Marriages of Convenience - retailers working together

Nov 7, 2022

Many retailers in the U.S., including Target and Ulta, Lowe’s and Petco, Nordstrom and Allbirds and in the UK BP and M&S, now use the “two power brands are more attractive than one” model to make them more appealing to consumers.

These co-branded arrangements offer significant intrigue and convenience to consumers, resulting in bigger shopping baskets. There also may be deeper, longer-running benefits to be derived not simply from the partnerships, but from the purchase data they generate, If they share and analyse the data effectively.

Long-term relationships require, compatibility and security. In retail, that means financial results and these partnerships appear to deliver.

Kohl’s, which installed 200 Sephora locations in its stores in 2021 and now operates nearly 600, projects the beauty brand will add $2billion in annual sales by 2025, due largely to new customers. “Even amidst a very challenging backdrop, our transformed stores with Sephora are outperforming the balance of the chain,” the company stated in its quarterly report, adding that Sephora is its “#1 initiative.” Nearly half of all its customers who purchase goods from Sephora also shop other Kohl’s categories.

Target’s partnership with Ulta, also initiated in 2021, is contributing to “high single digit” growth in the beauty category, Target executives reported in their second quarter earning report, Aug. 17. Ulta reported its sales rose nearly 17%, to $2.3 billion, from $2 billion in the second quarter of 2021. Target and the beauty chain plan to operate 250 Ulta Beauty at Target locations by the end of 2022. The ultimate goal is 800 shop-in-shops.

Nordstrom in May reported that “alternative partnership models,” such as that with the British fashion brand Asos, represented 12% of its total merchandise value in the first quarter of 2022. At about the same time, Nordstrom announced a deal with online sustainable shoe brand Allbirds to sell through 14 of its stores, a sign that the 12% figure will climb. The brand Asos, meanwhile, reported double digit sales growth in the U.S., according to Seeking Alpha, thanks in part to Nordstrom.

Several of these retailers have encouraged their customers to use their reward programme memberships to gain extra points and rewards. Shoppers of Target and Ulta, for example, can link their Target Circle and Ultamate Rewards accounts to multiply benefits with both merchants.

The power of shared consumer insights can attract the interests of other potential partners that appeal to different kinds of shoppers and generate fresh data insights. Target, Macy’s, CVS and other retailers have been exploring alignments with Apple, Toys R Us, Disney, Casper, Direct Smile Club and others.