Will store-within-a-store concepts make Hy-Vee’s more attractive destinations?

Basin boutique in Hy-Vee, Savage, MN - Photo: Hy-Vee
May 18, 2018

As the competition between Amazon and Walmart exerts pressure to innovate throughout the industry, smaller and regional grocery chains are looking for new ways to maintain and expand market share. For Hy-Vee, the most recent step consists of building out the beauty aisle with a store-within-a-store partnership.

Hy-Vee is working with boutique bath and beauty brand Basin to open a store-within-a-store in Urbandale, Iowa, according to the Des Moines Register, continuing the expansion of the concept now in 11 of Hy-Vee’s 240 stores. The shop, called Basin and Beauty, takes up 2,200 feet and, at least in the new Urbandale location, required the grocer to shift and condense other parts of the store to make room. Hy-Vee has also introduced other high-end cosmetics to its general assortment.

The addition of Basin store-within-a-stores inside of Hy-Vee locations is in keeping with the grocer’s strategy of moving outside of traditional grocery by way of partnerships. Last year, the chain partnered with Wahlburgers to open, own and operate 26 restaurant locations while also bringing items from Wahlburgers onto the menu in the grocer’s in-store restaurant, Market Grille. Hy-Vee also partnered with fitness chain Orangetheory to offer dietary advice, store tours that point out healthy products and even workout classes in or adjacent to Hy-Vee locations.   

Partnering to create store-within-a-store concepts has grown in popularity for various reasons.

In some cases, as with the long-successful Best Buy/Samsung relationship, the store-within-a-store gives shoppers a targeted brand experience with products that are adjacent to types of things they might already be shopping for.

In other cases, retailers use the tactic to go outside of their core offering and give their shoppers something off the beaten path. For instance, Walmart recently expanded a store-within-a-store partnership with CarSaver to offer in-depth car buying advice to Walmart shoppers in-store.   

Another regional grocer, Schnucks, recently opened a store-within-a-store in partnership with a local specialty meat producer, Volpi Foods.

DISCUSSION QUESTIONS: Do you think the Hy-Vee stores with Basin and Beauty boutiques will be a successful draw for shoppers? What do you see as the risks and rewards for grocers such as Hy-Vee pursuing store-within-a-store partnerships?

Please practice The RetailWire Golden Rule when submitting your comments.
"This is not something that can work in all stores, but it can be a boon to the right stores."
"Hy-Vee is thinking out of the box and that is a positive. Retailers need to start to think creatively to retain their customers."
"Grocery, from a recent BRP survey, still has 89% of all sales made in store so anything you can do to extend that unique stat is a winning strategy."

Join the Discussion!

15 Comments on "Will store-within-a-store concepts make Hy-Vee’s more attractive destinations?"

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Ken Lonyai

As a concept, store-within-a-store clearly works with one caveat: the mix is crucial. Adding convenience and unexpected reasons to visit a grocery or department store is easily a winner, but it takes adept research into what products/brands are of interest to shoppers.

Regarding Hy-Vee, supermarkets have for a long-time sold staple beauty items from the biggest mainstream brands. The success of Basin and Beauty is going to depend upon how well it differentiates them from competitors, how well it fits their customer’s wants/needs, and how much of a revenue driver it ultimately is given the loss of some internal footprint.

Phil Masiello

Hy-Vee is thinking out of the box and that is a positive. Retailers need to start to think creatively to retain their customers.

A store-within-a-store concept can be great for a retailer’s customers if it is executed correctly. The location has to be correct as well.

I am always hesitant to add beauty to a food store unless there is a clear barrier. In a food environment, you want the store to smell like fresh food. When beauty is involved, you create a conflict of smells.

When Harris Teeter and Duane Reade executed their store-within-a-store concepts that were not food related, they were on other levels of the store.

Michael La Kier

The key to the store-within-a–store concept is that the partnership be relevant for shoppers. A good example is that Walmart has had vision, nails, Western Union, and others which help condense trips for harried shoppers. In the case of Hy-Vee, making sure the surrounding store demographics support beauty vs. burgers will be key. This is not something that can work in all stores, but it can be a boon to the right stores.

Ben Ball

The mention of Schnucks and Volpi Foods struck me as central to the store-within-a-store theme. By featuring Basin, Hy-Vee is introducing a brand and products only tangential to grocery. By featuring Volpi, Schnucks is introducing a super-premium brand of a core offering in meat. Which is the better strategy? The argument for less competitive/more incremental goes to Hy-Vee and Basin. But the argument for relevance and core market served has to go to Schnucks and Volpi. I’d love to see the results comparing store traffic (probably not much increase for either approach), gross sales and net incremental sales and profit for each concept! Which would you bet on? My bet is on Hy-Vee and Basin — for the first three to six months. At the end of Year One I’m going with Schnucks and Volpi.

Chris Petersen, PhD.

In the case of Hy-Vee, the Basin and Beauty boutiques seem to be very compatible with core shoppers. And the extension of in-depth beauty products definitely compliments products already found on Hy-Vee shelves. In this scenario, the store-within-a-store should add value by offering customers more, while keeping Hy-Vee’s risks in expanded inventory at a minimum.

This article mentions a number of successful store-within-a-store concepts. Store-within-a-store concepts works with “compatibles.” There are also many examples where store-within-a-stores have not worked because the offering simply did not fit the core customers shopping in the stores. Forever 21 shops within Sears stores is a case where the offering was not compatible with core customers, nor did it draw a younger customer segment to stores.

Lyle Bunn (Ph.D. Hon)

A store-within-a-store puts pressure on all suppliers to up their game with improved merchandising, promotions and customer experience. It’s all good. The issue is always relevance when the promise is ease of discovery and shopping. Better staff training and the ability to use the store-within-a-store to implement better ways to engage consumers along their entire path to purchase add to the return on investment. Retailers must improve their partnership with providers beyond just aggressive negotiations, so the store-within-a-store can deliver optimization of consumer engagement in the physical and online presence.

David Weinand

The trend is valid for several reasons but the most important one is that it adds to the experience. Consumers want their shopping experience to fit into their definition of convenience, efficiency, empowerment and wholesome lifestyle and for Hy-Vee to tie the Basin & Beauty concept and the Orangetheory concept into their stores is very smart. Of course retailers need to consider how the partnership will add to their brand value vs. just viewing it as a potential revenue driver.

John Karolefski

Store-within-a-store concepts have a good chance to succeed if they present products that complement grocery assortments. They add excitement and engagement to an otherwise dull center store.

These concepts do not work well if the highlighted products don’t smoothly complement grocery assortments. For example, I do not think Ace Hardware units in Kroger will ultimately be a winning addition. Shopping list: milk, eggs, chain saw.

Harley Feldman

The question for a store-within-a store is, will the brand be recognized as being additive to the retailer brand enough to draw new consumers or will it detract from the retailer brand by confusing the shopper? Hy-Vee is smart to try the store-within-a-store approach on a trial basis and learn lessons that will help make the decision to expand the concept.

Lauren Goldberg

When executed well, a store-within-a-store concept can breathe new life into a store. The key for success is that the partnership has to resonate with the retailers customers and offer value, either in convenience of a one-stop shop or an elevated shopping experience.

In the case of Hy-Vee and Basin, they are smart to roll out in just a few store to test and learn. The initial execution is important, but the key will be how they will maintain this store over time and if resonates with their customers.

Ken Morris
Ken Morris
Managing Partner Cambridge Retail Advisors
4 years 2 months ago
As physical store continue to try new strategies to drive more foot traffic, store-within-a-store (SWAS) concepts have been a hot new trend. With the right brand and product mix, these SWASs can attract shoppers more frequently and consumers who might not typically shop at your store. The upside for SWAS partnerships for Hy-Vee is the increased margin per square foot and potential increase in sales of grocery items by driving more traffic to their stores. A couple of potential downsides to monitor is the potentially lower total margin dollars (space rental vs. revenues for products that were previously in that space) or alienating some customers that feel that your product mix of grocery items is too limited now. My guess is that it will be a net positive strategy for Hy-Vee and others who choose this approach. The idea here is to innovate and create excitement at the store. Grocery, from a recent BRP survey, still has 89% of all sales made in store so anything you can do to extend that unique stat is… Read more »
Kevin Marschall

The store-within-a-store concept is an effective tool to eliminate risk for both the host and the occupier, and provide the customer with something new, exciting, and perhaps unexpected and experiential.

In-store partnerships are “tested” in a handful of stores before they are rolled out portfolio wide. As a shared revenue model, both parties have a vested interest in the success of the in-store retailer. If the test fails to achieve predetermined benchmarks, then they shake hands and part ways, with minimal capital loss and risk to both parties.

When the relationship is productive, the host wins by providing a synergistic product or service that is likely outside of their core competency to self-fulfill. The in-store occupier wins by capturing the inherent footfall of the host. Also, their occupancy costs are greatly reduced as they scale up stores more rapidly than a traditional lease model. Lastly, the customer wins through the discovery of complementary products and services that provide convenience and reduce friction in their shopping behavior.

Shep Hyken

This is an opportunity to bring the merchandise the customers want to a location that the customer frequents most often — the grocery store. This means convenience for the customer and potential increased sales for the retailer.

Kai Clarke

This is too much of a “side” sale. Hy-Vee is in danger of becoming seen as a higher-end HBC retailer rather than its more traditional supermarket position. This will narrow their appeal to their overall target market and minimize their sales. The tremendous amount of square footage dedicated to this will probably fail to return the ROI that other mixed build-outs would provide (i.e. high-end cheese, wine, natural sections, farm-to-market, restaurants, etc.).

Morgan Linton

I think this is definitely a good move for Hy-Vee but it will take some time for customers to discover and get comfortable with the concept. The big challenge a company like Hy-Vee will have is capturing marketshare from other well-established brands in the beauty space that their shoppers might already know and trust.

Ken made a good point, the mix is crucial.

I could easily see this offering becoming cluttered with brands and varying prices leading to a “something for everyone” approach that could lead to very few things for an individual person.

Like most retailers, Hy-Vee will have to be comfortable taking a “test and learn” approach. While it might not be a runaway success out of the gate, if the are patient and take the time to learn what’s working and what isn’t then it does have the chance to be a real game changer for their business.

"This is not something that can work in all stores, but it can be a boon to the right stores."
"Hy-Vee is thinking out of the box and that is a positive. Retailers need to start to think creatively to retain their customers."
"Grocery, from a recent BRP survey, still has 89% of all sales made in store so anything you can do to extend that unique stat is a winning strategy."

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