Walmart &...

Always make it easier for your customers to do business with you is the lesson in this story from Brandweek:

In These Tough Times, Retailers Band Together

June 01, 2008

By Betsy Cummings

Trash bags? Check. Toothpaste? Check. Big Mac? Check. That may very well be the typical grocery list for today's Wal-Mart shopper.

The mega-retailer has been working to expand its in-store partnerships with not only McDonald's, but also Blimpie, Dunkin' Donuts and, most recently, the Campero chicken chain which caters to Hispanic consumers.

Fast feeders aren't the only ones increasingly involved in store-within-a-store partnership deals. Cosmetic, coffee, toy and other retail segments are setting up shop with larger retailers' shops.

Macy's, late last month, said it would put 700 FAO Schwarz shops in its stores over the next two years. Starbucks has been expanding into Stop & Shop and Sephora now has a stronghold in J.C. Penney—just to name a few.

The concept is gaining popularity because it provides added convenience for shoppers looking to make fewer trips. For the brands themselves, "Any way that a chain can broaden its [offerings] and points of access can't be a bad thing," said Bob Sandelman, CEO of Sandelman and Associates, a food service consumer research firm in San Clemente, Calif.

Many retailers can use the added attractions. While discount retailers have reported higher-than-expected first-quarter earnings, some of the country's major department stores are seeing revenue drops as high as 50%. Other big box retailers like The Home Depot, are closing locations and scrapping expansion plans.

In this tough economic climate, bringing in well-known brands can boost a retailer's foot traffic, brand integrity and consumer interest, said Howard Davidowitz, chairman of Davidowitz & Associates, a retail consulting and investment banking firm in New York.

For smaller companies like FAO Schwarz, such deals provide access to millions of new consumers. FAO Schwarz, which only has a few standalone stores, needed to figure out "how do you get to that consumer" who spends much of her time in larger department stores, said Edward Schmults, CEO of FAO Schwarz, New York. "Being in Macy's makes so much sense because that's where American families are shopping. That's where mom is shopping. If she's buying cosmetics and then, boom, there's an FAO, she's going to be thinking of us not just in the holidays but year-round . . . It just heightens the convenience factor for that customer."

Having "similar values" is key to the success of these partnerships, said Chris Nichols, café director for Borders, Ann Arbor Mich.

It has 475 Seattle's Best Coffee shops in its bookstores. These environments are a welcome retreat for shoppers looking to peruse a periodical or test-drive the day's latest hardcover release.

Coffee is admittedly an indulgence, but an affordable one, said Charlie Severn, brand marketing director for Seattle's Best, and therefore less likely to see revenue drops in a recession. Still, Severn said, developing in-house stores at major retailers is an important move in a slow economy.

In fall 2006, the J.C. Penney chain opened boutique cosmetic retail outlets from Sephora in five of its department stores just to "see how it goes," said company rep Tim Lyons. Less than two years later, there are now 300 Sephora unit.

But, the most common partners are coming from the fast food category. These days, "you can't walk into a big box store . . . like Wal-Mart or Target and not have at least one brand name quick service restaurant chain available," said Sandelman.

The logic is shoppers and their kids are likely to get hungry so instead of offering cafeteria fare, bring in the brand names.

"Offering our products in venues where they work and shop makes [the brand] more accessible to them," said Chris Burr, director of nontraditional development at Dunkin' Brands, Canton, Mass. Dunkin' Donuts locations are popping up in Wal-Mart, Home Depot and grocery stores.

Target, meanwhile, currently has more than 800 stores with a Starbucks inside its confines. It also is testing Jamba Juice and Cold Stone Creamery outlets.

There are currently more than 1,000 McDonald's in Wal-Marts nationwide. Another 25 to 30 McDonald's will open in U.S. Wal-Marts this year with as many as 200 more planned by 2011.

Bill Lowery, McDonald's U.S. vice president in charge of the Wal-Mart partnership said, "We are always looking to go where the customers are."

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