Everyone wants to be a grocery store these days. Walgreen
Too much choice
Shoppers already have the choice of everyday low prices at Wal-Mart Stores
That means it represents more of a threat to Target
The risk for Walgreen is that while general merchandise accounts for about 25% of its revenue, freshly prepared food like that it's planning on introducing carries the potential for spoilage and shrinkage.
Yet I've noticed 7-Eleven stores doing the same thing. Nachos and Spicy Bites have long been carried at the convenience store chain, but lately the chain has upped that to include chicken wings and pizza, as it moved to shore up flagging cigarette sales that have been hit by high taxes.
There is the hope that by selling sandwiches and salads, Walgreen will differentiate itself from CVS Caremark
A non-drug drugstore?
Overcoming consumer reluctance to shop for food at a drugstore may be the biggest hurdle. Walgreen is not rolling the program out nationwide, but is instead targeting select areas for trial, giving it the opportunity to tweak the initiative without jeopardizing the entire operation.
"We're looking to capture that on-the-go consumer looking for a quick, convenient lunch," explained Jim Jensen, head of the new initiative. "We're also responding to the fact that 80% of Americans don't know what they're going to have for dinner at 4 p.m."
Non-pharmacy sales have been difficult over the past few months, even as the chain has been working to revamp its stores to make them more "customer-centric." The fresh food program is something many are eyeballing, and while Walgreen might distinguish itself from CVS, there's sufficient doubt it can rise above 7-Eleven, Subway, or the myriad other options available to shoppers looking for a quick, fast, fresh bite.
And even if it does work for Walgreen, CVS can simply mimic the strategy and dilute the effectiveness for Walgreen. So I think it's likely we'll see Walgreen wilt with this effort.