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Store Within A Store (SWAS): The next stage of physical retail

illustration of a hand placing a storefront within another store building

Doom and gloom predictions about the future of brick and mortar have been popular news features long before the COVID-19 pandemic. 

The rise of ecommerce and the corresponding decline in foot traffic has left legacy retailers scrambling to entice consumers into stores – sometimes with mixed results. This is reflected in the record number of storefront and mall closures that took place during 2019.

But after months-long closures of the physical retail sector during the pandemic, retailers have taken the bold step of trying to reinvent their storefronts. One of the most popular strategies right now is SWAS, also known as ‘store within a store’.

In 2021, we’ve seen a whole host of retailers diving into SWAS partnerships with both well-known and up-and-coming brands.

tonal kiosk inside of a nordstrom store

Nordstrom recently teamed up with at-home fitness brand Tonal to put mini-storefronts into 40 of its stores in an effort to capitalize on the boom of interest in home fitness. 

Meanwhile, industry competitors Sephora and Ulta Beauty have embraced SWAS projects with Kohl’s and Target respectively to boost their footprint. Macy’s has also joined the bandwagon by rolling out Toys R Us locations inside 400 stores nationwide as a part of a broader strategy to target the lucrative toy category. 

And let’s not forget about Walmart, who is set to triple the number of Disney SWAS stores ahead of the 2021 holiday season.

So what exactly is SWAS, and why are so many retailers jumping on board?

What is Store Within A Store (SWAS)?

Store Within A Store, also known as SWAS, is an experiential retail strategy where retailers set aside floor space for partnering brands to set up shop. This may be done as a permanent arrangement or as a temporary pop-up strategy to drive foot traffic.

SWAS concepts will often involve value-added offerings in addition to just selling products. This includes tutorials/product demos, roundtable discussions, or product sampling campaigns that enhance the customer experience and drive a buzz around the brand and the host retailer.

SWAS locations are chosen according to the partner brand’s target audience and/or proximity to competing retailers. For the host retailer, SWAS arrangements help to maximize the profitability of floor space and drive foot traffic from new demographics.

Despite receiving a lot of hype recently, Store Within A Store is not a new idea. Department stores, for example, have been using SWAS for decades to get the right brands under one roof.

cosmetics hall inside of a department store

The classic ground-floor cosmetics hall is a classic example. The space is filled with a multitude of beauty brands, each with its own miniature storefront to display products. Each ‘storefront’ is staffed by a representative who is paid by the brand to facilitate transactions and give advice. In effect, the end-to-end shopping experience is decoupled from the host location entirely.

Why is SWAS growing more popular?

So, what’s caused so many retailers to embrace SWAS over the past year?

The role of brick and mortar is changing

The birth of ecommerce hasn’t just changed consumer shopping habits. It’s also caused them to question whether brick and mortar is still relevant.

Physical storefronts used to be where we would browse and compare products, find in-depth product information, and make purchases. But the rise of digital shopping has challenged the idea of end-to-end shopping journeys being siloed to just one channel.

Today, consumers are just as likely to discover new products on social media as they are in-store. In fact, 42% of shoppers globally say they’ve made a purchase through a social media platform, thanks to the rise of social commerce. Moreover, 81% of consumers say that they research a product online before purchasing it in any channel.

The COVID-19 pandemic has only accelerated this shift towards digital shopping journeys. 71% of consumers say they’ve been making more online purchases during the pandemic, while over two-thirds (67%) say that over half of their shopping took place online in the past year.

But if today’s consumers have never been more comfortable discovering, researching, and buying products online, what does this mean for brick and mortar?

Physical retail has grappled with finding purpose in an omnichannel world long before the pandemic. Many retailers have found out the hard way that if their stores provide the same offerings as their online catalog, customers have little incentive to shop in person. 

As we enter a ‘new normal’, retailers are trying to reinvent the playbook by focusing on what consumers have been missing most during the pandemic: Tactile experiences. 70% of customers rank the ability to try, touch, and see physical products as their favorite part of the in-store experience.

SWAS projects provide retailers with a valuable tool to keep the in-experience fresh and interesting. By moving away from the static storefront in favor of evolving experiences, this gives customers an incentive to come into your store to see ‘what’s new’ and stay in the loop with in-store activities.

D2Cs are investing heavily in retail partnerships

Having maxed out their online audience and facing increasing acquisition costs, many successful D2C brands have taken the plunge of bringing their products offline into participating retailers.

Cult skincare brand Drunk Elephant signed a deal in September to put their products into Ulta Beauty stores across the United States – including its SWAS partnership with Target. This is a massive expansion of Drunk Elephant’s brick and mortar presence, building on the gains of their once-exclusive partnership with Sephora. 

Other examples include underwear brand Proof, which released its latest line through Target, and youth-oriented skincare brand Bubble, which joined the shelves of nearly 4,000 Walmart stores in July.

SWAS has become the logical extension for the growing number of partnerships between direct-to-consumer brands and legacy retailers. For D2Cs, the benefits of this strategy are obvious. A SWAS approach helps to reduce overhead costs and allows brands to scope out regional markets that could be a good fit for future standalone stores.

a glossier pop-up store inside of a nordstrom
A Glossier pop-up at Nordstrom.

Glossier is one such D2C that has used SWAS very effectively to expand its footprint. Its 2019 partnership with Nordstrom put miniature Glossier storefronts into nine locations across the U.S., enabling many shoppers to interact with the brand for the first time. Glossier has since followed this up with an ambitious store expansion strategy, including three new stores in 2021.

In sum, Store Within A Store is helping D2C brands to turbo-charge their expansion into new channels by acting as a sophisticated audience research tool. It paves the way for stronger localized product selections that give big-box retailers much more relevance to shoppers.

D2C brands leveraging the fulfillment operations of larger retailers

Scalability in fulfillment is easily the biggest challenge faced by D2C brands as they grow. While it’s possible to self-fulfill orders when you’re only handling a few hundred per month, this system quickly gets overwhelmed once order volumes increase. To keep pace with growth, brands have two main options: To spend considerable sums on infrastructure and labor, or to bring in a D2C fulfillment provider.

SWAS partnerships offer businesses an alternative solution. By placing their products in a storefront, the host retailer takes responsibility for inventory management and the fulfillment and shipping of orders placed via their online store. This takes pressure on D2C fulfillment operations and enables them to introduce popular service offerings such as BOPIS, curbside pick-up, and rapid home delivery.

What does SWAS tell us about the future of brick and mortar?

Product discovery and demonstration are the key to growth. Retailers can provide unique value by offering experiences in-store that shoppers cannot get online. Opportunities to encounter and test out new products are what enhance the in-store experience and strengthen customer loyalty.

Physical stores are a crucial touchpoint – but not necessarily the point of purchase. Instead of trying to compete directly with ecommerce, storefronts need to start shifting their focus from driving transactions to facilitating greater omnichannel activity. Allowing customers to book an appointment via the website for a product demo, for example, enables storefronts to play a much bigger role in the shopping journey. 

A bigger focus on curation and localization. Moving away from identikit storefronts and giving stores their own unique character is proving a successful strategy to revive interest in brick and mortar. Localized product selections and retail projects give consumers much more incentive to make regular store visits, rather than conducting their entire shopping journey online.

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