'Services' Archive
In my last post, I posed the question: What’s next for Walgreen? In-store surgery? Boy, was I on the wrong track. While the nation’s #1 drugstore chain won’t be installing in-store operating theatres anytime soon (that I’m aware of), it will be opening apparel departments in most of its 6,000-plus stores tomorrow, April 1. This is no April Fools hoax! The drugstore chain’s first line of private-label clothing — called Casual Gear — will include clothing basics, such as hoodies, Capri pants, socks, and T-shirts, priced at $7 to $15. While Walgreen already sells some basic apparel, including T-shirts, bras, flip flops, and slippers, those goods aren’t exclusive to Walgreen.
The new Casual Gear line is made exclusively for the company by Wonderbrand LLC, a San Francisco-based firm formed by underwear maverick Nick Graham, the founder of the popular Joe Boxer line sold in Kmart stores.
Walgreen’s foray into the world of “low fashion” is unpretentious, and the company hasn’t done much to promote the launch. But the low-profile debut is at odds with Walgreen’s overall private-label strategy, which has been aggressive. No stranger to private-label goods, Walgreen offers its own brand of everything from over-the-counter medications, including aspirin and cough syrup, to personal care products like whitening strips for teeth and eyeglass wipes. Indeed, Walgreen’s own-brand business has grown from about 12% of general merchandise sales in 2000 to 20% today.
The reason Walgreen and other retailers — supermarkets come to mind — love private label goods is that they foster customer loyalty and, more importantly, return a higher profit margin to the retailer. So Walgreen takes its store-brand business very seriously. It recently upgraded the packaging and logo for Walgreen-brand products under the new “W” brand and — in another blow to struggling Starbucks — is even testing in-store beverage bars, called Café W, at some 200 locations.
While leggings and lattes may seem like a departure for a pharmacy chain, they fit right in with Walgreen’s strategy to drive sales and customer traffic.
Walgreen has become the nation’s largest drugstore chain (in terms of sales) by aggressively building new stores — often cannibalizing existing ones — and greatly expanding its inventory to include apparel, electronics, food, household goods, toys and games, and, oh yes, prescription drugs. So eclectic is the merchandise mix at Walgreen stores that they’ve come to resemble mini-Wal-Mart supercenters more than traditional drugstores. Its strategy of “hiding” its pharmacy departments at the back of the store, insures shoppers have an opportunity to pick up plenty of other stuff along with their prescriptions. Indeed, general merchandise and nonprescription drugs accounted for more than a third of Walgreen’s $53 billion in sales last year.
With more than 6,200 stores and the company on track to reach its goal of more than 7,000 drugstores by 2010, Walgreen has proven itself adept at the art of retailing. But with Walgreen’s and archrival CVS’s chain drugstores blanketing high-traffic retail locations nationwide, the Chicago-based chain launched by pharmacist Charles Walgreen over a century ago is looking for new prescriptions for growth.
Like other drugstore operators, discounters (including Wal-Mart), and supermarket chains, Walgreen has begun opening in-store health clinics — called “Health Corner Clinics” — at some of its stores to boost prescription sales and ingratiate itself with customers. Last year it bought its partner in the venture, Take Care Health Systems, to expand its in-store clinic business.
Now, in a bid to move beyond the confines of its retail locations, Walgreen yesterday announced that it’s formed a new Health and Wellness division to manage healthcare centers and pharmacies at worksites, possibly yours, if your company is big enough. Central to the new division is the planned acquisition of two worksite-health-center operators: I-trax (for about $260 million) and Whole Health Management (price undisclosed). Together the two firms provide worksite health services, including primary, acute, and preventive care, to about 230 employers, including Toyota, Continental Airlines, and Sprint. The acquisitions will also bolster Walgreen’s in-store clinic operation to more than 500 locations, up from about 145 today.
Walgreen pegs the potential market for worksite health centers and pharmacies at more than 7,600 corporate campuses of 1,000 employees or more. That’s a pretty healthy avenue for growth that rivals Walgreen’s already extensive retail presence.
Hertz and Avis. McDonald’s and Burger King. Citigroup and Bank of America. Coke and Pepsi. Many industries have companies that are famously No. 1 and No. 2.
When it comes to electronic component distribution, it is Avnet and Arrow Electronics.
Both companies also do big business in distributing and installing computer and networking products. Arrow and Avnet have bulked up their IT businesses through acquisitions. Arrow this year bought the computer distribution business of Agilysys. Avnet purchased Access Distribution, GE’s computer products distribution business, and the European Enterprise Infrastructure division of Magirus Group; both of those acquisitions were folded into Avnet Technology Solutions, Avnet’s IT distribution arm, which accounts for nearly 40% of its sales.
For both Arrow and Avnet, however, electronic component distribution represents the majority of their sales (80% for Arrow). They move microprocessors and memory devices, semiconductors familiar to many people, and other types of devices that are known only to electronics engineers and designers, such as capacitors, connectors, discrete devices, and resistors.
While Avnet now makes its headquarters in Phoenix, both companies were born in the “Radio Row” neighborhood of lower Manhattan, where dozens of small shops stocking radio parts could be found. Arrow and Avnet both relocated to Long Island when Radio Row disappeared in the development of New York’s World Trade Center during the 1960s.
By acquiring many of their competitors in the component distribution business, Arrow and Avnet grew into the distributing behemoths they are now. While the two companies will always be known as “distributors,” they have expanded into design, engineering, logistics, manufacturing, and supply chain services over the decades. Arrow calls itself “a supply channel partner” to contract electronics manufacturers, OEMs, and other electronics companies. Avnet touts itself as “one of the world’s largest value-added distributors.”
Iraqi leaders revoked the contract of US private security company Blackwater USA following the shooting deaths of eight Iraqi civilians by Blackwater guards. Despite an order by the Coalition Provisional Authority that gave companies immunity from Iraqi prosecution, Prime Minister Nouri al-Maliki has promised justice against the private security mercenaries. According to the 2007 CRS Report for Congress [pdf], the company employs about 1,000 private forces in the region.
Flying under the radar during the first half of the Iraq war, Blackwater USA became a household name after four employees were killed with their defiled remains publicly displayed from a bridge outside Falluja in 2004. The media attention from the tragedy gave Americans the glimpse of a hostile Iraqi population while also bringing the US government’s pay-as-you-go soldiers into the spotlight.
Blackwater is no stranger to controversy. Founded in 1997 by former US Navy Seal, George H.W. Bush intern, and billionaire heir Erik Prince, Blackwater’s concerns are decidedly tougher than your average place of business. In December 2006, an intoxicated employee shot and killed Iraqi VP Adil Abdul-Mahdi’s bodyguard. Five months later, a staff member killed an Iraqi driver in Baghdad. And videos like this on YouTube don’t help to put a gleam on the conservative Christian-backed company’s tarnished halo.
The Iraqi government has announced plans to review the contracts held by private security forces in the country. In addition to Blackwater USA, the following companies have contributed to the more than 160,000 private employees in Iraq:
- Aegis Assessment
- CACI International
- DynCorp International
- Elite Security
- Erinys International
- Garda World Security
- MVM
- KBR
- Security Consultants Group
- Spartan Consulting
- L-3 Titan Group
- Triple Canopy
- Vance International
Large record labels have always been known for nickel-and-diming artists out of their share of album sales. (Yep, recoup’s a pain!) It’s only fitting that big labels would begin to tarnish once artists found ways to cheaply manufacture their CDs through companies like Disc Makers and secure independent distribution through companies like The Orchard, CD Baby, and Amazon. Indie acts aside, even more prominent artists like Radiohead and Moby have found liberation in going label-less.
As album manufacturing and distribution services become easier to obtain than blunts at a Snoop Dog event, live shows and merchandising booths become the ultimate key to an artist’s survival. So, bands may not need their labels anymore, but artist management and merchandise services are still a must. And after proving unable to extort money from iTunes and having trouble meeting CD sales targets, it’s only fitting to see companies like Warner Music and Universal Music buy their way into a piece of the live music action.
Warner Music Group has dropped $110 million for a stake in artist management firm Front Line Management. The company has also teamed up with Violator Management to form a joint venture called Brand Asset Group. According to the PR, “The Group is designed to increase revenue by more aggressively managing artist brands from all genres and capitalize on the value of those brands through corporate sponsorships, strategic and integrated marketing campaigns and comprehensive brand extensions.”
Universal Music Group has agreed to fork over nearly $90 million for UK-based artist management and merchandise firm The Sanctuary Group (home to James Blunt and Elton John). The company has also bought into Loud.com, a social-networking site aimed at the urban music enthusiast.
These are actually smart moves by Warner and Universal. I’ll never complain about a company diversifying its holdings — especially when it is working in a tumultuous industry. As long as their focus remains on the balance sheets, they may find the revenues needed to make up for the CD sales slump.