Could Walgreen Threaten Apparel Retailers?

Implications: If recent experience has taught retailers anything, it is serious competition can come from unexpected sources.  Here's why Walgreens could be a real threat to apparel retailers.

Analysis: Walgreen announced that it would add casual apparel to the list of private products that it sells in its nearly 6000 stores.  That may not mean much to discounters and department store apparel merchants, but they could be surprised.  It was about 15 years ago that Wal-Mart came out of no where as the largest retail jewelry business in the US just by merchandising about 50 linear feet of low priced, fine jewelry products.  Most specialty retailers didn’t see it coming.  After all, consumers really didn’t think of Wal-Mart for jewelry and the company didn’t aggressively advertise it.  Nonetheless, the industry watched as Wal-Mart’s jewelry sales exceeded $2 billion in less than a decade.  
Now, the same thing could happen to traditional fashion retailers.  

One reason, so called specialty fashion stores aren’t that special anymore.  Fashion has become a lot less trendy, than it is casual.  In the 1980’s trend setters like The Limited built an industry by recognizing fashion trends and being the first to bring them to market.  Styling trends changed seasonally and so did colors which gave the advantage to companies that cultivated fashion conscious consumers and had the professional talent to identify the trends.  Now, fashion is more fluid and less rigid.  Casual and all the varieties of style that the name entails is a significant part of the apparel business today. 

But, the barriers to entry are much lower than a decade ago.  Price, convenience, accessibility, and utility are key factors for success in the casual apparel business, not just timeliness which was the prime driver in the past.  While, the trendy part the apparel business is relatively secure, fashion retailers could ill afford to lose even a portion of their casual business.  Any fifty billion dollar company that has wide retail distribution and has a large market share of the personal care and cosmetic product markets has the potential to sell a lot of casual apparel.  That sounds a lot like Walgreens and traditional apparel retailers and investors alike should listen for the foot steps.

In addition, Walgreens announced it was reorganizing it health care centers and pharmacy organization as a part of the expansion of its “Main and Main” retail care program.  The company expects to operate up to 500 health care centers at it Walgreen locations.  That not only means significant incremental revenue growth for the company, but a lot more customers for its traditional product lines; including casual apparel.