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Store-within-a-store has been making headlines of late, though the concept is nothing new to retailers. Owing to the shift in consumers’ buying behavior, retailers find this approach more viable and profitable to reach the target audience. The strategy seems compelling for many retailers and is often considered as a game changer, as it facilitates displaying different brands under one roof and ensuring a rise in footfall.
Simply put, and as the term denotes, the retailers offer space to product makers inside their own stores in return of rental fees. Product manufacturers in turn appoint staffs by themselves to manage the counter, thus lowering overhead expenses for retailers. Manufacturers are also in constant fight to avail the best space and offer efficient in-store customer service. The concept works for both the parties - while retailers are saved from managing inventories of these manufacturers, the product makers do not have to set up their own stores.
J. C. Penney Company Inc. (JCP - Analyst Report) is one such retailer which has been focusing on this business strategy for quite some time. We believe this might be a clever move for the company to reinvigorate growth. The company already showcases shops-in-shop from brands such as MNG Mango, Liz Claiborne and Sephora, and more remain in the pipeline.
J. C. Penney added 681 Joe Fresh apparel shops within its stores in the latest concluded quarter and plans to add newly designed home departments during the second quarter of fiscal 2013. J. C. Penney also has plans to add 60 more Sephora stores in this fiscal.
The recent one to join the league is consumer electronic retailer Best Buy Company Inc. (BBY - Analyst Report), which has been facing stiff competition from industry bellwethers such as Wal-Mart Stores Inc. (WMT - Analyst Report) and Amazon.com Inc. (AMZN - Analyst Report) to increase its footfall, sales and profitability.
Best Buy is leaving no stone unturned to woo consumers and attain incremental revenue, and it is well evident from its strategic initiative of opening over 1,400 "Samsung Experience Shops" within its stores, announced in April. These shops offer Samsung’s smartphones, tablets, laptops, cameras and other accessories. The model seems to be working for the retailer, which also has a dedicated floor area for Apple Inc.’s (AAPL - Analyst Report) products.
Taking the initiatives further, Best Buy recently unveiled its partnership with Microsoft Corporation (MSFT - Analyst Report) to roll out “Windows Store” across its 500 outlets in the U.S. with an additional 100 in Canada. The stores will feature Windows-based PCs, tablets, Windows Phone, Xbox and various accessories. Unlike Apple stores, which are approximately 200 square feet, these “Windows Store” will essentially cover 1,500 to 2,200 square feet and will employ 1,200 sales associates.
Microsoft has been grappling with plummeting sales of Windows 8 operating system and believes that the platform provided by Best Buy would help them reverse their fortunes. For Best Buy, the deal adds more compelling products to its portfolio to better compete against the discount giants and online retailers.
Now, it remains to be seen whether the store-within-a store concept can put these companies back on the growth trajectory and lead as an example for others to follow.