When does a store-in-store offer the same benefits?

Joanne McNeish, a marketing professor at Toronto Metropolitan University, explained in a column for the Toronto edition of The Globe and Mail that the store-within-a-store concept is a win-win situation for both partners as long as the two brands complement each other.

“In most cases, the retailer is at greater risk of damaging its brand image, so choosing a partner brand with an equivalent brand image should be done carefully,” said McNeish. “With multiple brands in the retail space, footfall increases. Customers will search for a specific product and may discover the partner brand in the same space.”

A late 2022 analysis by eMarketer found that store-in-store concepts work well when the two brands’ offerings complement each other and their customer bases align. eMarketer wrote: “For example, Target and Apple are a good fit because Target has a cheap-chic aesthetic and Apple has a high-end brand positioning. This allows both brands to benefit from each other’s traffic. Apple gets a prominent location where consumers already shop regularly, while Target gets traffic from customers looking for Apple-trained Target tech advisors or a wide selection of Apple products.”

eMarketer also found that in many cases, the store helps the retailer gain credibility in a new category, such as the partnership with Macy’s to open Toys“R”Us stores.

One risk, according to eMarketer, is that while third-party in-store shops can increase customer traffic for the retailer, “that additional profit is only valuable if it leads customers to explore the rest of the retailer’s store.”

Successful collaborations also depend on the financial structure of the deals. Many operate on leasing models with a profit-sharing component. According to research by professors at Texas State University, the agreement often involves the brand or retailer opening a store and “managing activities such as pricing, merchandising, staffing and warehousing partially or completely autonomously.”

Ali McEvoy, retail leasing partner at Maven Commercial, believes brands generally provide a better experience for consumers in their standalone stores.

“For example, an Apple Store in a Target will never be an Apple Store,” she recently told Trademark. “Mini-stores in stores also risk damaging their brand image if they partner with the wrong retailers. Starbucks in Safeway adds value to a Safeway location but does little to nothing for the Starbucks brand. However, given their decades-long partnership, the sales and awareness far outweigh these concerns.”

McEvoy also cited Sephora’s store partnership with JCPenney, which ended due to JCPenney’s bankruptcy proceedings, as an example of “too unequal a pairing with clearly insufficient return on investment to justify a continued partnership.”

The trend continues toward opening more in-store shops by brands or third-party retailers in stores. Some interesting new partnerships include home goods retailer Conn’s opening in-store shops in Belk, Petco shops at Lowe’s, smart home fitness equipment maker Tonal opening shops in the activewear departments of Nordstrom, Carhartt shops in Tractor Supply and Babies“R”Us shops in Kohl’s.