15730 Mon, 12/08/2008 - 2:10pm
By Barbara Thau
Retailers are tapping unlikely partners to spice up their stores: other retailers.
Lord & Taylor plans to add Fortunoff-branded home shops to the department store chain next year, J.C. Penney is rolling out more Sephora beauty shops to its stores and Macy’s has joined forces with FAO Schwarz to launch in-store toy shops.
The strategy is a way for one retailer to tap another’s core competency, said Charlie Chinni, chairman and chief executive officer of Fortunoff.
“There are businesses that are uniquely positioned to benefit from [another retailer’s] expertise to attract customers as opposed to retailers trying to do it themselves,” Chinni said.
For example, “Is J.C. Penney ever going to be as good as Sephora [at selling makeup]?” asked the former J.C. Penney home executive. “You get the expertise and a brand the customer recognizes.”
J.C. Penney’s Sephora shops carry makeup, fragrances and accessories, all wrapped in Sephora’s signature look. Sephora products can also be found online at jcpenney.com.
Although J.C. Penney has scaled back expansion plans in light of the sputtering economy, Mike Ullman, chairman and CEO, continues to invest in Sephora by expanding the franchise.
The retailer opened 10 Sephora shops during the most recent third quarter. There are now 91 Sephora stores inside J.C. Penney locations to date, with plans for an additional 64 Sephora shops inside J.C. Penney locations in 2009, the chain said this month.
“J.C. Penney never had a cosmetics business—in one fell swoop,” they fill that void, said Arnold Aronson, managing director of retail strategies for Kurt Salmon Associates.
What’s more, “J.C. Penney does not have to carry inventory and pay for salespeople,” Aronson said. “It’s basically a leased operation.” And the traffic Sephora generates “feeds the fashion business.”
Merchants also work the strategy to court favor with a new audience.
Such is the case with the decision to roll out FAO Schwarz toy shops to Macy’s stores.
The shops are in part designed to widen the department store’s appeal with young shoppers and their young children.
“With every child, there is typically a young mother in hand,” Terry Lundgren, Macy’s CEO, told HFN this fall. “The fact is, children like toys.”
Macy’s is also hoping to capitalize on FAO Schwarz’s brand cachet in toys.
“To have a very professional organization like FAO Schwarz, a very famous brand name and quality toys, exclusively in our stores, is a perfect alignment,” Lundgren said. “Over time, department stores got out of businesses that didn’t perform well—it didn’t mean customers didn’t want those products.”
Macy’s should especially reap the benefits of carrying toys during the make-or-break holiday selling season, Aronson noted.
Lord & Taylor will add Fortunoff-branded home departments to its 47 units around fall 2009.
The idea is to bring traffic and new shoppers to the department store, which has no home business to speak of, Chinni told HFN earlier this year.
“The Fortunoff customer has an aesthetic very similar to Lord & Taylor’s,” he said. In turn, “It will certainly give us [Fortunoff] a growth stream, which we need.”
Despite its woes—the retailer filed for bankruptcy in March, when it was also purchased by NRDC Equity Partners—Fortunoff has enormous brand equity in home, and bridal is an iconic business for the chain, Chinni said.
Private-equity firm NRDC also plans to add Fortunoff home departments to the Bay department stores, a division of Canadian merchant Hudson’s Bay. NRDC acquired Hudson’s Bay this year.