One of the retail phenomena of the past year has been the rise and rise of the supermarket shop-in-shop.
Grocery titan Asda has launched a ‘test and learn’ partnership strategy with a range of retailers including The Entertainer, B&Q and most recently Missguided, while Tesco has launched a shop-in-shop trial across five of its superstores with electricals retailer AO.com.
Whether this can be directly attributed to the pandemic or whether it was something that was already well underway when Covid made its debut is open to discussion, but it is certainly a trend that has picked up speed during the pandemic, and one that shows little sign of going away.
Why are retailers doing this now?
On the surface, it’s not hard to see why partnerships like this have appealed to grocers and third-party retailers alike - for the former it offers a chance to boost sales per square foot, while for non-essential retailers with shuttered stores during lockdown it offered access to a wider pool of shoppers and a new revenue stream.
But as David Dalziel, creative director at consultancy Dalziel & Pow which has worked on a number of shop-in-shops, points out: “As a tenant [operating in another store] it has to be about more than just paying the rent.”
So what is motivating supermarkets to launch more store-in-store tie-ups?
Asda’s chief of strategy Preyash Thakrar says its partnerships strategy is motivated by “making our customers’ lives easier… by bringing in complementary brands to help them complete more shopping missions in one location.”
For Waitrose, which has launched John Lewis shop-in-shops in a number of its stores on a trial basis, the motivation came from increasing the level of spend and loyalty it had with its existing customers.
Business lead for JLP’s Better Together initiative Zoe Brady says the partnership “had a hypothesis that we might sell more John Lewis merchandise effectively by putting the two together.”
What to consider and why do some partnerships work?
While it would be easy to think of a store-in-store tie-up as a quick bonus to drive revenue for both parties, Dalziel points out that it is not an inherent win-win.
“You have to ask whether big retailers are merely doing this to help pay the rent. If they are, then I would say that the success rate among those doing so is about 50%,” he says.
He notes the ‘shops’ that lurked beyond the checkouts of many hypermarkets rarely looked good and frequently didn’t work.
Put another way, for customers to accept a shop-in-shop, a visual logic between host and tenant is an obvious starting point and if this is missing, rejection will follow - which is bad for both parties.
He says that there are other instances where brands are complementary and cites the 20,000 book ‘branch’ of Waterstones that is in part of the massive Next flagship that opened on April 12th in Leicester’s Fosse Park: “Is it a good marriage? In this case, I think it is and I’m very comfortable with the idea of buying a book while I’m in Next.”
But how do retailers decide who to team up with and what works? Tim Greenhalgh, chief creative officer at consultancy Landor & Fitch, makes the point that an alternative perhaps needs to be found to the shop-in-shop label: “The only terminology that we have at the moment is a concession or a shop-in-shop. But what we’re really talking about is brand sharing.” Like Dalziel, he makes the point that not everything brand pairing works - putting a Screwfix in a branch of Ann Summers might find few takers from either brand, for instance.
Assuming a degree of commonality, what are the merits of some major retailers store-in-store partnerships launched in recent months?
John Lewis in Waitrose
The format
Homewares, and rather more specifically kitchenwares, have formed the bulk of the Waitrose non-food offer for some years, but the notion of there being a dedicated John Lewis area as part of the proposition is new.
Wallingford, in Oxfordshire, is one of the test sites for putting John Lewis into Waitrose.
In terms of what has been done in Wallingford, the brief given was for the area to feel reminiscent of the John Lewis brands. To this end, new point of sale and overhead graphics have been created for the space, and although this is not an enclosed shop-in-shop, there is the sense of a divide between the two brands.
The stock itself is at the lower end of the John Lewis price spectrum and, as might be expected, covers cookware, dining, ‘gifting’ and cards. As Brady notes: “There are limits to what you can put in.”
The potential
There is a temptation to think that by putting John Lewis shop-in-shops into Waitrose branches that there may be a degree of cannibalisation as far as the department stores are concerned. Given, however, the limited category nature of the shop-in-shop offer it seems more probable that it will act both as a turnover boost for the supermarket and a taster for the broader non-food world of the department stores. Both parts of the equation look set to benefit.
B&Q in Asda
The format
As a big space user, Asda is well-placed to accommodate shop-in-shops and its ongoing trial with B&Q, which has installed two outposts, in Sheffield and Dagenham, is a case in point. This is a true shop-in-shop inasmuch as it has its own entrance, walls and staff with the look and feel of one of the retailer’s branches, just smaller.
The real point about what has been done, however, is the nature of the merchandise that is on offer. Lawnmowers and timber-cutting do not form part of the proposition, paint, gardening and tools for domestic projects do.
The potential
The B&Q offer in Asda has much in common with the rapid nature of the supermarket shopping mission. By restricting the proposition to items that can readily be carried by hand or taken to a car, a ‘grab ‘n’ go’ mentality can be maintained, in tune with the food shop. For Asda, this means that DIY can readily sit with the rest of the offer, and for B&Q moving closer to the city centre is a potential reality.
The question is whether the turnover for B&Q will be incremental, grabbing market share from local indy hardware stores, or whether shop-in-shops will affect standalone branches. There is little certainty about this as there are so few DIY stores of any size from the big chains anywhere near our town and city centres.
Decathlon in Auchan
The format
Opened in October 2020, the Decathlon shop-in-shop in the Auchan branch in Saint-Jean de la Ruelle, northern France, straddles that space between what Waitrose has done in Wallingford and the B&Q semi self-contained shops in Dagenham and Sheffield.
This one has walls, but there are not four of them, and the 360 sq m area is essentially visible as a whole for the hypermarket’s shoppers. No fewer than 48 sports are catered for in this shop-in-shop, not far short of the number found in a standalone branch.
Interestingly, this is not a secondary space within Auchan, as the Decathlon space is located just inside the main entrance, making it hard to miss after the initial shopper decompression has taken place. It even has its own click-and-collect desk.
The potential
Sports equipment in French hypermarkets has a time-honoured pedigree, but all too frequently it has been lot more about price than performance. Giving space to Decathlon in an Auchan store makes sense as the offer sits within the hypermarket’s ambit but teaming up with the world’s largest sports retailer means immediate product expertise and authority. This one has real roll-out potential.
AO.com in Tesco
The format
Like B&Q, the 188 sq m AO.com store in Tesco Middleton really is a store with discrete walls, fitout and dedicated staff within. This looks and feels almost nothing like Tesco, but this is not necessarily a bad thing as the product range means that the needs of shoppers looking for electricals are catered for by the AO space.
As far as the design is concerned, AO has pulled a few tricks in its first physical store. The foremost of these is the use of white goods in the mid-shop to form a table at which consultations can take place, and on which monitors providing access to AO.com are positioned.
The potential
On the face of it, an AO.com shop-in-shop might seem to make sense within a Tesco, but it is hard to escape the sense that few food shoppers set off thinking about cucumber and celery and end up buying a washing machine.
The space may mean an enlarged electricals department for the supermarket, but there is a substantial leap from small items to big-ticket goods, and shoppers may prefer to head for a high street standalone. That said, there can be few who will argue with AO.com’s ability to turn a commercial environment to advantage, judging by its results.
Making shop-in-shops work
The majority of shop-in-shop action over the last year has been in supermarkets and hypermarkets, largely owing to the fact that they have remained open and a lot of them have excess space. As retail begins to find its feet once more, however, the question has to be whether shop-in-shop momentum will be continued or will shoppers head to standalone stores bearing the same logos once more?
Landor & Fitch’s Greenhalgh comments: “As long as you’re doing something that benefits the customer, then it’s good. As long as it doesn’t become a brand cluster, then it can work. For retailers, they need to ask ‘Will I attract more customers if I partner up with this brand?’ Customer sentiment about everything being under one roof will vary. If there’s a logical reason why a shop-in-shop should be in a specific host’s store then there are opportunities.”
There appear to be no hard and fast rules about what will work, but there are likely to be instinctive mismatches, of which both potential parties should be keenly aware. This looks a trend that seems likely to continue, but one that needs to be treated with considerable caution. For retailers, the ability to spot not just a gap in the market, but a shop-in-shop niche that makes sense for both parties, will prove key if this kind of thing is to succeed.
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