Retail’s Inward Expansion

Sometimes, true growth comes from looking inward first. While that may sound like a line from a self-help book, it’s actually a business strategy that more and more retailers are adopting.

Stores within stores. A concept that may not seem so novel is actually driving some impressive growth for retail chains across the country and around the globe. While retailers struggle to attract shoppers to their physical stores, why not double down on those coveted visits by offering a wider selection, exposure to new concepts and the opportunity to offer multiple shopping experiences within a single location?

The strategy is also a win for the business, operationally speaking. While the owner/leasee of the retail space can maintain a large retail footprint, they can also defray costs and decrease overheads by subletting the space to other retailers at a premium. For the retailer taking up a portion of that square footage, it can also be a win in not having to invest long term in prime brick-and-mortar space with well-established foot traffic.

It’s a concept that department stores are very familiar with. But it’s not a one-size-fits-all concept by any means, rather one that provides multiple unique experiences for customers with specific tastes. Take JC Penney, for example: It has had a successful in-store relationship with Sephora that has flourished for over 10 years. Housing mini Sephora stores within the department store chain’s larger footprint has allowed the retailer to both attract a younger (read: millennial), more product-savvy beauty consumer, while introducing its core customers to new products and brands. Partnerships like these have helped aid in JC Penney’s resurrection as a department store that can stay competitive amidst the changing winds of retail.

According to Market Realist, Sephora has played a major role in JC Penney’s comeback in recent years. Sales from ladies accessories (which includes products sold within the Sephora mini-stores) rose from 10 percent in 2012 to 12 percent by Jan. 2015. And that growth has continued. As reported by Chicago Tribune, JC Penney said Sephora was one of its best-performing divisions so far in 2016. CEO Marvin Ellison went on to note in a first quarter sales statement that the new Sephoras (there are 60 planned to open in new locations by June 2016) are expected to be among the company’s “2016 sales drivers.” The partnership between JCPenney and Sephora has been so lucrative that it has also expanded to the eCommerce space, where JCPenney offers Sephora items in its online shop as well. This growth has caused other mid-market department stores, like Kohl’s and Macy’s, to adopt similar strategies, seeking out their own partnerships and revamping their cosmetics offerings.

Macy’s has doubled down on its commitment to attracting millennial shoppers via stores-within-stores earlier this year, when the retailer announced it would be teaming up with online craft marketplace Etsy. As PYMNTS reported, on Jan. 28, Etsy officially opened its first-ever Etsy Shop, a brick-and-mortar pop-up shop located within Macy’s flagship Herald Square location in New York City. While Macy’s could certainly learn a thing or two from Etsy about cultivating a community of independent sellers, keeping a fresh offering of goods in rotation and attracting a wide swath of savvy online shoppers, Etsy is certainly also benefiting from just happening to open its first brick-and-mortar location in one of the most coveted pieces of retail real estate in the world.

Department store chains aren’t the only ones maximizing on this trend. Best Buy has also been actively growing its store-within-a-store strategy, partnering with the likes of Apple, Samsung, Sony and HP within its brick-and-mortar locations. The tech and electronics retailer has also expanded its offering of major home appliances, building out large display areas and training dedicated staff, according to Forbes, at many of its stores. These big-ticket items are not only helping the retailer make good use of all that “big box” space but are also helping it compete with the likes of Amazon. While the eCommerce titan may be able to beat Best Buy at selling small electronics — which are easy and cheap to ship — large home appliances are a differentiator that can still drive consumers to visit a Best Buy location.

The partnerships are sometimes unlikely, but the strategy is one that is bearing fruit for many of the retailers who have dipped a toe in the waters. As the lines between online and offline retail continue to blur and retailers continue to find new ways to attract customers, expect to see some even more interesting mashups.