Stores Inside Stores Lead to Sales

Discussion
Jan 20, 2010

By
George Anderson

All across the country, retailers are taking advantage of
store-within-a-store concepts to attract shoppers and drive revenue for all
the merchants involved, according to The Sacramento Bee.

Grocery store
chains have added coffee shops, including Dunkin’ Donuts, Starbucks and Peet’s
Coffee & Tea.

J.C. Penney has Sephora makeup
stores inside some of its locations and plans to launch Mango clothing shops,
as well.

Macy’s had FAO Schwarz stores before the company was bought
by Toys “R” Us. Soon, Sunglass Hut will set up for business inside the department
store.

“Sometimes it’s stronger to offer more than one brand, making
it better for the customer. Sunglasses, electronics, music, whatever it is,
it can create a better, more powerful mix. That’s where we’re heading,” Marshal
Cohen, chief retail industry analyst with NPD Group, told the Bee.

J.C.
Penney attempted to go more upscale with its own makeup sections in the past
but failed to attract shoppers to the concept. The addition of Sephora has
accomplished for the chain what it could not do on its own.

“It gave them cachet
they didn’t have,” George Whalin, president
and CEO of Retail Management Consultants, told the Bee.

“What Sephora brings is the ability to merchandize and sell cosmetics that
Penney’s hasn’t been able to do well,” Mr. Whalin added.

Discussion
Questions: Are stores-within-the-store more critical to retail success today
than in the past? Do you expect to see the number of these types of deals increase
in the future?

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20 Comments on "Stores Inside Stores Lead to Sales"


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Charlie Moro
Guest
Charlie Moro
11 years 3 months ago

The store-within-a-store concept may not be the brand building complement to the store hosting the “add-on,” but the concept of convenience as well as the shoppers’ affinity to the host store can be drastically impacted.

The consumer that goes to a store that may fulfill a feeling for them may have benefits that are not easily measured in the choice of stores. I like that my store has a Sunglass Hut or a Sushi Bar, I may not purchase for those offerings, but it makes my experience better.

David Biernbaum
Guest
11 years 3 months ago

The store-within-a-store concept is relevant and timely for the current retail era, provided that arrangements have been made in partnership to make it easy for the consumer to shop and pay altogether under the same roof.

Nikki Baird
Guest
Nikki Baird
11 years 3 months ago
I think it depends so much on brand. Whose brand should be promoted? Is it a poor reflection on JCPenney that it needs Sephora, or does it help their own brand image? And does it help Sephora reach consumers who might not have shopped them otherwise, or does it dilute their brand to have the association with JCP? I never understood Martha Stewart and Kmart, but Martha Stewart and Macy’s makes sense. Lands’ End and Sears–with their store-within-the-store concept–didn’t work at all. It felt like someone had dropped a completely different store, with more upscale merchandise, into the middle of a Home Depot. Alternatively, Target never lets another brand have the same degree of supremacy inside its four walls as the Target brand, but they do just fine in brand alliances around merchandise. As long as the alliance makes sense, both monetarily and in the story you’re telling to customers, then it should be a no-brainer. But I think it depends a lot on the strength of your own brand whether this kind of strategy… Read more »
Dick Seesel
Guest
11 years 3 months ago

The answer to the “store within the store” concept is, “It depends!” For example, Sephora has given JCPenney some critical mass and credibility in the cosmetics business that it was unable to achieve on its own, and it continues to surprise me that they have not rolled out this initiative faster. For other areas, such as toys, it makes sense for a retailer who is not a “category killer” to give itself the halo effect of a well-known specialty concept.

On the other hand, the concept can be carried too far. I still believe that traditional department stores have taken the European-style idea of branded “shops-within-the-store” too far in apparel areas, causing a lot of duplication of assortment and navigation issues for consumers.

Roger Saunders
Guest
11 years 3 months ago

Store-within-a-store concepts always bounce to higher results, when store management teams consistently and effectively communicate with the “leasee” who is also operating within the store. These folks are sharing a ‘box’ in which common consumers will travel.

Often, the “leasee” comes from a different world view–an entrepreneur, focused on their specialty, operating with different employee/compensation base, answering to a different group of leaders, etc.

The consumer often doesn’t differentiate as to who is in charge; “store” or “leasee”. Essential that store operations, as well as real estate/financial, know what the vision and objectives of the relationship between “store/leasee” are, and then regularly monitor and communicate as to how the relationship is working.

It doesn’t have to be messy. It takes a commitment on the front end to bring people together, in order to support the common ground–the consumer who walks through the ‘box’.

Gene Detroyer
Guest
11 years 3 months ago
The store-inside-a-store makes ultimate sense if the situation is correct. For the best utilization, the store-inside-stores should not be in primary categories to the retailer. FAO was a perfect complement to Macy’s. Toys are not primary to this department store. Macy’s can’t compete with large toy retailers, therefore they chose not to compete but to offer something different. On the other hand, Sephora would not work strategically in Bloomingdale’s as cosmetics are a primary category to Bloomies. Mango in JCP also makes sense. It is the only way that a department store can add fast fashion. The key to its success is that JCP can keep their hands off the operations and not turn their Mango stores into four-turn-a-year merchandise. For the store inside, it gives greater exposure and reach. It puts it in locations that would not be able to support a standalone store. For the consumer, it gives more variety of merchandise that they may not normally see, and shopping convenience. The key to success is that the host store doesn’t impose their… Read more »
Ben Sprecher
Guest
Ben Sprecher
11 years 3 months ago
The value of a store-within-a-store (SwaS?) depends on the goals of each store. For the “outer” store: are they trying to drive more traffic to the rest of the store? Generate a positive “halo effect” on their store’s image? Broaden their merchandise selection? Or are they merely outsourcing a department they are bad at? For the “inner” store: Are they just trying to grow revenue through cheap expansion? Increase awareness of their stores? Test new merchandising formats before rolling them out to their own stores? As several comments above point out, the success of this approach will depend on the particulars of the partnership. Only if both the “inner” and “outer” stores’ goals are met by the particular marriage in question will the outcome be positive. No matter what, though, both stores need to constantly measure and reassess. Stores should benchmark performance of departments using real POS and loyalty data both before and after the SwaS opens. And they should look beyond raw sales numbers to see the impact at a shopper level. Are the… Read more »
Bill Bittner
Guest
Bill Bittner
11 years 3 months ago

Whatever happened to Korvettes and Two Guys?

It seems the more things change, the more they stay the same. I guess the question is “When does a store-within-a-store become a mall?” I can imagine only two reasons for a store-within-a-store–to offer consumers a service the retailer cannot provide, such as dry cleaning, or a special assortment that does not appear in every store, such as fresh sushi.

So much depends on knowing the local traffic and demand patterns to make this concept work that I don’t see it as a panacea. It really needs to be considered on an individual location basis, taking into consideration the demographics of the area. If there are a lot of office parks in the area, not many alternative outlets, an unaddressed service, or some other opportunity then it may make sense.

John Boccuzzi, Jr.
Guest
John Boccuzzi, Jr.
11 years 3 months ago
Store-within-a-store has had mixed success. Some retailers have added a Staples store to provide their shoppers with office supplies they can trust and it seems to be working. Others have added Starbucks and Dunkin’ Donuts, but in many of those cases the retailer has pulled back from the approach because of the fit. Some thoughts on selecting the right store to add inside of your retail outlet: 1) If it needs to be staffed, how will it be staffed and who will train the staff? This is critical. Part of the Starbucks success is their service and how they make their coffee drinks. It’s not just a hot cup of coffee. Incorrect execution not only hurts the retailer but the brand–in this case Starbucks. 2) Is the store you’re adding a good fit with current customers and their needs? Adding a high-end makeup line to a retailer that services lower and middle income customers may not be a good fit. The same goes for a high-end retailer adding a discount store-within-a-store. 3) If you are… Read more »
Bill Emerson
Guest
Bill Emerson
11 years 3 months ago

Store-within-a-store is not a new concept. The cosmetics and fine jewelry businesses have operated this way in department stores for years, along with many apparel brands (Polo, Hilfiger, Calvin). On the plus side, it provides a good way for large companies to leverage their merchandising organization and brings skill-sets, look, and price points into the merchandise assortment that many companies either don’t have or don’t want to invest in.

On the down side, the host company loses price control (look closely at the department store promotional flyers), it sets a pre-defined limit to margin potential, and it typically involves a significant capital outlay.

The bigger risk, as noted above, is in maintaining the consistency and integrity of the brand. Unless this is done in a highly thoughtful and rigorous manner, the sales floor can take on a “flea market” personality, not a strong brand message.

Rick Myers
Guest
Rick Myers
11 years 3 months ago

A twist that we may see coming in the future, is what happens to the department store if the owner of the store-within-a store goes under? And would a retailer get caught up in a firestorm if the leasee were to get into legal trouble? Could there be a carryover effect for the retailer’s brand?

Kinshuk Jerath
Guest
Kinshuk Jerath
11 years 3 months ago

Numerous excellent points regarding the advantages (and limitations) of stores-within-a-store (SWAS) have been raised above.

Beyond these arguments, I’d like to point readers to a recent study of mine in which I find that SWAS lead to larger profits (for the brand as well as of the retailer housing the SWAS) in categories in which consumers identify strongly with brands, such as cosmetics, high-end apparel, etc. On the other hand, they might hurt profits in categories in which brands do not mean as much to consumers, such as everyday kitchen ware. These insights are supported anecdotally, and recently some formal empirical evidence confirming these results has emerged.

Moreover, there is another strategic incentive–SWAS will be more profitable in markets in which retailer-level competition is higher, as it gives competing retailers a tacit coordination mechanism. For example, in Asian countries the SWAS format is far more popular than in the USA.

The research paper was featured on RetailWire recently (on 9/11/09). It is forthcoming in the Journal of Marketing Research and is available here.

Doug Stephens
Guest
Doug Stephens
11 years 3 months ago

The 2010 U.S census will confirm that America is more ethnically and economically diverse than ever in its history.

There is simply no such thing as a “typical” consumer anymore. The big, fat middle market just isn’t there anymore.

For brands like Penney and Macy’s, this means bringing assortments of branded shops under their roof that can address diverse and specific segments.

This is part of a wider trend toward the aggregation of smaller high-equity brands to form larger, powerful consumer propositions.

It also enables large players to shift to new tastes and preferences without having to reinvent the “mother-brand” each time.

I believe we can expect to see much more of this to come.

Anne Bieler
Guest
Anne Bieler
11 years 3 months ago

Thus concept can help retailers get an edge in categories where they don’t lead. Particularly for high-end lines that may not be drawing as much as a standalone business in the mall, this is a good concept. Smart way for department stores to create more compelling reasons to shop there.

SWAS stores can be more experiential–Shoppers Drug Mart is opening Murale, high-end beauty boutiques in one side of the store, but you can get prescriptions and last minute food items too. Busy shoppers appreciate the convenience of going to “their” kind of store–Sephora, Coach–lots of higher-end possibilities. They question the need to go the mall for a purse or the “right” shampoo. The number of shopping trips per household has decreased, and is likely an opportunity for those who can bring the right partners in.

Craig Sundstrom
Guest
11 years 3 months ago

As many have noted, having a (name brand) boutique within a store isn’t a new concept; nor is having a department operated by a leasee (it’s probably as old as the dept store concept itself). But what does seem new–or at least less common–is to have a leasee who maintains a separate identity (Sunglass Hut, Sephora, etc.) These aren’t brands of merchandise, they’re store brands. This seems like an ominous concept for the host: one might go to the Polo boutique within Department Store X because one wants Polo, but if one goes to a Sunglass Hut within X, are they really even going to X at all?

Sandy Miller
Guest
Sandy Miller
11 years 3 months ago

Having stores within stores, when carefully planned with specific goals, is one of the most effective ways to attract more shoppers and increase profitable sales. One key thing we focus on is insuring stores-within-the-store directly reinforce the retailer brand.

Brian Anderson
Guest
11 years 3 months ago

The “store within the store” concept is a win-win for the host only if they can capture customers and add sales. If I go into J.C. Penney and purchase at Sephora and leave, it’s a win for Sephora and a loss for J.C Penney. I have gone into Macy’s, only to go directly to the Sunglass Hut, purchase and leave. So other than the percentage of rent which adds to the P&L, it does nothing to build the Brand for the host other than convenience. With Sears owning Lands’ End; that’s a store within the store” concept that works.

Ted Hurlbut
Guest
Ted Hurlbut
11 years 3 months ago

From my perspective, the renewed interest in store-within-a-store opportunities by retailers is an effort to generate more productivity out of underperforming space. This was an issue before the recession, and has only been heightened by the weakness in sales. As retailers rationalize inventories, they’ve been left with a lot of dead square footage. This makes many retailers naturally very receptive to leased-space opportunities.

Doron Levy
Guest
Doron Levy
11 years 3 months ago

I’m thinking this is a good direction for big box and here’s why: Shrinking resources and revenue (or any day that ends in d a y) will cause a reduction in labor. Meaning managers have less to work with. Leasing out space in my box means less area I have to cover with the few people I have left. The only drawback is that there is no guarantee of incremental sales with the addition of the new location. And since I’m working with fewer people, I can’t actually sell to those new people coming in to visit the new store.

Ideas have been thrown around suggesting that this model could save companies like J.C. Penney’s, Macy’s and Sears.

Phil Rubin
Guest
11 years 3 months ago

The store within a store concept is not new and was a core part of Macy’s strategy back in the mid-80s before its long slow burn. These “SWASs” were both Macy’s owned (i.e., a boutique dedicated to a concept or brand and engineered to compete with The Limited) and leased like T.J. Cinnamon’s.

The value of location and presence coupled with the ability to save time makes this concept work in the case of the latter, which is what we’re seeing now. It’s a logical extension of brands pursuing partnership marketing strategies which we are seeing as being increasingly embraced as retailers look for organic ways to build business.

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