Strategically designed partnerships can create a revenue-enhancing synergy that boosts loyalty and devotion for the participating brands. In this ongoing series, The Lacek Group’s Amy Farsht, our loyalty partnerships practice lead, spotlights examples of brands that are capturing our attention, exploring new approaches, and shattering expectations.
Are retail shop-in-shop partnerships a smart loyalty acquisition strategy?
In today’s competitive retail landscape, simply having a loyalty program isn’t enough to cut through the noise and capture the attention of discerning consumers. According to one recent survey, 63% of respondents said they base their purchases on the loyalty programs they’re in. Even still, retailers are facing increasing pressure to differentiate themselves and create more meaningful connections with their target consumers. Customers crave more than just discounts; they seek personalized interactions, engaging experiences, and a sense of community that motivates action.
The shop-in-shop model—where brands build a defined area within the retail space of another brand—isn’t a new idea. As early as 1997, Apple’s partnership with CompUSA demonstrated the power of dedicated spaces within existing retail environments. Today, shop-in-shop partnerships are increasingly integrating loyalty programs into their core value proposition.
Who
The retail landscape has absorbed and adjusted to intense new pressures in recent years, and the COVID-19 pandemic further accelerated the changes. Expanded online shopping, direct sales, and umbrella e-commerce sites (e.g., Amazon, Shopify, and Etsy) allow consumers who can’t or don’t want to shop in stores to access most goods from the comfort of home.
While physical locations still account for 83% of U.S. retail sales, they’ve seen just 1.2% yearly growth, versus 8.2% annual growth for e-commerce. Thoughtfully developed shop-in-shop partnerships offer a way to enhance the in-store experience, drawing in customers to physical locations—encouraging reciprocal brand discovery, spurring product experimentation, and opening the door to long-lasting loyalty.
What
Store-in-store installations allow brands to extend outside the bounds of traditional marquee locations while exploring additional customer engagement methods. This mutually beneficial approach allows a host retailer to enhance its in-store experience with unique offerings aimed at attracting new customers and deepening engagement with existing ones. Meanwhile, the partner brand gains access to a wider audience—which can drive product discovery and, ultimately, nurture long-term loyalty and increase customer lifetime value.
Where
The shop-in-shop model is being adopted across a wide spectrum of retailers—from established partners to surprising new pairings:
- Kohl’s + Sephora
The department store Kohl’s has long navigated the changing retail environment. Since it announced plans to partner with Sephora in December 2020, Kohl’s has opened more than 1,000 shop-in-shop locations with the beauty brand and now includes the Sephora logo on its buildings. Shoppers earn Kohl’s Rewards and Sephora Beauty Insider points with linked accounts. This ongoing partnership is part of Kohl’s strategy to become a leading beauty destination and lifestyle retailer.
- Kohl’s + Babies R Us
Earlier this year, Kohl’s announced plans to partner with baby-product retailer Babies R Us for 750 store-in-store shops and online sales of baby gear. Kohl’s hopes to deepen its appeal with expecting and current parents through an expanded assortment of trusted baby brands and a wider selection of products. With thousands of new items in-store and online, this partnership will “further establish Kohl’s as the go-to brand for families.”
- Target + Ulta
Giving the Kohl’s and Sephora partnership a bit of competition, Ulta’s shop-in-shop concept is now thriving in 500 Target stores. This collaboration not only attracts a diverse range of beauty enthusiasts but also encourages shoppers to explore prestige products. Unlike Kohl's, Target had an established beauty department. That set the stage for Ulta to curate an enhanced shopping experience, including a concierge to help customers find the perfect product. And members earn Ulta Beauty Rewards points on eligible Ulta Beauty purchases at Target when their Ulta Beauty Rewards and Target Circle accounts are linked. - Bed, Bath & Beyond + The Container Store
When Bed, Bath & Beyond was purchased by Overstock.com and all its retail locations closed, many loyal shoppers mourned the loss of the in-store shopping experience with the iconic brand. Now the parent company is reintroducing Beyond-branded kitchen and bath products in co-branded spaces in more than 100 locations of The Container Store. But the endeavor isn’t just about reviving a beloved brand; The Container Store believes leveraging Beyond’s IP, customer data, brand network, and affiliate relationships will boost profits. - Lowe’s + Petco
In 2023, Lowe's grew its Petco shop-in-shop partnership from 15 stores to nearly 300. The rapid expansion was part of Lowe’s larger strategy to serve rural customers. With more than 77% of U.S. households (102 million families) owning a pet, this partnership provides the convenience of one-stop shopping and is a smart investment poised to deepen brand affinity and loyalty. The shop-in-shop partnership introduces new brands and offers additional services to rural populations. This expansion offers shoppers the heightened convenience of accessing essential supplies, expert advice, and convenient services for their pets alongside Lowe’s comprehensive array of home improvement products.
Why
By strategically integrating complementary brands in a shared physical space, shop-in-shop partnerships create unique, engaging experiences that go beyond traditional retail. These curated environments let customers explore new products and brands, participate in interactive experiences, and discover product features and benefits. The collaborations often provide a new convenience for shoppers while also fostering the thrill of discovery by transforming the shopping journey into something more memorable—and, potentially, more meaningful.
How
Successful partnerships hinge on finding the right partner—one aligned with your business aspirations. Start by defining your goals and articulating what partnership success looks like for your brand. Then consider how a potential partner can help you achieve those goals, whether through data sharing, loyalty program acquisition, enhanced member benefits, or other collaborative opportunities.
With proper planning and strategic collaboration, a shop-in-shop experience can benefit both brands by boosting engagement and driving sales. Customers enjoy a seamless experience, discover new products, and often accelerate their loyalty rewards, fueling lasting brand devotion.
Amy Farsht is senior director, Partnership Marketing at The Lacek Group. For more than 30 years, The Lacek Group has been perfecting the art and algorithms of brand devotion. We help world-class brands identify their highest-potential customers, engage them across channels throughout their lifecycles, personalize each relationship for optimal long-term results, and measure the true effectiveness of those efforts. The Lacek Group is an Ogilvy company.
