Back to the Brands

Vendor shop-in-shops help retailers stand out from the competition while quenching consumers’ thirst for product knowledge.
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Posted August 31, 2009
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When The Kroger Co. opened a Fresh Fare concept supermarket in Cincinnati last year, it didn’t bring just any meat counter into the store. It added a branded Boar’s Head meat counter, located at the store entrance near produce and baked goods and housed within a black-and-white wall tiled shop. In place of a standard cheese counter, there’s a branded Murray’s Cheese shop that looks like it’s been transplanted from the chain’s main store at Bleecker and Leroy in New York.

Traditionally, grocery chains have focused on offering in-store banks, portrait studios and food service-related shops, such as Starbucks in a Kroger store or Krispy Kreme at Walmart. So why is Kroger now experimenting with these branded concept shops (also called vendor shops or shop-in-shops)?

“Highlighting a brand reinforces the level of commitment promised to the customer experience,” says Ken Pray, Kroger’s director, store design. “Assuming there is already recognition, trust and appeal in that brand, it can make the entire store a destination that draws customers.”

While this may be newer territory for grocery retailers, such as Kroger, other sectors have a history of incorporating branded environments within their stores. The idea is regaining popularity across sectors these days to establish authenticity. “Vendor shops have become more relevant in this world of needing to connect with consumers,” says Randall Stone, senior partner, Lippincott (New York), which worked on Samsung’s vendor shop for a Dixons Travel at London’s Heathrow Airport.

Department stores – the original homes of the shop-in-shop – are again seeking more assimilation with vendors, says M.J. Munsell, principal, Callison (Seattle). “Retailers are realizing the power of their brands,” she says, “but they still want a point of differentiation.” So you’ll see a smaller mix of hard shops around the perimeter of a department store for those brands that still deserve that build-out, she says, while more soft shops will be concentrated in the middle, where the retailer provides the shell space, flooring and lighting and the brand provides the fixturing and signage.

FOOD FOR THOUGHT

For Kroger’s first foray into branded meat and cheese counters, Pray says the company is evaluating the results to determine if the vendor concepts will be applied at other locations. “The primary reason for including branded shops within a supermarket is to leverage the reputation of that brand,” he says.

Other chains within the consolidating grocery sector are searching for that perfect brand match, too. Bigg’s, a regional subsidiary of Minneapolis-based SuperValu, recently expanded its partnership with HoneyBaked Ham. Two years ago, the grocery retailer started adding HoneyBaked Ham kiosks in select stores, then expanded the concept when customers demanded more menu items, including the company’s meats and cheeses. Today, Bigg’s is testing a HoneyBaked Kitchen café, with to-go and in-store dining options. Jimmy Nichols, Bigg’s vp of merchandising, told The Cincinnati Enquirer the partnership is part of a new formula to drive additional traffic to Bigg’s stores, while also “providing customers with the brands they love, supporting the community and staying locally relevant.”

BALANCING ACT

Lippincott’s Stone cites Bloomingdale’s as one retailer whose “curated collection of shops” is a good example of balancing a retailer’s brand statement with vendor shops. Others laud the partnership between Sephora and J.C. Penney, which began in 2006 when the middle-market department store turned over its beauty department to Sephora shop-in-shops. “For Sephora, it’s instant real estate,” says Callison’s Munsell, “while for J.C. Penney, it helps draw a younger customer and gives them credibility in a new category.” Since the debut, the retailer has added the Sephora nameplate to its outdoor signage, while also expanding its vendor relationships to include Vera Wang and Ralph Lauren’s American Living, among others.

Still, department stores are cautious not to turn into a “house of brands,” a phenomenon that occurred in the ’80s and ’90s when vendor shops began marking the landscape. “Today, the showcase of the individual brands is not as important as the overarching brand,” says Stone.

Carol Spieckerman, president of Newmarketbuilders, a strategic resource firm for retail suppliers and brands (Bentonville, Ark.), attributes this change to the acceleration of private labels and their ability to compete with national brands. “As retailers’ private labels get more sophisticated, they want to make more of a statement with them,” she says.

So stores are taking more control of the in-store environment, deciding where and how much space to give to outside brands – a task once ceded to the brands themselves – and giving more dedicated space to their own labels, rather than intermingling them among other products.

In the mass market sector, she sees retailers going through more SKU rationalization, editing down the number of brands they carry to create more clarity within the store. “But the brands they’re getting behind, they’re making a statement with,” she says.

Walmart (Bentonville, Ark.), for instance, is reinforcing its pro-organic message with branded shelf space for Alba and Burt’s Bees personal care product lines. “So a customer coming in will say, ‘Wow, I can buy Burt’s Bees at Walmart,’ ” says Spieckerman. “You wouldn’t get that same reaction if those products were sprinkled throughout the store and merchandised by category only.”

THE NEXT GREAT OPPORTUNITY

As retailers and vendors continue to form partnerships, all with the aim of grabbing shoppers’ attention, Lippincott’s Stone says he sees great potential in incorporating electronic media, sight and sound technology and merchandising techniques, such as RFID, into the vendor shops of tomorrow. “As the environments become more sophisticated,” he says, “there’s more opportunity to connect with consumers who are looking for more than just products.”
 

After all, he says, the goal is for consumers to walk away knowing more about your brand. “They have a thirst to know who and what they’re buying,” says Stone.