The Disney Store is an institution. The first one opened in the Glendale Galleria in 1987, and since then, the bazaars of polyester accessories and action figures proliferated in malls and shopping districts. At one point in the ‘90s, they numbered over 1,000 worldwide. 

Disney’s merchandise empire helped pioneer “retail-tainment” with their play castles, rainbow floors, plastic tree-lined aisles, “magic mirrors” affixed to walls, and lifesize Toy Story and Cars characters. 

But the magic of Disney has been no match for the downturn in mall foot traffic and the general crisis of brick and mortar retail. In March, Disney, which had around 200 stores in the US as of late 2020, per the Wall Street Journal, announced it would be “significantly reducing” its North American footprint, closing 60 stores. The company described this measure as “the beginning” of their downsizing effort. This week marked the end of operations for dozens of stores. 

The news signals the beginning of the end for standalone Disney Stores, at least as they’ve been known: Sprawling, playground-like emporiums, where it’s as much about the experience of wandering through thousands of square feet of Mickey Mouse waffle makers, Little Mermaid-branded shampoos and Star Wars chess sets as making a purchase. 

But while rapid closures sound like a symptom of crisis, they’re actually reflective of a very deliberate new retail strategy. Predictably, the company has stated that it's leaning into a “more flexible, interconnected e-commerce experience.” However, stores aren't going online entirely. Disney’s brick and mortar footprint will actually increase in number over the next year, as it opens 100 new mini-stores within Targets around the country. The partnership was first announced in 2019 as a joint “effort to cater to families.” That year, Target cut the ribbon on around 60, roughly 750-square-foot Disney “shop-in-shop” locations, which means at the end of 2021, there will be over 150 Target Disney stores in total. 

This move is not the desperate last resort of a sinking ship. Although Disney’s brick and mortar numbers had been shrinking for years (the below chart doesn’t yet reflect new closures), and its theme parks and movie business virtually shut down during the pandemic, its share price hit an all time high in March of this year. The success lately has been buoyed by the streaming bonanza of Disney+, as well as the recovery of theme parks and cable TV in recent months. Before the announcement of the new closures, there were 123 Disney Stores across the US, according to Thinknum data. 

Stores-in-a-store is the one of the trendiest moves in retail right now. Recently, Target has been making a number of such partnerships, styling itself as a mall-like landlord for outposts of brands. Branches of Ulta Beauty opened up in Targets last month. Starbucks, CVS and Levi’s already had in-store partnerships. Macy’s recently announced a deal with Toys R Us, which went bankrupt in 2017 and just closed its last two standalone stores in February, to open 400 shop-in-shops. 

The trend, which already has people asking if shop-in-shops are the future of brick and mortar shopping, resembles a permanent pop-up shop of the sort that have become popular from food to beauty to fashion in the last few years. These mini-stores fit the convenience-at-all-costs mindset of today’s retail landscape, meaning fewer stops for consumers on one shopping trip.

By all appearances, Target and the Disney Store will be a beautiful marriage. It gives Target the opportunity to expand its selection of toys and costumes, making it a destination right before Halloween and Christmas. “One of the trends that I think they’re leaning into is ‘How do you create more uniqueness and differentiation for your brand’ and kind of elevate it from the typical sort of merchandising?” retail strategist Steve Dennis told CNBC. “What’s that extra reason to go to the store or go to the website or perhaps, buy something else on your trip?” 

Toys were already a growth category for Target, with sales up 20% in the second quarter. Given Disney has already released Luca, Raya and the Last Dragon, Cruella, Black Widow, and Shang-Chi and the Legend of the 10 Rings this year, and the long-awaited Eternals, the new chapter Avengers franchise, coming in November Disney toys will undoubtedly be as popular as ever.

Meanwhile, Disney can keep its store count up while ditching hefty rents for its sprawling, pricey locations. (The Times Square location is here to stay, but stores at Brea Mall in Orange County and The Oaks in Thousand Oaks will shut down). The niche store will benefit from Target’s strong foot traffic. The company recently reported that its in-store sales rose 4% in the last quarter despite the surge of the Delta variant. Even last fall, in the midst of the pandemic, foot traffic rose, in addition to online sales and in-store pick-ups, while rivals like Walmart slid.  

While many niche brick and mortar retailers struggled during the pandemic, most big box stores saw record profits. While Disney’s not an example of a company on life support, both its partnership with Target as well as Macy’s union with Toys-R-Us  could be an interesting blueprint for both categories, as customers looked for both the variety and the efficiency of e-commerce when they do step outside to shop.

Consider the many retailers who went bankrupt last year. Could mini-Guitar Centers in Costco, Muji cubbyholes in Home Depot, or Dean & DeLuca stalls in Sam’s Club be an answer to steep rent and falling foot traffic for retailers who need to close stores but avoid falling off the map completely? They’d do well to watch Disney and Toys-R-Us closely.

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