The shop-in-shop retail concept is where a brand owner or retailer takes space in another retailer’s store and fits it out to provide selling space dedicated to that secondary company’s products.
A lot of brands/retailers have monobrand stores which are totally dedicated to their ranges e.g. adidas, Hugo Boss, UGG or Levi’s; often they have shop-in-shop programs where they occupy a set amount of space in other multiple outlets, in addition to their monobrand stores.
One example of the mix of retail space is Umbro, with nearly 2,000 outlets but 80% are “shop-in-shop” outlets and the balance stand-alone monobrand stores. There are benefits to both retailers e.g. shared costs, shared marketing and demand-generation, and speed to market. The concept is as old as the farmers’ market!
A store-within-a-store is an agreement in which a retailer rents a part of the retail space to be used by a different company to run another, independent store.
This agreement is popular among filling stations and supermarkets. Many bookstores partner with coffee shops to improve customer experience (customers often desire a place to sit and enjoy a drink while they browse). Companies employing this technique include BP/Amoco Sheetz, Exxon Mobil and Hollywood Video with its Game Crazy video-game boutiques.
An arrangement that works…
Often the store-within-a-store is an owned by a manufacturer, operating an outlet within a retail company’s store. For example, El Corte Inglés in Spain with Bimba y Lola, Purificación García, Carolina Herrera, etc. Or the American department store Bloomingdale’s that has had such arrangements withRalph Lauren, Calvin Klein, DKNY and Kenneth Cole. Neiman Marcus, another American department store, has had them with Armani and Gucci.
A study by business-school academics found that the arrangement works, because the retailer offers prime locations for which it can charge high rents, the manufacturer makes a higher profit than it would through a wholesale model and the consumer gets a lower price and better service.
The operator of the store-within-a-store can provide these benefits because it receives all profits, instead of having to share them with the retailer, as it would in the traditional split between manufacturer and retailer activities. The study also found that the arrangement works best for relatively non-substitutable goods, like cosmetics and brand fashions.
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