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BOSTON -- The co-branding trend popularized by convenience store and petroleum retailers seems to be accelerating in other channels as many retailers are banding together to cut costs, boost sales and provide more one-stop shopping as they seek to extract more dollars from time-pressed consumers. Two more alliances were unveiled this week.
Over the next few months, Office Depot Inc. plans to regain a Boston-area retail presence by opening office-supply shops in 15 of Stop & Shop's 330 supermarkets. And beginning in 2003, KB Toys will become the exclusive toy supplier to CVS Corp., a pharmacy chain with more than 4,000 locations, the Boston Globe reports. Terms of the transactions were not disclosed.
Retailers are seeking to be more things to more people. And the toy and office-supply deals may be the next logical step in an evolution that already has pharmacies selling food, supermarkets selling pharmacy products, and Barnes & Noble using the cachet of the Starbucks coffee brand to sell more books.
Over the last two years, the Stop & Shop Supermarket Co. has been aggressive in teaming up with brand-name partners, to set itself apart from the competition. In some Stop & Shops, customers can buy Dunkin' Donuts coffee or a Boston Market takeout meal.
Office Depot products will be in a Walpole, Mass., store early in November. "By working with Office Depot, Stop & Shop has another way where we can offer 'all the ingredients' to our customers," Stop & Shop chief executive Marc Smith said in a statement, referring to the chain's slogan.
Similar alliances have popped up all over. Within the last few months, Dunkin' Donuts announced a test program with Home Depot Inc. KaBloom Ltd., a flower chain, began selling flowers in some Au Bon Pain cafes and BJ's Wholesale Clubs. And Staples Inc. entered an alliance with FleetBoston Financial Corp. to offer banking services to its small-business customers in convenience stores and supermarkets.
With consumers starved for time, they are demanding convenience, and these alliances help retailers provide it. And for retailers, these alliances, he said, are a way to reach customers at every corner.
During a sluggish economy, when many retailers are "risk-averse," teaming with a partner is a cost-efficient way to expose products to a wider audience, John Macht of Macht Group, a Boston consulting firm that advises retailers, told The Globe. These partnerships can also increase store traffic and persuade customers to spend more time in a store, and that extra time often results in more sales and impulse buys.
Based in Florida, Office Depot has never had much of a store presence in Massachusetts, the home turf of archrival Staples. "'While we have a strong contract and e-commerce customer base in the Northeast, this alliance [with Stop & Shop] provides us with a tremendous opportunity to leverage our brand and access a segment of the market without significant four-wall investment," said Office Depot's chief executive, Bruce Nelson.
Additional in-store shops are planned if the initial 15 succeed. Office Depot officials declined to comment on whether, or when, a full-fledged Office Depot store might open in Massachusetts. Meanwhile, KB Toys is involved in several partnerships. With more than 1,300 stores, it is looking for other ways to grow besides opening new stores, and alliances fit that bill. KB is the toy supplier to Safeway Inc., a supermarket chain based in California, a KB spokesman told The Globe.
KB also plans to operate 77 toy boutiques inside Sears Roebuck & Co. department stores this holiday season. Signs makes it clear to Sears customers that KB is operating these boutiques. CVS customers might not see a dramatic visible change when KB becomes CVS's supplier, though.
CVS, which once shared a corporate parent with KB, already has shelf space devoted to toys. By tapping into KB's expertise, toy-buying power, and distribution system, CVS can more nimbly respond to trends and get access to exclusive product lines. One theoretical possibility is Pharmacist Barbie, said CVS spokesman Todd Andrews. "We're trying to give our customers another reason not to go to the mall,'" he said.