Store-Within-A-Store Operating Models

Store-within-a-store shops can be wonderful revenue and brand-enhancing strategies for retailers looking to fill space in their brick and mortar stores.  The key is to understand what the retailer is trying to achieve and to select a partner wisely.

For retailers looking to create a permanent solution and a brand differentiator, they should partner with a known brand that augments their core assortment selection.  One of the best examples of this is PetSmart’s parternship with Banfield Veterinarian services to offer its customers a true one-stop shop for pet owners.  Other examples might include Walmart’s partnership with McDonalds.  These are services that augment the shopper experience in the store and give the shopper a reason to spend more time or make more frequent visits to the store. In most situations like this, the retailer basically “sublets” the space for all intents and purposes.  Back end system and personnel are rarely shared.  There is a high degree of autonomy between the two store operators.

A different example would be JCPenney’s partnership with Sephora where Sephora is putting its branded store within JCPenney.  Sephora manages the assortment, inventory, personnel and systems to deliver a shared percentage of the profits with JCPenney.  Penney gets access to brands that would normally never sell to their channel.  Overall, the companies operate fairly independently, but customers can use their Penney card when shopping in the Sephora store and the Sephora stores do not have a separate entrance so there is some sense of creating a cohesive JCPenney experience.

At the other end of the spectrum are the cell phone sections within Best Buy stores where everything is managed by Best Buy except the augmented sales staff and sometimes incremental signs which are provided by the carriers.  The customer is does not encounter a different brand experience but may perceive that their sales assistant is not through the traditional blue shirt.

For retailers considering a long term store-within-a-store partnership, it is important for them to consider how much control they are willing to relinquish in return for ease of implementation and integration. Certainly it is simpler for Walmart to simple collect its rent from McDonalds than it is for JCPenney to integrate POS systems and shopper marketing data with Sephora.

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