living organisms which co-exist in the same environment. For...
find it almost impossible to operate profitably in that industry (or in the same local area). The existence of a category killer eliminates almost all market entities, whether real or virtual. Many existing firms leave the industry, thereby increasing the industry's concentration ratio
Concentration ratio
In economics, a concentration ratio is a measure of the total output produced in an industry by a given number of firms in the industry. The most common concentration ratios are the CR4 and the CR8, which means the four and the eight largest firms...
.
The definition most often associated with the term is a big-box retail chain (such as Home Depot, Best Buy
Best Buy
Best Buy Co., Inc. is an American specialty retailer of consumer electronics in the United States, accounting for 19% of the market. It also operates in Mexico, Canada & China. The company's subsidiaries include Geek Squad, CinemaNow, Magnolia Audio Video, Pacific Sales, and, in Canada operates...
or Toys "R" Us) that is focused on one or few categories of merchandise and offers a wide selection of merchandise in these categories at relatively low prices. The emergence of such stores has taken a toll on specialised local stores in the same market (such as toys), but also affected many larger department store
Department store
A department store is a retail establishment which satisfies a wide range of the consumer's personal and residential durable goods product needs; and at the same time offering the consumer a choice of multiple merchandise lines, at variable price points, in all product categories...
s.
An example of a category killer business is eBay
EBay
eBay Inc. is an American internet consumer-to-consumer corporation that manages eBay.com, an online auction and shopping website in which people and businesses buy and sell a broad variety of goods and services worldwide...
. The online auction site has a near-monopoly
Monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...
because buyers and sellers naturally gravitate to the largest, most liquid market. As a result, the site has almost no competition and has forced similar auction sites (like those run by Yahoo!
Yahoo!
Yahoo! Inc. is an American multinational internet corporation headquartered in Sunnyvale, California, United States. The company is perhaps best known for its web portal, search engine , Yahoo! Directory, Yahoo! Mail, Yahoo! News, Yahoo! Groups, Yahoo! Answers, advertising, online mapping ,...
) into a very small portion of the market. Jupiter Communications has estimated that eBay earned 90% of all revenues in the consumer-to-consumer auction market in the year 2000.