A concession is often seen as a simply route way of extending a retailer’s presence. But the recent experiences of Wiggle and ScS have proved it’s not so easy.
Wiggle closing its concessions in Homebase and ScS revealing its House of Fraser concessions are loss-making have proved there are many pitfalls when it comes to striking such partnerships with other retailers.
Cycling and tri-sports retailer Wiggle revealed it was forced to close its concessions due to “circumstances outside our control” after Homebase decided to embark on a “new strategy”.
It is understood the changes have come about as new Homebase boss Echo Lu reassesses the store estate and phases out non-core concessions.
Subject to whims
It is a prime example of perhaps the biggest drawback of running a concession – being subject to the whim of another company.
“You are at the mercy of the hosts and them deciding they can better use the space for themselves,” says Verdict Retail analyst Matthew Walton.
Although contracts can be drawn up to determine the flexibility of the concessions, a smaller retailer will always have a limited negotiating power with a larger host.
The reverse is true when the concession retailer is a powerful brand such as Apple.
“It will say: ‘If you do not have this exact piece of kit and allow us to backlight this and power that then we are not interested’,” says Conlumino consultant Sophie McCarthy. “More powerful brands use the concession space purely as marketing.”
Concessions are an obvious means of a smaller retailer gaining further exposure too.
“One of the great things is you can do it with an established brand and appeal to a new customer,” says McCarthy. “It is a really effective way of broadening the appeal if the host retailer is already established.
In the case of Wiggle, concessions are also an effective way for an etailer to dip its toes into bricks-and-mortar retailing. Fashion etailer Missguided is also using concessions as a means to test overseas appetite after securing a deal to open in US department store group Nordstrom. It followed that launch with a concession at Selfridges in June.
“For pure-plays it is a good way to test physical retail before they make a decision to open full-line stores and is a test balloon to see if it is something they would want to consider,” says Walton.
However, a key consideration is whether the product categories are complementary and, in the case of Homebase and Wiggle, it appears that Lu decided to call time on the initiative over that very issue.
Walton says it is “difficult, but not impossible” to pull off a concession where the product is divergent from the host retailer’s offering.
“If you are completely misaligned with the retailer you are putting the concession in then that can be bad for both parties,” adds McCarthy. “You have to look at natural synergy.”
Walton believes the Carpetright concessions in Homebase work better than the Wiggle ones because they are more complementary.
“Carpetright is similar enough for people looking to refresh their homes, and Homebase does not have a particularly strong presence in carpet and there is no real cannibalisation of sales,” he says.
Walton believes retailers are walking a fine line - if their products are too similar it “will be a difficult relationship to manage”.
The final consideration is all about location, according to Walton. He says Verdict Retail has visited Argos concessions in Sainsbury’s stores in Reading and in Sevenoak, and noted Reading was far less busy because “too close to other Argos mainline stores”.
While there is no doubting concessions provide many benefits, they are not a magic bullet to easy expansion, as Wiggle and ScS’s experiences have proven.