Over the past few years, retailers from Target to Kohl’s to Lowe’s have jumped headfirst into the world of shop-in-shop concepts, looking to drive visits, increase basket size, and create engagement with new audiences. The rationale behind these partnerships is relatively straightforward. The larger retailer fills a gap in its product assortment, differentiates itself from competitors, improves engagement, and increases basket size. The smaller retailer gets a capital-efficient way to broaden its target audience and, in many cases, leverages the larger retailer’s online ordering and distribution platform.
The results so far are incredibly promising, with many retailers seeing locations with shops-in-shop benefit from greater year-over-year (YoY) and year-over-three-year (Yo3Y) visit boosts than those without. The concept also has a unique level of staying power in that it dovetails with a rising interest in finding better ways of engaging in physical retail on the part of different digitally native brands, product oriented companies, or even struggling retailers. Shop-in-shops emphasize a significant, but often overlooked element of physical locations – they can serve as a platform for brands to maximize their reach. In a digital age that has been heavily influenced by the ability to cross-sell online, leading brick-and-mortar retailers are now bringing that same capability to the physical store.
Shop-in-Shops Expand Reach of Host Brand
Shop-in-shops can attract specific consumer segments while increasing the reach of host retailers. Target, for example, launched its partnership with Disney in 2019 with 25 shop-in-shops and announced plans to add 100 more Disney stops in 2021. To see what this partnership means for Target’s performance, we analyzed three nearby Illinois Targets, one with a Disney shop-in-shop and two without.
The data shows that the Target with a Disney shop is seeing more visit year-over-three-year (Yo3Y) growth than those without, which could mean that the Disney merchandise is attracting some shoppers who would otherwise not have visited the store. The trade area of the Target with a Disney shop also included a larger share of family households than the trade areas of the two Disney-less nearby Targets – indicating that the partnership is helping Target reach this key demographic.
Shop-in-Shops Drive Visits to Hosted Brands
Shop-in-shops also benefit the hosted brand by increasing its exposure and diversifying its sales channels while minimizing overhead – and these partnerships can even drive traffic to the hosted brand’s owned platforms and venues. Sephora launched its partnership with Kohl’s in 2021, and the two companies recently announced plans to expand the program to every Kohl’s nationwide by 2023. And looking at statewide data indicates that the advent of Sephora shop-in-shops in Kohl’s has been driving visits to standalone Sephoras.
Foot traffic data from California, New York, and North Carolina indicates that the share of Kohl’s shoppers who also shop at Sephora jumped in 2021 when the partnership first launched. Since then, the share of cross-shopping with Sephora has continued to increase, indicating that, like with the Ulta-Target partnership, the Sephora shop-in-shops in Kohl’s stores are not cannibalizing visits from standalone Sephora venues. Instead, Kohl’s visitors who encounter the beauty retailer during their trip to the department store seem more likely to also seek out the brand’s owned retail outlets.
Thinking Outside the Standalone Store to Drive Success
The rapid proliferation of shop-in-shop concepts demonstrates that retailers have many ways to optimize their physical presence beyond just choosing an appropriate site for their store. And this flexibility empowers companies to focus more on bringing the right products to the right audiences and to maximizing the impact of each location – a process that will ultimately drive greater success.
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