Joan McNeish, a marketing professor at Toronto Metropolitan University, wrote in a column for Toronto’s Globe and Mail newspaper that as long as the two brands are complementary, the store-within-a-store concept is a win-win for both.
“In most cases, host retailers run a high risk of compromising their own brand image, so they must be careful when choosing a partner brand with a comparable brand image,” says McNeish. “Having multiple brands in a retail space increases foot traffic. Customers may come in looking for a particular product and discover the partner retail brand in the same space.”
An eMarketer analysis from late 2022 found that the store-within-a-store concept works well when two brands offer complementary products and have aligned customer bases. eMarketer wrote, “Target and Apple, for example, are a good match, given the former’s cheap-chic aesthetic and Apple’s luxury brand positioning. This allows both brands to benefit from each other’s traffic: Apple gets a high-profile location where consumers already shop regularly, while Target sees traffic from customers seeking Target’s Apple-trained tech consultants and a wide assortment of Apple products.”
eMarketer also noted that in-store shops often help the host retailer gain credibility in a new category, such as when Macy’s partnered to open in-store shops with Toys “R” Us.
One risk, according to eMarketer, is that while third-party in-store shops may increase foot traffic for the host retailer, “that increase is only worthwhile if it encourages shoppers to explore the rest of the host retailer’s store.”
The success of collaborations also depends on the financial structure of the deal. Many agreements operate under a lease model with a profit-sharing element, in which brands and retailers set up in-store shops and often “autonomously maintain partial or total control over activities such as pricing, merchandising, staffing, and inventory management,” according to a study by professors at Texas State University.
Ali McEvoy, retail leasing partner at Maven Commercial, believes brands generally provide a better experience for consumers in standalone stores.
“For example, an Apple at Target will never be an Apple Store,” she recently told Trademark. “In-store mini-shops also run the risk of diluting the brand image by partnering with the wrong retailer. A Starbucks at Safeway elevates a Safeway store, but [does] “For Starbucks, the brand has little leverage, but the revenue and exposure given a decades-long partnership clearly outweigh that concern.”
McEvoy also cited Sephora’s store partnership with JCPenney, which ended when JCPenney was in bankruptcy, as an example of “a huge mismatch that clearly did not provide a capital return to justify continuing the partnership.”
Brands and third-party retailers continue to open shops-within-stores. Some interesting recent combinations include home goods retailer Conn’s opening stores inside Belk, Petco opening stores inside Lowe’s, smart home gym maker Tonal opening stores in Nordstrom’s activewear department, Carhartt opening stores inside Tractor Supply, and Babies “R” Us opening stores inside Kohl’s.
