Journal of Marketing Research, Forthcoming

Posted: 2 Sep 2009

See all articles by Kinshuk Jerath

Kinshuk Jerath

Columbia University - Columbia Business School

Z. John Zhang

University of Pennsylvania - The Wharton School - Department of Marketing

Date Written: June 30, 2009


Under the store-within-a-store arrangement, retailers essentially rent out their retail space to manufacturers and give them complete autonomy over retail decisions like pricing and in-store service. This intriguing retailing format, also known as vendor shops, boutiques or manufacturer-managed retailing, is observed in an increasing number of large department stores all over the world. In this paper, the authors use a theoretical model to investigate the economic incentives that a retailer faces while deciding upon this arrangement. The retailer’s trade-off is between channel efficiency and inter-brand competition, moderated by returns to in-store service and increased store traffic. The retailer cannot credibly commit to the retail prices and the service levels that the manufacturers will effect in an integrated channel, so it decides, instead, to allow them to set up stores-within-a-store. This suggests that stores-within-a-store is a phenomenon that emerges when a power retailer, ironically, gives manufacturers autonomy in its retail space. An extension of the model to the case of competing retailers shows that the store-with-a-store arrangement can also moderate inter-store competition.

Keywords: distribution channels, contracting, retailing formats, power retailer, department stores

JEL Classification: L14, M31

Suggested Citation

Jerath, Kinshuk and Zhang, Z. John, Store-Within-a-Store (June 30, 2009). Journal of Marketing Research, Forthcoming. Available at SSRN:

Kinshuk Jerath (Contact Author)

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

Z. John Zhang

University of Pennsylvania - The Wharton School - Department of Marketing ( email )

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