“Embedded Retail” or the Rise of “Store-Within-A-Store” Concepts
In our article ‘A Sure Way To Kill Your Retail Business – And How To Avoid It’ we discussed a number of ways retailers can improve their business. These can be the basics such as prioritizing customer service to introducing engaging in-store kiosks, however, with the competitive landscape getting more fierce, retailers are looking for innovative ways to secure foot traffic and increase sales. One example is the rise of the store-within-a-store concept (also known as a “pop-in shop”), which allows retailers to cede a space within their store(s) to smaller companies and branded manufacturers in exchange for a fee. As the concept of the store-within-a-store grows, we are learning more about the advantages, challenges and overall effects on retail. And with the Covid-19 pandemic, some retailers are falling back on “Embedded Retail” as means to stay relevant and survive.
The Growing Threat of E-Commerce
Independent retailers have faced various challenges for a while now. ‘How In-Store Retail Experiences Push Customers To Shop Online’ on Forbes, details how subpar shopping experiences have led many customers to use online shopping instead of visiting physical stores. This has led to a huge rise in digital advertising that is aimed at online shoppers. Where marketing budgets were once spent on TV ads, now it goes to placing them on social pages and Google feeds, with direct links to the online store. This change in consumer habits shows no sign of slowing down, with Maryville University outlining how the traditional advertising industry is now competing with digital, as “digital marketing spending is expected to grow to $335 billion by 2020.”
This figure is a good indication of the competition brick and mortar shops are facing. And as a result, retailers are looking for ways to differentiate themselves and are feeling the need to innovate at a more rapid pace, which in turn pushes them to embrace new concepts, such as store-within-a-store partnerships.
Store-Within-A-Store Concept – Why It Works
According to The Orange County Register, traditional retailers like Bloomingdale’s are using this retail concept to appeal to new customers. Retail analyst Greg Stoffel told the site: “It broadens their merchandise. These are pop-ups that may have gone elsewhere around them and are now going in the store, particularly when they further the position of the store.” This arrangement ensures retailers that these stores do not open up elsewhere around them and create further competition.
Pymnts also talks about some of the other ways this has helped physical stores expand, as a new revenue stream is opened up for both retailers and their partner vendors. Operationally, not only do the stores-within-a-store help retailers save on overhead costs, but the vendor taking up that space also avoids having to invest long-term in a prime space with well-established foot traffic. This is crucial because even though long-term investments in these spaces tend to be costly, they’re also highly effective in terms of establishing consistent revenue streams.
Challenges- Is This A Solution For You?
When introducing any new concept there are challenges and drawbacks. For instance, while the partnership between JC Penney and Sephora has lasted over a decade, the fact that JC Penney is now struggling to stay afloat reveals that the store-within-a-store set-up is not a “cure-all” for solving long-term retailer problems.
Although the concept can certainly be effective for some retailer-vendor pairs, it’s not for everyone. Established and traditional retailers may find it hard to work with startups used to doing things their own way, as presented in an argument by Digiday. Stiff rules around necessities such as displays, lighting and signage may stifle startups and create friction in the partnership. Other issues such as a lack of preparation on the part of retailers to play host and the fact that large retailers get to keep customer data are also causing smaller brands to think twice. For both retailers and vendors, considering these potential drawbacks is a huge part of the equation. Ultimately, the outcome of these partnerships all depends on the cooperation and efforts both parties are willing to give.
How Others Make It Work
If brick & mortar stores want to survive in the digital age, the in-store experience is going to be a key to success. Providing a new experience with visitor pop-ups or pop-ins gives shoppers a reason to come back. If partners can manage each other’s expectations and deliver their respective promises, both retailers and vendors stand to gain more foot traffic and thus ensure higher revenues – at a relatively low cost to both.
A good example is how luxury beauty retailer Cos Bar opened the Cos Bar Lab at six of its 20 stores in order to feature various vendors whose products complemented their own. Based on how the vendors perform, Cos Bar plans to eventually expand these partnerships throughout all of its stores, ultimately creating one-stop-shops for all of their customers’ beauty needs. This is just one example of how the store-within-a-store concept can be executed to the benefit of all involved. By offering something that can’t exactly be replicated online, retailer-vendor partnerships can provide consumers with more reasons to actually spend money at physical stores.
Store-Within-A-Store For The Home Furnishings Industry
Major retailers and department stores have been hosting pop-ups or pop-ins for years. This concept is not nearly as common in the home furnishings industry, except for some early adopters. Beat your local competition to the punch and stand out from the rest.
Invite related businesses to set up shop in your store. Connect with your community and think local!
Here is a list of pop-up concepts for furniture retailers:
- Local artists and craftspeople who create unique wall art shoppers can’t get elsewhere
- Interior designers and decor services to help educate your shoppers and provide added value
- Photographers to help fill picture frames and other table-top accessories with meaningful artwork
- Local coffee shops to keep customers caffeinated and browsing longer (added benefit: A great smell in your store!)
- Jewelers showcasing handmade items to also give the home owners a new look
- Home cleaning services to educate customers on how to clean rugs, sofas, throw pillows, and more
The bottom line is, you’re creating a memorable experience for guests who come to your store all while extending the amount of time they spend browsing. These unique experiences will be something shoppers remember as something they cannot get at home browsing the Internet.