When Toys “R” Us said in August that stiff competition from mass merchant Wal-Mart Stores was making it consider exiting the toy business, the news struck fear in the hearts of retailers everywhere.
After all, Toys “R” Us pioneered the “category killer” concept that's now employed by big box specialty stores like Best Buy, Home Depot and Bed, Bath & Beyond. The notion of creating giant specialty stores that cater to a particular product segment has become a staple of the U.S. economy. But Wal-Mart, the antithesis of a category killer with aisles stocked with a vast spectrum of products, is posing a dire threat to this way of business.
Wal-Mart had sales of $259 billion for fiscal 2004, ended Jan. 31, ranking it as the world's largest retailer. That sheer size has vaulted it to the number one spot in categories as disparate as food, apparel, jewelry and home furnishings. For fiscal 2005, Wal-Mart plans to add 310 new stores and 30 new Sam's Clubs, to its stable of 3,625 locations. Oppenheimer retail analyst Bernard Sosnick expects that by 2010, Wal-Mart will have 3,000 supercenters, up from 1,600 this year, and total company sales of half a trillion dollars.
That kind of growth will make Wal-Mart number one in plenty of other product categories soon enough, and it will put an even tighter squeeze on existing players in arenas that Wal-Mart already dominates, like apparel and food. With a lion like Wal-Mart on the loose, no store is ever safe, but here we've identified five categories that that look particularly vulnerable to its looming threat.