What Do You Think Of The Stores-Within-Stores Trend?

These days, more and more big box and department store chains are taking a cue from shopping malls by renting out floor space to retailers to create smaller stores within stores. It’s a model that has helped some businesses to stay afloat in these tough times, but does it benefit you?

From Fortune:

Sears is carving out about 15% of the square footage its Costa Mesa, California store to house the much trendier retailer Forever 21. Target will have 1,450 Radio Shack-run mobile phone shops in its stores by the end of June. And Wal-Mart Realty says it has almost 400 in-store leases ready for some well-matched retailer who sees the benefit of letting “Wal-Mart’s repeat customers become [their] repeat customers.”…
Besides Forever 21, Sears Holding Corp worked out in-store leases with Edwin Watts Golf Shops, Work ‘N Gear, a uniform apparel store, and the Whole Foods organic grocery chain, among others. Macy’s has continued to expand relationships with partners like Sunglass Hut, Destination Modernity, and Lush, a UK toiletries concern. Bloomingdales is negotiating deals that would cede square footage to several luxury brands including Jimmy Choo, and Reiss, a hip UK-based clothier.

There are also examples like the Sephora counters inside many JC Penney stores. Even grocery stores are getting in on this idea; several Kroger outlets have Murray’s Cheese stores located within.

On a purely budgetary level, the revenue generated from the rent for these mini stores can help struggling outlets pay their own leases. For the renter of the mini-store, it can mean not having to worry about all the overhead of operating a full-size bricks-and-mortar store.

The mini stores also allow the department stores to fill in gaps in their product offerings without having to be the ones responsible for placing orders and tracking inventory.

And then there are moves that can benefit the public images of the companies involved. Of the Sears deal with Forever 21, a professor at the University of Pennsylvania tells Fortune, “Sears has a worn out, old-timer image and obviously wants to make sure young people have a chance to again see how good it is.”

Of course, one of the problems with this model is that it could potentially alienate or annoy customers.

For example, if Target puts in a RadioShack section, it needs to remove or consolidate something else to make room. Yes, Target will make guaranteed revenue from the Shack deal, but what if the store ends up losing customers who had been buying whatever products were ousted to make room for the kiosk?

And then there’s also the question of variety. Say that a department store makes a deal to rent a mini shop space to a sneaker brand. Will the department store still be allowed to sell sneakers that compete with what’s for sale in the mini store? One could easily see a situation where a mini store lessee makes non-compete or most-favored-nation agreements with its host store.

What do you think: Should department stores continue on with this trend, or is it time to slow down and give it some thought?

Stores within stores: Retail’s savior? [CNN/Fortune]

Comments

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  1. Grogey says:

    Was in a local best buy this past weekend where it looks like they rented out a small spot to the local Time Warner Cable. Helped me out cause I had a quick question on some Road Runner stuff.

    Funny thing is, this BB was in a Mall so technically it was a store within a store within a store?

    • Loias supports harsher punishments against corporations says:

      If you can get one more store in there, you could accomplish inception!

    • Grogey says:

      Dont forget there’s also Verizon in the BB’s to but that wouldn’t be under TWC so its null.

      Wait Wait I have inception, I can order a 3G service through TWC….

    • raydee wandered off on a tangent and got lost says:

      Yo dog, I heard you like shopping, so I put a store in your store, so you can shop while you shop.

  2. jason in boston says:

    Seeing on how any storefront is just the “browsing” section for Amazon (I love that app on Android) or Newegg…doesn’t matter to me.

    Clothing might be a different thing although trying on in a store for size then trying to find a better price online might work. I don’t really know how I feel about that yet.

    • Bativac says:

      I’ve had mixed results ordering clothes online. I prefer to try on the actual pair of pants I’m going to be wearing. Of course I only buy clothes once every couple years, so I gotta make it count.

    • human_shield says:

      Really? I’ve found the selection at pretty much every big box store to be so poor that it is a waste of time to try to window shop there. A shelf with 4 products can’t beat an Amazon search with 50 results. Unless I’m looking for something specific and mainstream that I already know they have, I don’t waste my gas.

    • Outrun1986 says:

      For me clothing must be bought in a store and tried on, unless I am looking for a replacement for the exact item that I already own, and that is rare. As far as B&M stores I honestly don’t buy much at them except for food, groceries and other consumables like paper products and toiletries. Mainly for the reasons above, why should I choose from 4-5 mediocre products when on Amazon I can have a choice of many products and I can find something that will more closely fit my needs usually with superior quality and a better price.

  3. Darrone says:

    Waiting for my local package store to open a gun store. Then i’m set for life.

  4. HoJu says:

    They’re all copying the master:
    http://www.youtube.com/watch?v=vao-IfsMROA

  5. Rebecca K-S says:

    I don’t think anything of it because it doesn’t strike me as much of a trend. I can’t remember when stores like Walmart and Meijer, at least, did NOT rent retail space to smaller businesses.

    • balthisar says:

      I’m wondering myself if this is the same thing, because I know what you mean. You’re talking about a kind of mini-mall. The larger Meijers have a row of small specialty stores at the front of the building, kind of like a mall. I’m thinking the article must be about leasing out part of the retail floor space to these other companies. Like, say, you go back to the electronics section at Meijer and find a closed off section dedicated to AT&T Wireless’ sole use.

      • Rebecca K-S says:

        Hm. Valid point. That strikes me as a little odd, but whatever.

      • gman863 says:

        This is known as the “fourth wall” – something Wal-Mart has been including in practically every SuperCenter for the past 20 years.

        The rent varies by location; however it’s not uncommon for a 10′ x 15′ space to go for upwards of $2000 per month in some areas. This includes electric, heat, AC and thousands of people visiting the store every day.

        I looked at renting space for a possible business venture. Wal-Mart won’t even consider a merchant unless they have at least two years of audited financial statements showing a profit. They also have extreme restrictions on signage and a minimum number of hours the business must be open.

        Other stores are also screening new tenants with a fine-tooth comb. Some of the older H-E-B supermarkets in Houston have flea-market type bling-bling and knockoff perfume tenants. When these leases expire, I have it on good authority they will not be renewed; H-E-B already has more upscale tenants waiting in the wings.

    • Firethorn says:

      Pretty much my thought; I remember reading a while back about the ‘death of malls’. Well, this is just a retake on the idea.

      It has it’s upsides and downsides. At least for now, the operator of the ‘submall’ always has their core brand recognition and product line. This acts as an anchor, much like Sears, Target, and the other department stores used to with the ‘big’ malls. Unlike those malls though, by owning the main store themselves and keeping it the majority of their business, they’re not ‘dependent’ upon the leasees, and don’t have to worry about losing their core attracting business.

      The practice does appear to be spreading – most of the local grocery stores, for example, have opened small bank branches. Get a car loan while you’re getting your groceries! ;)

    • mandy_Reeves says:

      Target down the street has a Boots section in the Make up dept. Boots is a UK make up toiletries store.

  6. Loias supports harsher punishments against corporations says:

    So it’s a Corporate Co-OP. Corporations are doing the same thing that flea markets do to remain competitive, relavent, and solvent.

  7. katarzyna says:

    There’s been a Lush mini-store in my local Macy’s for years.

    In fact, is this much different from department store having a Estee Lauder or Clinique or MAC makeup counter in their stores? Because that’s been going on for decades.

    • pecan 3.14159265 says:

      I agree. I don’t see how this is very different from Lancome or Estee Lauder counters. This just seems like the space is a little bigger.

  8. ExtraCelestial says:

    The issue for me is the fine print. Terms and conditions for coupons, returns, sales, etc. often get jumbled when this “store-in-store” business comes into play and nobody ever wants to take responsibility

    • jesusofcool says:

      That’s a good point. I was going to comment that I thought this was a fairly creative way for smaller stores/chains to continue operating with lower overhead, but I could easily see that become a problem.

  9. jason in boston says:

    Yo Dawg, I heard you like stores so we put a store within a store…

  10. ellmar says:

    Sounds like someone invented the shopping mall.

  11. daemonaquila says:

    Aside from questioning the utility (i.e., is a mini-Radio Shack going to have a useful line of anything, or just random cheap plastic toys?), this seems almost inevitable. The big boxes have been getting bigger and bigger, and they’re finally realizing that they’re too big to support themselves. The risk to consumers and neighborhoods always has been that a big box in their area would close, and the building would be left as a blight. So, they’re doing what they have to do to survive. I suspect that we’re seeing the birth of a new kind of mall.

    Maybe we can’t even call it a “new” kind of mall. I grew up near America’s first mall, Southdale, which was built in the early 1960s. It seemed huge, but somewhere in the 1990s much of it was rebuilt to megasize it so it could keep up with other malls. Right about that time, we started seeing malls with multiple copies of the same store – one I visited had 3 Victoria’s Secret stores scattered throughout, plus 1-2 perfume/makeup only Vic’s mini-stores. In other words, malls had already gotten too big, and the only way to fill the bays was to get businesses to keep opening more satellites and hope that the economy wouldn’t tank. Given super-sizing, I wonder how many of these stores that are inviting other stores to open kiosks are the same size today as a single store as entire mall wings or even malls, a few decades past.

    • raydee wandered off on a tangent and got lost says:

      I’ve run across a couple of mini photo-documentaries of abandoned malls. They are sad, creepy places.

      • Youngfrankenstein says:

        We have one near my city and it is creep-city. There are probably 5 stores in this huge mall left. The riffraff kept people from shopping. It is very eerie.

  12. B says:

    I won’t be impressed until they put a Starbucks in the bathroom of another Starbucks.

  13. Seldini says:

    It’s all fun and games until the receipt checkers at the big store don’t believe the receipt from the smaller store and call the cops when you try to leave.

  14. The Upright Man says:

    This looks like a job for Xzibit…

  15. MaliBoo Radley says:

    Isn’t this exactly what department stores are supposed to be? Or used to be? When my mother went to a department store in the 50’s, it was an all day event (including a ladies light lunch). This is because, rather like wal-mart, the store contained dozens of departments carrying myriad goods. Sounds like, if anything, stores are taking a trip back in time

    In a way, this exactly what the makeup counters in department stores are. They’re essentially separate stores representing whatever brand they’re selling . Sometimes, the sales gal at the makeup counter doesn’t even directly work for the department store. It’s never been an issue before.

  16. Brie says:

    I like Sephora within JCP, but I don’t think Sephora does; there’s zero mention of S@JCP on the Sephora website (or there wasn’t the last time I looked), and there are certain promos that Sephora does (like free bath gel on your birthday for club members) that S@JCP just doesn’t do.

    It’s like Sephora is the glamour queen at high school and Sephora at JCP is the ugly stepsister never to be acknowledged.

  17. wonderkitty now has two dogs says:

    I find the store-inside-the-store prices are MSRP and don’t really offer any deals. But then again, I haven’t had a lot of exposure to it, either. I might be missing something.

  18. selkie says:

    Before Sephora started putting staroes in JC Penney, there wasn’t one within several hundred miles of me. And before the Sephoras started showing up there, I had zero reason to ever set foot in the store. So I tend to see it as win-win in that case since I like to test beauty products in-store before buying them.

  19. MEoip says:

    It’s becoming more common to have mini-stores, partner lines, and outside sales reps in stores. Lowe’s and Home Depot have been doing this for years with equipment rental and water treatment solutions. Wal-mart has outside sales reps (Cable companies and it’s not the same one every day) in their TV section to sell customer’s HD cable with their TV.

    • mischlep says:

      But that also gets annoying. I can’t tell you how many times I’ve been accosted by “BJ’s Home Services” representatives while shopping at BJs. Or all the stupid Forever Sharp (?) knife demonstrations/sales they do and all their annoying announcements for them.

  20. Cosmo_Kramer says:

    I can’t imagine how the jewelry store in my local grocery store survives. But banks in grocery stores are really common, and make sense.

    • mbz32190 says:

      Is it a Kroger-based store? Because Kroger also owns a few jewelery stores, Littman Jewelers comes to mind.

      • The Lone Gunman says:

        Fred Meyer owns Littman Jewelers, not Kroger.

      • gman863 says:

        Kroger’s main jewelry chain is Fred Meyer. Although the Kroger-owned Fred Meyer superstores are mainly in Arizona, they have recently started opening “Kroger Marketplace” stores in Texas (same format as Arizona but with the Kroger name) with a Fred Meyer jewelry store inside.

  21. TerpBE says:

    Hey, I recognize the sign in that photo from the Exton Mall!

  22. skwigger says:

    It’s annoying when you can’t use a Macy’s coupon to buy sunglasses because it’s technically Sunglass Hut that you are purchasing from. This may only add confusion for customers with deals/coupons/promotions.

  23. toberead says:

    I wouldn’t mind it if the mini-store doesn’t offer similar merchandise to the actual store. But it gets a little annoying when you’re looking for something and you have to go to several different places to find it. For example, if I go to Sears and want to buy a sweater, I have to go to their regular clothing’s section and then also to their Lands End section to find all the sweaters. They are often on opposite sides of the store so you can’t even use the same dressing room. I don’t really want to go to multiple “stores within a store” just to find the same item.

    • quail says:

      When Sears first brought their Lands’ End apparel into the store it was mixed up among all of the other Sears brands. The problem was that the die-hard Lands’ End purchaser would get frustrated looking for the brand they wanted. In the end they just went back to ordering online and never stepped foot into a Sears.

      Now that Lands’ End is a boutique within Sears I’ve actually wanted to visit our local Sears. And a store that would always appear vacant now has customers strolling through it.

  24. chargerRT says:

    REAL stores-within-stores? Not like Montgomery Ward’s semi-partitioning of every department, with genericky names? Never really understood that one.

    My mother finds it much easier to park and get into the Sephora at JCPenney, rather than the Sephora at the new, swanky “town center” outdoor mall.

  25. MrMagoo is usually sarcastic says:

    I really wish Consumerist would fix their comments section. Half the time, new comments don’t show up when I revisit an article. For example, the first time I looked at this one, there was one comment. Now it shows that there are 30 comments, but no matter how often I refresh, I still only see the first one. This happens regularly to me.

    • veritybrown says:

      I have the opposite problem. The number of replies listed on the expander button tends to remain the same as the first time I accessed the story, while the number of actual replies if I expand the thread is usually much higher.

  26. captadam says:

    My local Kroger has a Starbucks in the store. And the local Wal-Mart has a bunch of low-rent retailers like Woodforest bank, Subway, and some crummy hair salon. It’s nothing new. But I’ve always been a little confused by it.

    • human_shield says:

      Walmart is a special case. I fully expect them to start adding a second floor to their stores and start renting out apartments.

  27. Rose says:

    “…it needs to remove or consolidate something else to make room.”

    Or just rearrange more efficiently, with no loss of items.

  28. There's room to move as a fry cook says:

    This was the original model for junior department stores (Kmart …) . When I was in the business the shoe department was run by one company and clothing by another.

  29. GrimJack says:

    The old B. Dalton bookstore chain (was part of B&N) used to have mini-bookstores inside of some department stores. The staff was employed by B&N and even though it wasn’t physically separated from the surrounding departments, you could only buy books at their register.

    This was back in the mid-80’s, so I guess it’s not a new trend (maybe a revival).

  30. vastrightwing says:

    There is nothing new here. No matter how many nested stores there are, you still browse, pick your item and pay. It comes down to price. I don’t care who I buy from, as long as there is value to me in it.

  31. Talisker says:

    I thought the Land’s End store within the local Sears was a good idea, but I still never go there. I just buy my Land’s End stuff online.

    I doubt that I would ever go to a Radio Shack for cell phones or cell phone accessories regardless of whether they were in a strip mall or a Target.

    I loathe shopping, though. I’d rather just use one-click buying on Amazon and be done with it.

  32. Kate says:

    The only problem I see with it, is when it gets hard to tell if you are for instance, buying something from Lush, or Macy’s. If you pick something off one counter and then go to the other end of the store, you have to return to the Lush counter to pay for it, which is kind of a drag. But I’ve had that problem in other stores between departments. Lush hires about a dozen clerks to roam their few displays, so it’s hard to make that mistake there. You can’t even look in the direction of their products without getting jumped on by an over eager saleswoman.

  33. thrashanddestroy says:

    Eh, a local Target has a Starbucks across from their generic eatery. The Kroger around the corner from me has had a Chase bank across from their registers for years, as do several Meijer and WalMarts in our area.

    Art Van furniture has a laughable “Paul’s TVs” located deep within their selection of crap kitchen tables and bedroom vanities, never seen such ridiculous prices.

  34. valthun says:

    This is just expanding on what has been going on for ages with the cosmetics counter in the departments stores.

  35. quail says:

    It’s not a big sacrifice for the store that’s doing the renting. All of the big box stores in the past 3 years have remodeled in order to hide the fact that they’re carrying fewer items than they did 5 years ago. (Those bare spots that showed up during 2007 were embarrassing.) Those wide aisles can go back to being narrow like they were before the economic downturn in order to provide room to another retailer or two.

    I’d actually look forward to it, if they pick decent retailers or force them to carry a few hard to find products. Let RadioShack into the space only if they’ll carry a few of their good World Band radios & HD radios along with the crappy cell phones. Or let Ritz Camera into a spot only if they have one or two EVIL cameras for sale along with the cheapos.

  36. Pax says:

    Mini-malls, is what my first thought was.

    As long as the boundary is clearly demarkated, and/or, people in mini-store A don’t jump down my through for picking up some of their merchandise and wandering, unawares, past the invisile boundary between them, and mini-stoe B … eh, I’m fine with it.

  37. catastrophegirl chooses not to fly says:

    i like it better than the regular mall concept. having worked in several malls, there’s often a lot of store space sitting empty. at least if a store leases space within a larger store – if they fail, the larger store will reclaim the space and use it

  38. PsiCop says:

    I understand this is not really new, just an acceleration of something that’s been done for a long time (e.g. makeup counters in department stores), and often it works well for everyone, but there are still too many opportunities for confusion and havoc on the part of consumers.

    What about promotions? Will Sears promotions/coupons/discounts apply to the Forever 21 sections? What about return policies? Will they differ? What about most other aspects of the store’s operation?

    It’s great that businesses get to work out these profitable little deals with each other … but consumers are forced to adapt to something they never signed up for, and which may well not work in their favor.

    • scgirl_212 says:

      Being from the area, and knowing the politics, The Forever 21 will be renting retial space from Sears..but in fact be it’s own store. They did this because people that shop at Chanel, Versace, Armani, Harry Winston etc do not go into Sears..the people in charge of the mall have been trying to figure out how to diminish the Sears without losing it completely since it has the most retail space.

      This is not to say that those same people will be shopping at Forever , but it will bring in more business for the mall..that is the one store it is lacking.

  39. Tallanvor says:

    Eh. Harrod’s has been doing this for years.

  40. scgirl_212 says:

    The same sears already does this with a Friar Tux (tuxedo rentals) renting retail space from them.

    In this case, South Coast Plaza is one of the fanciest malls in the country, and Sears is not exactly fancy..the board of directors for the mall has been trying to get rid of the Sears..or at least diminish it for a long time. It is the biggest of the other department stores in terms of square footage and it just so happens that Forever 21 has been expanding their brand to include children, men, plus size and misses to become a new department store (they soaked up all of the old Mervyns and May Company after they went under).

    Anyway, I think it is a good move since no one goes to the Sears there anyway…at least not the kind of clientele that shop at SCP. They gotta stay on top of Fashion Island in Newport Beach!

  41. Bonnie says:

    There’s a post office in a Macy’s in San Francisco. It’s practically hidden and incredibly hard to find. Dislike.

  42. kimmie says:

    It’s rubbish. The mall near my parents (Ross Park near Pittsburgh) doesn’t have an Origins, just an Origins within Macys. However, the girl that manages the station apparently takes 4 hour lunches at odd times because she’s never there and the girls at other counters always say she’s at lunch. They’re also consistently out of certain products. I’ve taken to ordering online, which entails paying shipping, and is really frustrating.

  43. dblevins says:

    this is a turn of the century (1900, 2000) concept – where do you think the name “department store” came from?

    As for bringing it back: BARF

  44. stevied says:

    The only advantage to consumers that I can see

    (and it is a big one)

    would be dedicated staff operating the in-the-store store.

    But do we really need a college drop-out wanna be electronics Rat Shat employee standing around the Rat Shat store in the Target store trying to pedal out of date cell phones and crap?

  45. speckthepumpkin says:

    Got my last wireless phone from Target. I was surprised to see “Radio Shack at Target” or something like that on my credit card statement. No complaints about the service in this case, and they weren’t taking up any more room than you’d expect for cell phones and the kiosk.

  46. JohnJ says:

    Grocery stores have long had stores-within-stores, such as pharmacies and mini-banks.

  47. Triene says:

    It doesn’t bother me at all, espeically for things like clothing and the like. Japanese department stores use this format. Each brand even usually has its own cash register that you have to pay separately at. The service is better and you can get a better sense of what different brands have to offer at a glance.

    I tried to exchange a coat at a Macy’s recently (one I hadn’t been to before), and NO ONE knew where in the store the coat was. Everything is completely jumbled. This model helps you find something specific if needed, while allowing you to browse more easily than in discrete stores would.

    I guess what I’m trying to say is, I’m for it. Just get a variety! Don’t pull a Sears and just sell your entire top floor to Land’s End (as it is in my mall). That’s just silly.

  48. gman863 says:

    Leased departments within a main department store’s sales floor have been around for ages. In addition to practically every branded cosmetic counter (Estee Lauder, etc.), specialty items such as oriental rugs are usually a leased department. The store rings up the transactions and deducts a hefty commission (usually at least 20%) to cover expenses and profit.

    Since many department stores have cut or reduced the stock of certain items (music, furniture, automotive, hardware, etc.) they have excess floor and backroom space they still have to pay rent and utilities on. Leased departments help offset this expense.

    Personally, a store within a store has no effect on my shopping habits (the only exception is the contract Post Office in my neighborhood Ace Hardware; I confess I’ve made impulse purchases when my only intent was to ship a package).

    Finally, some useless trivia on leased departments: The major appliance departments at stores including GEM and Woolco were leased. When Woolco closed in the late 1970s, the lessee had to quickly find another way of selling its product,

    You already knew how Circuit City died. Now you know how it was born.

  49. samandiriel says:

    It’s moot. Market forces will decide this pretty quickly.

    Personally, I like it as it means you can get staff who are more knowledgeable about a topic from the specialized store, with perhaps more specialized merchandise, than a generic dept store employee/stock. For specialized things like electronics or gourmet cheese, I think this sort of ‘outsourcing’ makes a lot of sense. A dept store gets to use the experience and management techniques of the ‘mini-store’ without having to actually go to the trouble of acquiring or managing it.

  50. buzz says:

    I really LOVE having a Lush inside my local Macys. Great customer service. I didn’t realize it was a “store-within-a-store”, just thought it was another makeup counter type setup. I can see the benefits of this trend, especially for larger stores that can afford to lose some current product and still maintain a strong consumer base.