Obviously, we’re taking this pun as far as it can go, but Old Navy’s plan to hit 2,000 stores in the US might be an even more aggressive move. The announcement was all the more interesting considering Old Navy is splitting from GAP, a company that has closed over 200 stores. So where does the confidence come from?
Low Cost, High Opportunity
While there have been many struggling retailers on seeming closing sprees, not all are facing troubles. In fact, there has been a significant amount of success for off-price retailers - a group of which Old Navy is a part. In fact, looking at visit trends of Old Navy (blue), show a brand that is trending closely with Ross (red) a leading retailer focused on lower-priced goods. This shows that not only is there room to grow but even the larger player is trending up.
Taking both brands’ visits compared to their respective baselines shows the point even more clearly. If this comparison holds, there may indeed be room for a significant expansion.
Grow Smart
But, one element that may dictate the ultimate success or failure of the move, is how the expansion is rolled out. One of the biggest risks a brand takes when embarking on a widescale growth plan is rolling out too fast and cannibalizing visits from their own stores. Yet, Old Navy has shown an ability to handle this risk effectively. Taking a look at four South Florida locations show a minimal amount of cannibalization even with all four stores possessing fairly large True Trade Areas.
Should this level of focus and strategy hold throughout the expansion, Old Navy’s new spin-off may become one of the most exciting retailers to watch. But Old Navy distribution isn’t always maximized. Analyzing two sites in Northern California shows a tremendous overlap in True Trade Areas, a worrisome sign of cannibalization between stores.
The Wind Behind Old Navy’s Sales
Old Navy has rightly recognized that there is a wider resurgence among off-price brands that is increasingly driving visits. As one of the larger brands focused on this area, they are planning a large scale expansion across the country. And all of this should be very exciting.
Except, there are serious risks when large scale expansions happen without a clear and focused plan. Instead of seeing strong separations between True Trade Areas, as we see with Old Navy in Florida, we instead see high risks of cannibalization like in the case of Northern California.
Can Old Navy steer their way to calm and open seas? Check-in at Placer.ai to find out.
