A store-within-a-store is an agreement in which a retailer rents a part of the retail space to be used by a different company to run another, independent store.
This agreement is popular among filling stations and supermarkets. Many bookstores partner with coffee shops because customers often desire a place to sit and enjoy a drink while they browse. Companies employing this technique include BP/Amoco Sheetz, Exxon Mobil and Hollywood Video with its Game Crazy video-game boutiques.
Often the store-within-a-store is an owned by a manufacturer, operating an outlet within a retail company's store. For example, the American department store Bloomingdale's has had such arrangements with Ralph Lauren, Calvin Klein, DKNY and Kenneth Cole. Neiman Marcus, another American department store, has had them with Armani and Gucci.
A study by business-school academics found that the arrangement works, because the retailer offers prime locations for which it can charge high rents, the manufacturer makes a higher profit than it would through a wholesale model,and the consumer gets a lower price and better service. The operator of the store-within-a-store can provide these benefits because it receives all profits, instead of having to share them with the retailer, as it would in the traditional split between manufacturer and retailer activities. The study also found that the arrangement works best for relatively non-substitutable goods, like cosmetics and brand fashions.
- Staff (September 2, 2009). The Economics Incentives of the 'Store-in-a-Store' Retail Model. Knowledge@Wharton (news module of the Wharton School of the University of Pennsylvania). Retrieved January 13, 2012.
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