A category killer is 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.
An example of a category killer 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 stores.
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.
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