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Russian Dolls of Retail

Sephora/Kolh's A brick-and-mortar storefront for Kohl's, complete with a separate storefront for Sephora
From cosmetic shops at apparel stores to coffee shops within bookstores, shop-in-shops have gained popularity in the retail space.

In August, ULTA Beauty at Target launched in more than 100 Target stores and on Target.com, with plans to reach a total of 800 locations in the years to come. Before that, Kohl’s announced in 2020 a partnership with Sephora for a retail partnership at least 850 Kohl’s locations by 2023.

While it may seem shop-in-shop concepts in multiple types of brick-and-mortar stores is happening more in recent months, this has been happening in retail for decades. Consider Starbucks’ partnership with Barnes and Noble, which began in 1993. And before that, several department stores have long boasted branded makeup counters, shoe shops, handbag retailers and more within their walls, each with a dedicated space.

Research from Wharton looked into the dynamics of manufacturer-run shops operating under the roof of traditional retailers.

“The store-within-a-store has the effect of stabilizing the price competition across all retailers,” says Z. John Zhang, marketing professor, Wharton, and a co-author of the study. “This [is] very important if the retailing market is very competitive.”

That stabilization allowed companies like Magnolia, Microsoft, Pacific Kitchen, Samsung and Sony to team up with Best Buy in 2014 for its store-within-store program, which resulted in extensive renovation to carve out spaces for each of these brands at the retailer and provided shop-pers with an expanded experience.

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