For more information on how retailers are using mixed commerce solutions, check out our Mixed Commerce Glossary, which defines the terminology being used by businesses to describe the changes currently sweeping retail. For a rundown of the biggest developments in Virtual Reality and Augmented Reality from the past 12 months, check out our 2016 roundup, Augmented Reality and Virtual Reality – The Year In Review. And for a look ahead, check out the 5 top Virtual Reality and Augmented Reality technology trends for 2017.
“Store-within-a-store” has retailers seeking strength in numbers
Commercial real estate is expensive, and it’s critical for businesses to maximize revenue from each and every square foot. Leasing space to another business and giving them full control over design, marketing and staffing — a concept known as “store-within-a-store” or “shop-in-shop” — reduces overhead, and is one way to generate additional revenue from underperforming space. A store-within-a-store can also become a destination, attracting buzz and new customers to a retailer they don’t regularly patronize.
Take the partnership between JC Penney and Sephora. More than half of JC Penney stores have a Sephora inside, a number that continues to grow. Why? It’s a win-win for the companies involved. The inclusion of Sephora has proven to be a growth driver for JC Penney, and it’s much cheaper for Sephora to open inside an existing retailer like JC Penney than it is to open its own stand-alone retail store.
Adopting a store-within-a-store strategy makes sense for big brands like Macy’s and Kohl’s, which have been closing stores amid dropping sales, blaming the cuts on slower foot traffic at existing locations and increased competition online. Despite the obvious appeal, store-within-a-store is still a sizable investment, and many retailers remain unwilling to give up a portion of their showroom floor. The company that comes in to occupy the space must typically staff it, and commit to invest heavily across many locations to make it successful.
Mixed commerce solutions make store-within-a-store affordable
Retail square footage is increasingly competitive and valuable, and businesses need to take full advantage of however much they have. Mixed commerce solutions use Augmented and Virtual Reality to create memorable shopping experiences that can have a small footprint, and provide consumers with an endless aisle shopping experience that allows them to interact with and customize the merchandise. Best of all, mixed commerce solutions greatly reduce the cost of a store-within-a-store experience, making it more profitable and far more scaleable.
For example, imagine a manufacturer that sells products nationwide from inside a major big box retailer. Floor space is limited, as is advertising signage, and the products are shelved right next to the competition. How does that manufacturer differentiate itself? One way is the use of an eye-catching mixed commerce kiosk, which allows the manufacturer to better advertise and present their brand, gives consumers access to the full product line as opposed to whatever limited stock is on the shelves, and allows those consumers to customize and interact with the products in an entirely new way. The cost to implement is low, and the kiosks are easily scalable across hundreds of locations. A manufacturer could even place them in high-traffic areas like malls and airports, to better meet potential shoppers wherever they are.
Coming soon to a store-within-a-store near you
Mixed commerce gives every manufacturer an opportunity to own their brand’s consumer experience within pre-existing retail locations. The Shopper Marketing 5.0 Survey reported that “87% of the survey’s respondents agree or strongly agree that their shopper solution efforts have enabled them to improve their relationships with retail partners.”
It’s time for businesses to capitalize on the glut of retail space currently swamping the market. You’ll soon see retailers and manufacturers using mixed commerce solutions inside existing stores and high-traffic areas like malls and airports. In fact, there are already some cool concepts in the marketplace. Here’s a few examples of brands that are doing interesting things with their store-within-a-store concepts.
1. Etsy gets creative inside of Macy’s
Etsy, an ecommerce platform known as “the world’s most vibrant handmade marketplace,” recently jumped into brick-and-mortar retail by opening a store-within-a-store at Macy’s Herald Square location in New York City. Macy’s Herald Square is one of the most visited tourist destinations in the Big Apple with 20 million visitors annually, but the massive department store chain has had trouble attracting millennials — something a partnership with younger-skewing Etsy will look to address. And for Etsy, the partnership allows the company’s network of independent sellers to create brand awareness by getting their products in front of millions of Macy’s customers.
Etsy is not the only e-commerce company looking to department stores as potential store-within-a-store locations. Another example is Bonobos, which has gone from online-only to opening brick-and-mortar stores inside about 20 Nordstroms. Expect to see this trend accelerate, mainly because it’s a cost-effective and low-risk way for online retailers to jump into brick-and-mortar.
2. Best Buy adds Time Warner, among many others
Have you walked into a Best Buy recently? They are fully committed to the store-within-a-store strategy, and it’s working. Revenue generated per square foot has steadily increased over the last few years. They have partnered with Apple, Samsung, Microsoft, Sony, HP and more to open up stores inside Best Buy locations. This strategy makes sense for an electronics and appliance retailer, as it requires employees with a solid understanding and knowledge of the product offerings. This format has allowed Best Buy to better utilize its floor space, and give consumers a pleasurable shopping experience.
Most of the companies partnering with Best Buy have their own brick and mortar locations in addition to the store-within-a-store counters, which makes this implementation by brands like Samsung and Microsoft seem more like experimentation than a settle-upon future strategy. That said, mixed commerce solutions are now making store-within-a-store a viable option for businesses of all sizes and revenue levels. Going forward, expect to see unexpected brands popping up in unusual places, and the experience of interacting with those brands to change from simply transactional to something bordering on entertainment.
For more information on how retailers are using mixed commerce solutions, check out our Mixed Commerce Glossary, which defines the terminology being used to businesses to describe the changes currently sweeping retail.
Tim Sandlund is a Senior Project Manager at Marxent.