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What Every Struggling Retailer Can Learn From the Kohl’s x Sephora, Target x Ulta Partnerships

As the retail industry grapples with seismic shifts borne of the coronavirus pandemic — along with challenges that have carried over from years prior — perhaps the sentiment “better together” has never resonated more.

With macroeconomic challenges helping to push teetering firms off the edge, others that possess the scale and capital to do so, have leaned into creativity, innovation and buzzy strategic partnerships. The latter is quickly becoming a hot trend in retail: In the past few weeks alone, boldface traditional retailers Target and Kohl’s have announced massive alliances with beauty juggernauts Ulta and Sephora.

And while the momentum in beauty — boosted by pandemic-induced emphasis on self-care — is an obvious reason for firms like Target and Kohl’s to expand their reach in that particular category, experts contend there are larger retail lessons to be gleaned from the value of collaboration amid broad uncertainty.

“We’re seeing all kinds of creativity and partnerships in the digital space as well as the brick-and-mortar space, which is probably reflective of the [continuous stream of] partnerships and synergistic relationships that we’re going to continue seeing through the next 6 to 12 months,” said Alexandra Wilkis Wilson, co-founder and managing partner at Clerisy and co-founder of Gilt and Glamsquad. “It’s a fun exercise right now to be able to take some of the most creative marketing and business-oriented minds [and come together] to think outside the box.”

Pointing to Gilt’s partnership with luxury car brands as one example of synergistic yet unlikely collaborations, Wilkis Wilson likened business alliances to “putting together a puzzle,” which ultimately creates a whole that’s greater than the sum of its parts.

“[It’s exciting] when you realize you can fit pieces together even if they didn’t look like they were going to fit when you were initially assessing it,” she said. “I would encourage brands to open up their aperture of companies, sectors and categories that they might not normally have considered partnering with.”

Of course, it makes sense for big firms like Kohl’s, Target, Sephora and Ulta to take the gamble on a partnership that could prove to be bust — it’s no secret that Sephora’s new deal with Kohl’s is its bid to replace a purportedly unexceptional prior deal with bankrupt JCPenney, which is in the midst closing hundreds of underperforming stores. However, Nicole Leinbach Reyhle, founder and publisher of RetailMinded.com, said small businesses, too,  should actively explore new relationships — although they’ll need to be especially crafty and cautious in the planning and execution.

I’ve always felt that this collaboration and partnership opportunity has been there for businesses, but, too often, people become self-absorbed in their thinking around how ‘my’ business could survive,” said Leinbach Reyhle. “But now it truly is the time to think about ‘how do we [as a business community] maintain the survival of the consumer?’”

For example, a mom-and-pop footwear store focused on the outdoor category could consider a short-term venture with a local group that offers tours, exhibitions or other outdoor activities, said Leinbach Reyhle.

The possibilities may indeed be endless.

The key, noted both Leinbach Reyhle and Wilkis Wilson, is that all such partnerships must be mutually beneficial. And, added Leinbach Reyhle, they must merge non-competitive and like-minded businesses and consumers.

If those boxes are checked, there could also be cost-savings attached to collaborations, said Melissa Gonzalez, CEO of Lion’esque Group.

“Partnerships can be a great a way to expand without those full-on investments or building out a whole entire store,” said Gonzalez, pointing to the relatively smaller square footage of the Sephora and Ulta shop in shops for Kohl’s and Target. “Brands and retailers can have a more targeted, curated experience and a dedicated footprint without the operational list and investments they would in their own stores.”

She added, “Everybody’s just being a little bit more open minded and thinking creatively around the power partnership and realizing that extending the reach beyond your own channels and footprint makes a lot of sense right now.”

As part of a 10-year partnership, Sephora will open 850 permanent shop-in-shops — spanning 2,500 square-feet — inside Kohl’s stores by 2023. Ulta’s 1,000-square-feet shop-in-shop destinations will begin rolling out at 100 Target stores in 2021, “with hundreds more locations opening in coming years,” according to both companies.

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