Retailers like to have their own space that reflects their style and brand values – but who says this space has to be a standalone store?
More retail brands are now opting to rent small areas from established players as the next step in their growth strategies. And unlike the boutique approach of department stores, these mini shops are controlled by the brand, staffed with brand employees and replicate the look and feel of the brand itself.
Earlier this year Apple Watch opened its own store within Selfridges department store in London. In July, UK retailers Peacocks and Sports Direct opened 10,000 square foot shops within Tesco stores in Hungary to build their presence in the market. And over in the U.S., CVS Health snapped up Target’s pharmacy chain: it will now operate as a CVS store-in-store format.
Also known as shop-in-shop, kiosk or concession retail, the store-in-store concept has become an enduring favorite among retailers.
Anuj Puri, JLL’s Global Head of Retail Leasing says: “The store-within-a-store concept is an easy way for retailers to break the monotony of shopping and create a unique experience for the customers. It lets retailers differentiate themselves from the competition while being convenient to both customers and retailers. “
The good and bad of store-within-a-store
Stores-within-stores give retailers an opportunity to cross market their brand and reach new demographics. It is also a cost effective alternative for both the kiosk and host retailers: The host retailer earns a steady income from renting out the extra space while the kiosk retailer saves money negotiating a smaller footprint.
U.S. consumer electronics giant Best Buy, for instance, has successfully strengthened its position in the highly competitive market of electronics retail with this concept after snagging deals with technology giants like Sony, Microsoft and Samsung. Its recent deal with Samsung is one of the biggest store-within-a-store initiatives.
Tracey Hatley, JLL’s Senior Vice President, Director of Specialty Leasing in U.S. says: “The store-within-a-store concept improves the appeal of both brands among consumers. These stores can attract customers that bring energy into an otherwise tired business.
For example, when Sephora opened pop-up stores with JCPenney back in 2006, the high-end makeup retailer’s presence helped to reshape the JCPenney brand and is one of the key strategies that have helped JCPenney to reinvent their brand. There are many retailers now pursuing this store-within-a-store concept to broaden their retail offerings and attract new consumers.”
This concept is popular in other parts of the world as well. In fact, according to research published in Journal of Marketing Research, this arrangement is seen in more product categories in Asia and Europe than in USA. But the purpose behind the concept remains the same.
“What the retailers around the world are hoping to accomplish through this concept is for customers to linger a little longer and buy something they didn’t intend to buy – impulse buying,” John Zhang, professor of business marketing, Wharton School of the University of Pennsylvania tells Journal Gazette.
This makes sense when you have stand-alone brands that people recognize and have an affinity towards. “This strategy will entice customers to shop in these stores-within-stores and then it’s up to the host retailer to further engage these customers,” explains Hatley.
Secret behind the success of store-within-a-store
So, the success and failure of this concept lies in different factors like choosing the right retail partner to deciding the concept and location of the brand. According to Hatley: “Customers are loyal to brands. Therefore, it’s very important not to compromise the integrity of the brand when choosing a retail partner to open up shop. In looking at retail partners, the host retailer needs to be very particular. The store-within-a-store should complement the host retailer while adding a sense of excitement and variety to the overall store concept.”
A good example is the arrangement between Finish Line and Macy’s. Finish Line offers exclusive shoe line at department stores of Macy’s. With 567 banded shops in 398 Macy’s stores across U.S last year, Finish Line enjoyed 17 percent increase in the net sales. Macy’s also registered an increase in foot traffic.
“The key to success also lies in choosing the right concept that will drive customers to the host retailer while also enhancing the retail offerings. Success can also depend greatly on ease of access within the store as well as external advertising. If a customer cannot easily find the store-within-a-store or isn’t aware that it exists, success is compromised,” adds Hatley.
Like any other business decision, the decision to accept store-within-a-store has to be well-thought out. But if done well, this concept might help bricks and mortar retailers to evolve and innovate within a highly competitive global shopping marketplace.