Category Killers Retail

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Category
Killers
The Retail Revolution
and Its Impact on
Consumer Culture

Robert Spector
H A R VA R D B U S I N E S S S C H O O L P R E S S
BOSTON, MASSACHUSETTS

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Copyright 2005 by Robert Spector
All rights reserved
Printed in the United States of America
09 08 07 06 05
54321
No part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form, or by any means (electronic, mechanical, photocopying, recording, or otherwise), without the prior permission of the publisher. Requests for permission should be directed to permissions@hbsp.harvard.edu, or mailed to Permissions, Harvard Business School Publishing, 60 Harvard Way, Boston, Massachusetts 02163.

Library of Congress Cataloging-in-Publication Data
Spector, Robert, 1947Category killers : the retail revolution and its impact on consumer culture / Robert Spector.
p. cm.
Includes bibliographical references.
ISBN 1-57851-960-8
1. Shopping centers. 2. Retail trade. I. Title.
HF5430.S67 2005
658.8'7—dc22
2004012224
The paper used in this publication meets the requirements of the American National Standard for Permanence of Paper for Publications and Documents in Libraries and Archives Z39.48-1992.

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Contents

Acknowledgments
Introduction

Part I

ix
xi

The Colossal Competitors

1

From Cow Pastures to Category Killers

2

Charles Lazarus and the Birth of
the Category Killer

11

Category Killers Everywhere

31

3

Part II

3

How and Why They Dominate

4

Pricing
The Cost of “Everyday Low Prices”

55

5

Competition
There Used to Be a Department Store Here

81

6

Growth
Expanding Their Reach

107

7

Expansion
Paper Clips in Portugal

123

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viii

Contents

Part III

The Winds of Change for Category Killers

8

The Backlash

141

9

The Changing Shape of Retail

175

Notes

193

Bibliography

201

Index

205

About the Author

221

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PA R T I

The Colossal
Competitors

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1
From Cow Pastures to
Category Killers

There is nothing wrong with change,
if it is in the right direction.
—Winston Churchill

T H E J E T - B L A C K P AV E M E N T of Southcenter Parkway slices

a path through an expanse of commercial sprawl ten miles
south of downtown Seattle, Washington. On one side of this
land is the convergence of two major highways—Interstate 5 and Interstate 405; and on the other side is the bustling,
upscale Southcenter Mall, where the Nordstrom, J.C. Penney,
and Bon-Macy’s department stores anchor the 1.3-millionsquare-foot shopping center, which was built in 1968 by the real-estate arm of Allied Stores, then one of the most powerful forces in department stores and shopping centers. Just to the north of Southcenter Mall are Toys “R” Us, Target, and the Bon-Macy’s clearance store. Adjacent to that group of stores is the 450,000-square-foot Parkway Supercenter. Parkway is a “power center” of category killers and specialty stores, which are grouped together and share a common

3

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THE COLOSSAL COMPETITORS

parking lot: Best Buy electronics, Babies “R” Us, CompUSA, Gart Sports, Pier 1 Imports, Party City, Old Navy, Hallmark
Cards, Bath & Body Works, Cost Plus Imports, Marshall’s,
Ross, David’s Bridal, and Starbucks. The Supercenter also features a twelve-screen multiplex movie theater and a halfdozen chain restaurants, including Applebee’s, Red Robin, Outback Steakhouse, and Sizzler. Across the street from Parkway Supercenter are Borders Books & Music, Office Max, PETsMART, Linens ’n Things, and Jo-Ann, Etc. (fabrics,...
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