J.C. Penney will open Disney children’s boutiques in at least 520 stores next fall, advancing the plan to transform its selling floors from an open sea of racks to being totally merchandised by shops-in-shop.

This story first appeared in the September 19, 2012 issue of WWD. Subscribe Today.

Disney products are widely distributed to other retailers such as Macy’s, Wal-Mart and Kohl’s. However, those are licensed products whereas the products to be sold at Penney’s will be designed and sourced by Disney Consumer Products exclusively for Penney’s, as well as Disney stores and theme parks.

“Joe Fresh was a big deal. Disney is as big of a deal,” Liz Sweney, J.C. Penney Co. Inc.’s chief merchant, said in an exclusive interview Tuesday.

The Disney deal gives Penney’s an edge on the competition by providing exclusive and potentially higher-quality Disney branded products and some unique interactive elements, including a video wall in the back of the shops, which Penney’s is calling a mini-theater. The wall could be programmed with Disney trailers, cartoons or shorts. The shops could also at times be populated by associates in costumes of Disney characters to hype new products and films.

The Disney shops will range in size from 750 to 1,100 square feet and, according to Sweney, will command prominent space. Costumes, plush toys, figurines, footwear, sleepwear, underwear, backpacks, lunch totes and apparel for boys, girls and babies will be in the assortment, which will be composed of 60 percent softlines and 40 percent hard goods. The products, also to be sold on jcp.com, will feature Disney characters such as Mickey and Minnie Mouse and Goofy, and characters from Disney movies like “Snow White,” “Cinderella” and “Toy Story.”

“The merchandise and the experience will be unique to J.C. Penney, Disney Stores and Disney theme parks,” said Sweney. “It’s a very different situation from dealing with licenses.”

For Disney, which has about 200 stores in the U.S., it’s a chance to ramp up volume quickly without the challenging task of opening additional stores. The Penney’s deal is the latest one aimed at raising the profile of Disney products. The entertainment company has linked with Barneys New York for the retailer’s holiday campaign, “Electric Holiday,” which features a short film starring Disney characters. In addition, Disney worked with a group of British fashion designers to create outfits for Minnie Mouse, which were exhibited this week in London to raise funds for the British Fashion Council/Bazaar Fashion Arts Foundation charity.

Penney’s is also expected to continue selling licensed Disney products in other departments such as tweens, boys and girls.

The Disney deal bolsters Penney’s efforts to revamp its children’s department for back-to-school next year and could serve as a magnet to attract other brands, just like the Joe Fresh announcement in July. Children’s wear at Penney’s will include shops for Carter’s, Giggle (selling products under its own label and other suppliers) and Disney. Cynthia Rowley and Tori Spelling have exclusive collections and will be merchandised to stand out, but without their own shops.

Today at a mock-up inside a store in Dallas, Penney’s will unveil to retail analysts shops-in-shop for Disney, Haggar, Dockers, Carter’s and Giggle, in addition to those previously shown in July for Joe Fresh, Levi’s, the jcp private brand, Liz Claiborne, Izod, Arizona and I Jeans by Buffalo. By the end of 2013, Penney’s expects to have 40 unique shops-in-shop on its selling floors. Cosabella Amore, Cosmopolitan, Maidenform, Vanity Fair and Arizona Kids are among the labels also be putting up shops. Ultimately, Penney’s expects to have 100 shops-in-shop, some with multiple brands.

Penney’s has long sold Disney licensed products, but when Ron Johnson became Penney’s chief executive officer about a year ago, “we started talking about a larger Disney brand presence,” said Bruce Morrison, senior vice president of retail sales, Disney Consumer Products. “We are really intrigued by the shop-in-shop concept Penney’s is pushing. We’ve always had a strong licensed business at Penney’s. We fully expect to continue that in a lot of categories outside the shop-in-shop. It’s a bit of new business model for us.”