Has the SWAS (Store-Within-A-Store) Model Hit the Brand Wall?

Retail brand partnerships are nothing new. Big-box retailers seeking new ways to drive traffic were drawn to the SWAS (store-within-a-store) model. In other words, retail brands that had their brick-and-mortar stores set up “outposts” in other well-known stores to bring new consumers through the doors and boost sales of the co-located brand, without the full expense of a new build and local marketing.

What have we seen? In short, mixed results.

Stores that set up Amazon return centers in their locations seem to be on to something. Consumers appreciate the convenience of local drop-off points and perhaps while they are in the store they may pick up a carton of almond milk (Whole Foods) or a new pair of jeans (Kohl’s).

But other partnerships have proven to be a bust.

The latest demise is the Ulta Beauty/Target relationship, which was not renewed.

Ironically, it was recently cited by one publication as an example of retail success, along with other store-within-a-store concepts.

Buying beauty products in a store other than a cosmetics store is not, in itself, a bad idea. Sephora still has locations within Kohl’s. Although the Kohl’s brand itself is not performing well, Sephora’s sales are estimated to hit $2B via this concept.

Accessory store Claire’s threw out a lifeline by locating its products within Walmart, CVS, and Toys “R” Us. However, none of those alliances could save the struggling mall brand, which has filed for bankruptcy twice and is on the verge of closing 1,100 of its stores. Note that the ear piercing category remains strong. That has been proven by Rowan’s explosive success with a run rate of $100M in sales.

What can we learn from these mixed results?

• Partnerships need to work for BOTH partners. Like any marriage, both parties need to reap clear benefits. One might argue that Target doesn’t need additional foot traffic. They already have a cosmetics section, so the Ulta brand hasn’t boosted their street cred (or off-the-street visits).
• If a brand is already struggling, no affiliation will save it (e.g., Claire’s).
• Marketing is key to both parties. Relying just on the discovery factor (“Gee…I didn’t realize Ulta has a make-up section here. Maybe I’ll pick up some blusher along with my bananas”) may be overly ambitious. Consumers need to be able to find locations as easily as they locate leading stores, and inventory needs to be “special” and appealing. Retailers need to understand exactly what’s selling in these outposts as well as their primary locations. The bigger brand may not embrace responsibility for the smaller locations and feel no responsibility for customer service or even cleanliness and stocking of the section.

In short, the store-within-a-store concept is not inherently flawed, and we can’t draw mass conclusions from the Ulta/Target breakup.

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