Target, Macy’s, and others embrace store-within-a-store concepts

The trend: A growing number of retailers are rolling out or expanding store-within-a-store concepts.

• Target more than tripled the number of Apple at Target shop-in-shops this year, in addition to adding over 250 Ulta Beauty at Target locations. By year end it will have about 800 stores with an Ulta presence and 150 with an Apple presence.
• Over 360 Walmart locations have a Claire's store-within-a-store, as part of a partnership in which Claire’s accessories and jewelry are available in more than 2,500 Walmart stores. Walmart is also working with pop-up shop marketplace platform Popable to allow small businesses to rent retail space in Walmart stores across the country for short-term leases.
• Macy’s rolled out Toys R Us locations to all its US stores in the lead up to the holidays.
• Kohl’s, which currently has about 600 stores featuring Sephora at Kohl’s, is in the midst of expanding the concept to all its locations.

The concept’s expansion comes at a time when brick-and-mortar remains as important a channel as ever. For example, 63% of consumers plan to do their holiday shopping in person this year, up from 58% last year, per JLL’s Retail Holiday Survey 2022.

Is there a mutual benefit? The store-within-a-store concept works well when the two retailers have complementary offerings and customer bases that align.

• For example, Target and Apple are a good fit, given the former’s cheap-chic aesthetic and Apple’s high-end brand positioning.
• That enables both brands to benefit from each other’s traffic. Apple gets a high-profile location where consumers are already regularly shopping, while Target sees traffic from customers who are seeking Apple-trained Target Tech Consultants or a broad selection of Apple products.
• Other retailers, such as Macy’s, use the concept to gain traction in a new category, such as toys.

The risk: While a store-within-a-store can drive more foot traffic, that incremental gain is only valuable if it leads shoppers to explore the rest of the host retailer’s store.

• That’s why Kohl’s makes a point to highlight how stores that feature Sephora at Kohl’s outperform the balance of the chain both in terms of sales and visits.
• That said, there is some risk that if both parties aren’t strong, a partnership can hurt a brand’s identity. That’s a critique that some (including us) have made in regard to Kohl’s both for its expanding relationship with Sephora—it is currently testing cross-company click and collect and accepting Sephora gift cards—and its relationship with Amazon, in which it accepts the online retailer’s returns.
• Walmart and the retailers that lease space via Popable face a similar challenge as they need to ensure that both brands’ customer bases align.

The big takeaway: For host retailers, the store-within-a-store helps maximize the value of their real estate. And, when two merchants’ have similar brand positioning and customer profiles, the concept is a no-brainer.

• But retailers that operate within another merchant’s store need to carefully consider how they can benefit from such a relationship.

This article originally appeared in Insider Intelligence's Retail & Ecommerce Briefing—a daily recap of top stories reshaping the retail industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.

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