Here are two very different quotes about genre from two very different authors:
"Focus in on the genre you want to write, and read books in that genre. A LOT of books by a variety of authors. And read with questions in your mind."
"Genre is a bookstore problem, not a literary problem."
Can you guess who the authors are? More importantly, can you guess what kind of books they write?
I thought this was very telling. The first quote is from Nicholas Sparks, named "Best Author" by readers of Entertainment Weekly.
The other quote is by Rick Moody, the author of The Ice Storm among many other books, a darling of the Village Voice set.
Both authors are wildly successful in their chosen genres, but they are as unalike as they can be. And their views of genre are, not surprisingly, worlds apart as well.
Does genre matter?
If you are writing literary fiction, if you are writing for your own pleasure, if you are interested in telling a story without any concern for marketability, then the answer, I think, is no. It is just a "bookstore problem," something outside of your field of view. All attention is on story, and story alone. The readers you want are those looking to be challenged, those who want to meet you halfway, those who want to be taken somewhere new and different and who want to see the world from a completely new perspective.
If, on the other hand, your goal is to reach a mass audience, if your goal is to entertain, if your goal is--yes--to make money and hit bestseller lists, then genre does matter.
Genre is the label that not only bookstores use, but readers. They use it to find the kind of books that interest them in the vast sea of words out there. Do they want a quiet, gentle tale that comforts? Do they want a rip-roaring adventure that excites? Do they want a tear-jerker, or an intellectual mystery, or a sweeping family saga? The reader wants to be able to find--quickly and easily--the particular pebble that interests her in the overwhelming tide of stories hitting the market.
Does genre matter? It matters as much, or as little, as you want it to.