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In a column for Toronto’s The Globe and Mail, Joanne McNeish, a marketing professor at Toronto Metropolitan University, said the store-within-a-store concept is a win-win for both partners as long as the two brands are complementary.
“In most cases, the host retailer is at greater risk of damaging its brand image so picking a partner brand with an equivalent quality brand image should be carefully managed,” said McNeish. “With multiple brands within the retail space, foot traffic is increased. Customers come in to look for a specific product and may discover the partner retail brand in the same space.”
Analysis from eMarketer in late 2022 found that store-within-a-store concepts work well when the two brands have complementary offerings and their customer bases align. eMarketer wrote, “For example, Target and Apple are a good fit, given the former’s cheap-chic aesthetic and Apple’s high-end brand positioning. That enables both brands to benefit from each other’s traffic. Apple gets a high-profile location where consumers are already regularly shopping, while Target sees traffic from customers who are seeking Apple-trained Target tech consultants or a broad selection of Apple products.”
eMarketer also noted that in many cases, the in-store shop helps the host retailer gain credibility in a new category, such as Macy’s partnership to open Toys“R”Us in-store shops.
One risk, according to eMarketer, is that while third-party in-store shops may increase foot traffic for the host retailer, “that incremental gain is only valuable if it leads shoppers to explore the rest of the host retailer’s store.”
Successful collaborations also depend on the financial structure of the deals, with many operating under leased models with a profit-sharing component. As noted by research from Texas State University professors, the arrangement often involves the brand or retailer opening an in-store shop “partly or wholly managing activities such as pricing, merchandising, staffing, and stocking in an autonomous manner.”
Maven Commercial retail leasing partner Ali McEvoy believes brands generally provide a better experience for consumers in their stand-alone stores.
“For example, an Apple in a Target will never be an Apple Store,” she recently told Trademark. “In-store mini-shops also run the risk of lowering the image of their brand by partnering with the wrong retailers. Starbucks in Safeway elevates a Safeway location but [does] little to nothing brand-wise for Starbucks. However, the sales and exposure clearly outweigh that concern, given their decades-old partnership.”
McEvoy also offered Sephora’s in-store partnership with JCPenney, which ended as the latter was undergoing bankruptcy proceedings, as an example of a “pairing that was too mismatched with clearly not enough capital returns to justify a continued partnership.”
The trend continues to favor the opening of more in-store shops from brands or third-party retailers inside stores. Some interesting recent pairings include Conn’s, the home goods retailer, opening in-store shops inside Belk, Petco shops opening at Lowe’s, smart-home gym maker Tonal opening shops in Nordstrom activewear departments, Carhartt shops opening inside Tractor Supply, and Babies“R”Us shops opening inside Kohl’s.