Are In-Store Shops a Problem for Department Stores?

By and large, I see things moving in the opposite direction from the scenarios described in many cases. That is, brands already have their own retail stores and are re-entering department stores, or re-working their presence in those stores as shops-within-shops.

Saks' Fifth Avenue (the Fifth Avenue location) re-do is a great example. Chanel, a brand that has many stand-alone locations around the world, is serving as Saks' anchor; yet it was previously considered to be a glaring omission in the store's previous assortment and set-up. Other brands that will be featured such as Ralph Lauren, Gucci, Marc Jacobs, Louis Vuitton, and others also have well-established stand-alone presence.

In terms of featuring up-and-coming designers, 1,500 square feet of Saks' re-envisioned store will be "neutral" flex space of new brands, though without strong brand call-outs.

Finally, Saks has also re-worked the good-better-best pricing matrix to be more wallet friendly (75% good and better; 25% best).

The fact is that department stores are competing against their chosen brands' pristine stand-alone showcases so anything less than that looked like a mishmash by comparison. This is particularly true as stores cut floor staff and merchandising suffers. I think it's high time that department stores make an investment in doing these shops right. If you can't beat 'em, join 'em!

Carol Spieckerman, President, newmarketbuilders

It's about execution and the experience of the consumer. If it's done appropriately, doesn't affect customer service, and can create a fun profitable experience, it makes sense.

Susan Rider, President, Rider and Associates, LLC

The topic of shop-within-shop merchandising gets to the heart of the debate between item (or category) merchandising versus "collection" merchandising. It's easy to point out the merits of merchandising by lifestyle or collection: It provides a more pointed brand or demographic message to a targeted customer, and it also enables that customer to add more to his or her shopping basket.

On the other hand, collection merchandising has contributed to the "breakdown of order" in the traditional department store. It's become less convenient to shop within a category (for example, women's shorts or men's knit shirts) because of the fragmented approach to the product. I believe this has helped traditional department stores lose share over the past 15 years to more convenience-driven retailers like Kohl's or the category killers.

Richard Seesel, Principal, Retailing In Focus LLC

It gives department stores the opportunity to get into areas which are not their core competency with minimal risk. It gives the other retailers exposure they might not be able to otherwise afford.

Len Lewis, President, Lewis Communications, Inc.

This is not a new story, really. Department stores have been organized into brand manager "collections" for as long as I can remember.

It's what makes the stores fundamentally unshoppable. If you want to buy a v-neck black blouse in size 7, and don't really care who the manufacturer is, you must wander around aisle after aisle. It's an incredibly inefficient use of consumers' time. If you have a brand you like, well, it's just as easy to go into that brand's retail store and avoid the hassles of crowded aisles and hard-to-find staff.

Rather than getting better, the problem is getting worse. I was in one major department store the other day and discovered that the handbags aren't even all together anymore. They've become part of the manufacturers' collections too. As a consumer, I can tell you I won't shop there anymore. As a retail observer, I can tell you it's a terrible mistake in layout.

Advantage? Marginally the merchandise vendors. Disadvantage? Everyone else, including the consumer.

Paula Rosenblum, Managing Partner, RSR Research

I find myself drawn to a middle ground between pure "shop within a store" and straight category merchandising. On the one hand, "shop within a store" leaves similar merchandise too Balkanized, as Paula points out. While there are many department store customers that are brand driven, and choose a specific store because that's where they can get the brand they want, many others aren't.

Intelligent merchandising which pulls collections together as features within categories and departments makes the most sense to me when I walk in a department store. If I'm brand-focused (and I am on certain things), they are easy to find, and if I'm just looking for something appealing within a category I'm not chased all over the store.

All of this masks to a certain degree, however, the real merchandising challenge department stores are facing. Fashion at those price points, and for younger customers in general, is no longer established in department stores, it's driven by the purely vertical brands. That leaves the department stores with older legacy brands, or secondary brands that are indistinguishable from PL. The challenge for departments stores is the relevancy of what they carry, not how they merchandise it.

Ted Hurlbut, Principal, Hurlbut & Associates

Retail is constantly changing, evolving. That shop-in-shop brands used these spaces to eventually launch their own stores is simply a smart business decision. The onus then falls on the department store to be just as smart and find new brands to fill the spaces.

The shops can be differentiators by using them to sell unique product that's exclusive to the department store or for selling local brands. There are ways to make stores-in-stores work for the department store brand. Department store merchants just need to demonstrate some creative thinking and be willing to take reasoned risks.

Tim Henderson, Independent Retail Consultant, Independent

The problem is not store-within-a-store but with execution oversight. Just like meat and produce in a supermarket, they can be a key element with customer draw. A department store with an exclusive designer serves the same role. For the designer, the benefits are great; they don't have to invest and operate stores which few have done successfully long term. When a designer falls out of favor, the stores close. The department store has the option of dropping the designer when they no longer attract sufficient sales and target customers.

The problem I see is presentation control. Too often the store within a store presentation does not support the overall store image in an effort to stand out.

W. Frank Dell II, CMC, President, Dellmart & Company

The collection is the ultimate reflection of the completeness and timeliness of any merchant.

The department store should be the destination sought after because it can fulfill so many needs because of the ability to carry a good array of desired materials--not just ALL of the available goods. Having complete lines does not make a store desirable. If half of what is there is not wanted--what is the point?

Stores-within-stores when overdone simply make the particular department store a mini mall with limited offerings. Thus the importance of knowledgeable buyers and merchandisers (on a smaller scale).

It IS simple--and VERY difficult--know your customer and what they want and have it in stock.

A store-within-a-store may seem to solve many problems but proliferation of merchandise to have every possible thing a customer might want is simply a mess.

The original beauty of the department store was the ability to easily mingle offerings from different designers and manufacturers, and price points, to create a style that was unique and hopefully, inspiring.

It seems that it was easier to do this in the past, although there seems to be more merchandise than ever in department stores today.

William Passodelis, associate, ML Co.