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Feature
Store Within A Store Offers
One-Stop Shopping For Consumers
For the past few years, consumers have had the
option of walking into a Barnes & Noble and ordering a Starbucks cappuccino or
leaving Wal*Mart with a McDonald’s value meal. But not until recently have
shoppers been given such a vast array of one-stop shopping choices. Stores
within a store have been popping up all over the nation, as retailers are
beginning to realize the benefits of joining forces to attract more consumers.
The most recent major store within a store opening was with Dunkin’ Donuts and
Home Depot. The donut chain and the hardware giant debuted a test store at 80
Buckland Hills Drive in Manchester, CT and opened a second location shortly
thereafter in South Attleboro, MA. Other store within a store alliances include
Office Depot with Stop & Shop supermarkets, Kabloom Ltd. (a flower chain) with
Au Bon Pain and BJ’s Wholesale Club, Staples with FleetBoston Financial Corp.,
Hammett’s Learning World, as well as Heaven & Earth (a Christian bookstore),
with select Wal*Mart stores and Cocoa Moka Cafe with Macy’s. Even Toys “R” Us
has joined the game by signing a test agreement to open stores within
Albertsons’ Jewel-Osco stores throughout the Midwest.
While these stores within a store can be profitable, the leases involved are
usually no longer than five years depending on the amount of money invested in
the construction of the store. There are many reasons to limit the lease. For
instance, if a big box retailer plans on doing a $1 million renovation of its
store in 2005 they may not be able to go through with it because the tenant
within their store is still leasing space. Therefore, they would want to keep
the lease short-term. Another negative for the specialty retailer is that it
would lose some of its identity. A customer can’t just walk into their store.
However, there are many benefits (mainly financial) that come with the alliance.
The specialty retailer entering the big box has lower expenses because it is
paying a gross rent and not dealing with CAM and taxes, while not having to
worry about security. They also wouldn’t have to deal with problems like snow in
the parking lot. The landlord, on the other hand, would not initially see any
increase in the rent. The upside for the landlord would be that the store should
be more profitable.
An issue that could arise is the “use clause,” which controls what the tenant
may sell or operate in its store. The Use Clause can affect the tenant mix in
the center and the landlord’s future leasing plans. For instance, if Wal*Mart
decides to open a Blimpie within its store it may affect the landlord’s ability
to negotiate with another sub shop in the future. Another potential issue would
be collecting percentage rent. The upside for the specialty retailer is that its
space within a store may have more “traffic” than it would normally have in a
strip center.
For the shopper, however, there’s nothing but benefits, said Jeff Kintzer of
Royal Properties, a real estate company based in Bronxville, NY. “No one likes
to make several stops,” said Kintzer. “They’d rather do it all in one.”
Kintzer and Royal Properties are leasing “store within a store” space inside Wal*Mart
Supercenter locations. Spaces range from 450 sq.ft. to 900 sq.ft.
Dunkin’ Donuts will lease space in the “Pro” section of Home Depot, an area
dedicated to builders and contractors. The 220 sq.ft., full-service store with
seating and internet hook-up will serve all Dunkin’ Donuts products.
Office Depot will open its store within a store concept with Stop & Shop across
the Northeast. Over the next few months, the company plans to open shops in 15
Stop & Shop stores in CT, MA, NJ and NY. Seven stores are planned for year’s
end, including locations in Walpole, MA and Rhinebeck, NY. The company will open
additional stores depending on the success and performance of the initial
stores.
Toys “R” Us launched its “Toy Box” concept, a store within a store, last year.
The company will now provide a selection of the most popular toys to Albertsons’
Jewel-Osco stores throughout the Midwest. Another toy store, KB Toys, is
planning to become the exclusive toy supplier to CVS drugstore. The company
already operates 77 toy boutiques inside select Sears department stores in FL,
GA, HA, IN, MA, NJ, NY, PA, RI and WA. Signs in these stores let Sears shoppers
know that KB is operating these boutiques.
But besides Barnes & Noble and Starbucks, the most well-known alliance has been
between Wal*Mart and McDonald’s. The fast food giant already has restaurants
inside of more than 700 Wal*Mart stores nationwide. Now the companies offer a
check-through program, where customers don’t even have to leave the checkout
line to get their food.
Along with the store within a store concept, many concepts have also been
cobranding, such as a Dunkin’ Donuts/Baskin Robbins/Togo’s, KFC/Taco Bell/Pizza
Hut, KB Toys/CVS and KFC/A&W. As of recently, all of these concepts have proven
successful.
For more information, contact Jeff Kintzer, Royal Properties, Inc., 850 Bronx
River Road, Bronxville, NY 10708; 914-237-3403, Fax 914-237-0196; Email:
jskroyal@aol.com; Web site:
www.royalpropertiesinc.com.
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