The shop-in-shop model - what exactly is a concession contract?
Step inside your local Saks and you may be greeted by a carved out portion of the store reserved exclusively for Louis Vuitton or Gucci. While it's not hard to image why brands of this stature deserve its own separate corner, there's more to that carved out space than you may think.
As a way of cushioning the costs of opening up one's own retail store, brands sometimes enter into a concession contract with large retailers to occupy a part of their retail store and operate as it's own. Also known as a "stop-in-shop" model, more specifically, the idea of a concession contract revolves around a designated space in a department store and where that brand can run its business separately and apart from the large retailer. The brand occupying space inside can still obtain the benefits of being inside a retailer, such as foot traffic, but still run autonomously in determining what signage it wants to place, providing its own staff, and even controlling inventory and agreements over distribution.
The larger the brand the more bargaining power it will have in its negotiations with a large retailer. For example, Louis Vuitton may have favorable terms in its agreements with Saks, such as its ability to provide its own staff, dictate employee rules and regulations, and even its ability to be excluded from any sales Saks offers. There are many minute details that these contracts should consider however, such as who owns customer information collected from sales all the way down to how much Louis Vuitton should pay Saks for electricity.
With the stress of maintaining retail space in the United States, the concept of a concession model can be very beneficial for brands and help minimize risks associated with operating its own store.