What retail apocalypse?
That's the question Old Navy's likely been asking recently. Business at the clothing retailer is booming--so much so that the company just made a huge announcement:
It currently plans to open 800 (800!) more stores in the foreseeable future.
800 is a lot of stores. Is Old Navy really ready for that type of growth?
Before we answer that question, let's take a look at how Old Navy got here in the first place.
Why Old Navy's Killing It
For years now, Old Navy has managed to outshine its parent company, the Gap. This has led to major changes: Company executives announced earlier this year that Old Navy would split off from the Gap, resulting in two publicly traded companies.
That's a smart move, considering that Old Navy has consistently outperformed both the Gap and sister company Banana Republic. In 2018, Old Navy made up almost half of Gap Inc.'s $16.6 billion of sales, according to the Wall Street Journal.
So, how does Old Navy do it? How does it manage to grow sales at a time where its own partners are slumping?
It all comes down to the company's brilliant execution on a very simple strategy.
"[Old Navy] has an amazing handle on who their customer is," says Hitha Herzog, Chief Research Officer of market research firm H Squared. "It also understands said customer and has priced merchandise accordingly."
Whereas Gap and Banana Republic have lost market share to competing fast fashion brands like Zara and H&M, Old Navy has carved out a comfortable sector of the market by differentiating itself from those brands as a little brighter, a little more youthful--and a lot less expensive.
Getting carried away?
But again, 800 is a lot of stores. Is Old Navy getting high on its own success?
Remember that we've seen far too many retailers move too fast and furious, only to oversaturate the market and have to pull back within a few years.
Additionally, it's notable that Old Navy doesn't currently have many direct competitors. But that may soon change as British retailer Primark continues its entry into the U.S. market.
Much like Old Navy, Primark focuses on providing youthful, trendy clothing with smart and targeted marketing--all at a very low price point. Primark, whose stores are typically larger than Old Navy's, has successfully opened nine stores in the northeastern part of the U.S. in just four years--with big plans for continued expansion.
Can Old Navy continue to grow, despite an oncoming assault from new competitors like Primark? Or will it suffer the same fate of its parent company, the Gap, in a just a few years?
Time will tell.
But if Old Navy is smart, it'll find a way to move forward while keeping Gap's past mistakes firm in mind.