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Rise of the Shop-in-Shop: 4 Tips to Drive Growth with Retail Partnerships

October 28, 2022
Rise of the Shop-in-Shop: 4 Tips to Drive Growth with Retail Partnerships

Today, shoppers expect speed, convenience, and personalization in their retail experiences. However, retailers are grappling with unprecedented challenges. Shifts in consumer privacy laws, coupled with macro-economic factors such as supply chain challenges and inflation, have increased the cost of acquiring customers.

One way retailers can drive growth heading into 2023 is the concept of the shop-in-shop. While the “shop-in-shop” concept is not new, they have seen considerable growth in recent years, with brands like Apple tripling their total number of Target shop-in-shop locations in anticipation of the 2022 holiday season. Brands across categories have embraced the shop-in-shop, including Casper, Nordstrom, Indochino, Parachute, and Lively.

With this construct, brands and retailers meet evolving consumer demands while acquiring new customers—reducing both risk and cost. We'll cover the following topics to give you a better understanding of shop-in-shops, and how to best leverage them.

  • What is a shop-in-shop?
  • Benefits of the shop-in-shop for brands
  • Benefits of the shop-in-shop for retailers
  • Best practices for opening a shop-in-shop

What is a shop-in-shop?

A Shop-in-shop is a partnership between two retailers where one brand opens a small store or display area within a larger preexisting store.

Some recent examples of a shop-in-shop include:

Tonal at Nordstrom.

These partnerships vary in duration and range in size. While Tonal’s locations are fifty square feet, Sephora’s locations inside Kohl’s are 2,500 square feet.

The recent increase in the number of shop-in-shop locations is not limited to the United States. UK retailer Next recently announced partnerships with Homebase and GAP. Last year, DSW and Lids teamed up to open Lids locations across DSW’s Canadian store portfolio.

Benefits of the shop-in-shop for brands

By opening a store in an existing retailer, brands can drive growth and innovation. Brands can benefit from opening a shop-in-shop in the following ways:

  • Scale a physical presence faster: Real estate can be a barrier to growth. Leasing, store design, construction, and staffing can be expensive, especially for new retailers. A shop-in-shop allows brands to open stores in high-growth markets that might not otherwise be affordable. Leap can open stores in as little as three months.
  • Expand their customer base: Brands can use existing foot traffic to attract new customers. With the ability to meet the brand in person, a shop-in-shop also increase loyalty among existing customers. Within the first two months of opening with Leap, Little Words Project acquired over 3,500 new customers in-store.
  • Take advantage of existing omnichannel fulfillment options:  The ability to leverage a retailer’s existing omnichannel options, like curbside pick-up or same-day delivery, is valuable. By opening in Target, brands like Disney and Ulta can offer customers the same convenience and speed as the discount retailer.
Disney at Target.
  • Test: A shop-in-shop allows brands to explore new products, store formats, and markets. Before opening standalone stores, Something Navy and Goodlife Clothing opened shop-in-shop locations in Nordstrom. The partnerships allowed both brands, now powered by Leap, to understand and build their audiences. We match brands to the best locations based on where their customers are and our data on consumers and products, so we know where you'll succeed.
  • Gather consumer feedback: Finally, a shop-in-shop is a valuable opportunity to collect information from your customers about your products and brand experience.

Drew Green, CEO at Indochino, credits showrooms for the brand’s expansion into womenswear. The brand operates thirty showrooms inside Nordstrom as well as standalone stores. In a company statement last month, Green said, “We have increasingly heard from women visiting our showrooms that they are impressed by the attention to detail and level of personalization our appointments offer. [And] that they wish there was a made-to-measure option specifically catered to them.”

Indochino at Nordstrom

Benefits of the shop-in-shop for retailers

Hosting a mini store can increase revenue while reducing operating expenses. For retailers, a shop-in-shop can:

Offset real estate costs: Retailers can reduce leasing, staffing, and operational costs by dedicating space to a brand. Leap help brands by sharing costs, so it's cheaper and less risky for brands to open stores.

Attract new customers: By partnering with brands, retailers can expand their customer base. With its Sephora partnership, Kohl’s reported one million new customers. “The new customers are younger and more diverse and shop more frequently than our average customer,” said Michelle Gass, CEO at Kohl’s, during the company’s recent earnings call.

Increase foot traffic and cross-shopping: In a press release earlier this year, Target credited Ulta for increasing sales across categories. “In stores where we’ve added an Ulta Beauty experience, guests are buying incremental items from the assortment while continuing to shop the beauty brands they’ve loved at Target for years and adding more to their baskets in complementary categories,” said Christina Hennington, Executive VP and Chief Growth Officer at Target.

Expand product assortment and keep stores fresh: A shop-in-shop allows retailers to offer value without expanding into every category. Retailers can also use partnerships to bring new experiences to their stores. Leap's merchandising capabilities allow us to pick an assortment based on proprietary product and shopper data, allowing brands like ASTR the Label to launch in a new city with a winning product-market fit.

Leap-powered brand Goodlife Clothing showcases KOIO and Sharkchaser products inside its store. As a result of the partnership, this essential lifestyle brand offers customers footwear and handbags to complete their outfits, build larger baskets, and increase AOV.

Best practices for opening a shop-in-shop

While a shop-in-shop benefits brands and retailers, not all partnerships will be successful. Here are four ways to ensure your collaboration is productive:

1. Choose the right partner

Whether hosting a brand or opening a mini store, picking the right partner is critical.  

Brand partners should share similar values. This summer, Something Navy collaborated with Cotton Incorporated to create The Cotton Cabana. The shop-in-shop features an exclusive collection inside several Something Navy locations. Both companies share a commitment to sustainability.

Brands should also assess psychographic data to determine whether their target audiences overlap. Tonal and Nordstrom share affluent, health-conscious, and technology-oriented customers.

The Cotton Cabana at Something Navy

2. Be authentic

While a shop-in-shop may look different from standalone stores, maintaining brand identity is crucial. Today, customers expect consistency across channels—whether shopping online or offline.

Last year, Parachute Home opened inside sixty-five Crate & Barrel stores. The collection reflected the brand’s casual beach ethos despite a different set-up from its standalone stores. Leap's store design and development team works closely with brands to make sure that every store reflects each brand's unique identity.

3. Create a sense of urgency and exclusivity

Although customers expect consistency, a shop-in-shop should also feel unique. Brands should offer exclusive products or experiences to drive interest and engagement.

Underwear brand Parade recently opened inside twenty-five Urban Outfitters locations. The partnership includes an exclusive collection, with proceeds benefiting the Trans Law Center.

Parade at Urban Outfitters

4. Time the opening

While some partnerships will work all year, others will perform better during certain seasons. The timing should align with company goals and consumer habits.

For example, Frank and Oak teamed up with Package Free for its grand opening weekend. The zero waste lifestyle brand operated a small shop-in-shop inside the apparel store. The short partnership was ideal for creating buzz and urgency.

Meet consumer expectations with omnichannel retail

A shop-in-shop is an opportunity to reach new customers and enhance the shopping experience while  reducing costs and risks. Consider both a shop-in-shop and/or a permanent brick and mortar presence heading into 2023.

Leap’s full suite of omnichannel store formats ensures a seamless shopping experience for customers. Interested in learning more? Contact us today.

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