Article | Adaptive Spaces

New Ways Grocers Can Embrace the Store-within-a-Store Concept

Retail Insights: Evolution of Consumer Experience

A woman filling a bag at a self-service station in a grocery store

The store-within-a-store model has been a mainstay of many large department stores and retailers, such as Macy’s and Best Buy, for decades. With recent major announcements of new ventures like Sephora’s partnering with Kohl’s and Ulta with Target, it’s safe to say that it will continue to be a reliable strategy for retailers. One subsector that stands poised to take advantage of new opportunities with this model is grocery.

During lockdowns, grocery proved as resilient as ever. Despite major shifts in consumer practices, most people were still willing to travel to the grocery store for their purchases. Now, many large providers are reassessing ways to engage their customers using store-within-a-store concepts. The goal is to reduce friction points for shoppers by offering an even wider variety of services, thus making the grocery store a one-stop shop.

Financial Services Are Changing Strategies

Store-within-a-store is not a new strategy for grocers. Traditionally, this activity has been led by national banks. While financial services will still play a role, many of the large national banks have changed their strategies and are pulling back from grocery store locations. Many already have several branches in a given trade area surrounding the grocery store and no longer benefit from the added density. Recently, financial services such as credit unions and local retail banks have been stepping in to backfill these locations, which offers a low-risk way to enter a market and build a brand within a community hub that is ripe with prospective new customers.

While this backfilling will continue, it may not be enough to completely replace the withdrawal of national banks. And frankly, it would seem a missed opportunity to stop there anyway. With all of the foot traffic that goes through a grocery store daily, retailers across the spectrum can capitalize on the built-in customer base.

New Partnerships Offer Synergies and Convenience

For future partnerships, grocers are now exploring relationships with a variety of users. Health and wellness has become a focal point for several grocery store chains. Healthy food and pharmacy services were the original drivers, but many are exploring opportunities to take that concept further and providing space for small urgent-care facilities, prescription eyewear, hearing centers, physical therapy and weight-management counseling.

In addition to adding health care specialists, many grocers have made a push toward adding conveniences. Having a third-party pack & ship service on-site can be a big time-saver for shoppers. The same goes for dry cleaners, wireless providers, salons and pet supply stores. By providing their customers with extra conveniences that limit trips to multiple locations, grocers are finding they can garner more loyalty.

Meal kits and prepared foods have experienced a surge in popularity in grocery venues. To capitalize on this trend, some grocers have incorporated third-party restaurants inside their four walls. Taking the restaurant concept even further is the opportunity for ghost kitchen operators to license space inside of grocery stores, providing a multitude of various restaurant brands for on-site consumption, take-home or delivery.

Part of the motivation for grocers to address this concept of convenience is not just to compete with other grocers but rather to stave off competition from some of the nation’s largest big-box retailers. As several big-box retailers have added grocery to their offerings, consumers have demonstrated a willingness to shift a portion of their food budget to these providers. While shoppers may not be able to find the product variety or all of the dedicated food services a grocery store can provide, they can accomplish many of their shopping tasks under one roof.

As more grocers embrace this idea and start to think outside the box with their store-within-a-store concepts, we could see some exciting new partnerships in the near future that will allow  customers to save on perhaps their most valuable commodity—time.

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