Are pop-ups a permanent fixture in retailing?

 
July 10, 2013

The following is an excerpt from a recent conversation on RetailWire, reproduced here with kind permission.

A rash of pop-up stores have opened in recent years to fill in the darkened spaces that were created during the recent recession. But many market observers don't see the trend going away, even in better times.

An article on Knowledge@Wharton, "Are Pop-up Stores Here to Stay?," detailed how various parties across retail are benefiting from the emergence of a wide variety of pop-up stores.

For landlords, pop-ups generally pay less than market rate but they do offer some rent for a brief period when a spot is empty. Filling vacancies is expected to remain an ongoing challenge, and a successful draw for a pop-up may attract a full-time tenant. The arrival of brokers and other build-out specialists has also eased the pop-up process for landlords.

For shopping centers and permanent stores, a pop-up can create excitement and a sense of urgency that can drive traffic. Wharton marketing professor Barbara Kahn said the time limit of pop-ups works similarly to the way demand builds around a luxury item. 

"If too many people wear it, it's not a luxury anymore," she told Knowledge@Wharton. "There's a paradox if you sell too much of something. Perhaps that is some of what's going on. It's a way to make it exclusive and special because of the time period."

Finally, for those outside Halloween stores, doing the pop-up is said to be less about making money than building awareness or testing an idea. Target has particularly earned praise for creating buzz through its many start-ups over the last decade. But cosmetic and toy companies, airlines, restaurants, non-profits and others are also experimenting with pop-ups to test initiatives or garner publicity.

A pop-up of merchandise honoring the U.K. boy band, One Direction, ended a three-week run in Tempe, AZ, representing the twenty-second city where the pop-up has landed across the globe. Several online retailers are also increasingly using pop-ups to physically bond with shoppers.

"I think it is a wonderful vehicle for small businesses to use to build their business and sample their business, meet consumers that want to be long-term customers," Christina Norsig, founder of PopUpInsider, a national online exchange that connects potential pop-up retailers with landlords, told The News-Observer.

RetailWire BrainTrust comments:

The pop-up store may have started as a response to vacant space, but it has evolved into a legitimate strategy. It allows brands to test new design concepts and merchandising strategies without the commitment of a long-term lease—and it provides a laboratory of results that can be rolled out to other stores. And, as the article points out, it's a great way to create "buzz," along the same lines as the short-duration designer goods inside Target, H&M and Kohl's recently. — Dick Seesel, Principal, Retailing In Focus LLC

Call it "portable retailing" and throw in kiosks, food trucks/carts and a host of other manifestations that are "popping up." It is a very effective approach to fishing where the fish are—and it's not going away.

Start with incremental availability, add in market location and timing flexibility, then toss on lower capital costs and potentially lower space costs. Any CFO can add that up to be a winner. — Ben Ball, Senior Vice President, Dechert-Hampe

A recent report from Bloomberg explains the meteoric growth of pop-up retail with these statistics, "Pop-up Retail. Zero dollar industry in 2003, an $8 billion dollar industry today."

The state of the pop-up store was one of several fascinating topics addressed at the recent ReCON conference (ICSC) in Las Vegas. I was privileged to participate on a panel which included Daniella Yacobovsky, a co-founder of BaubleBar.com, an innovative online jewelry seller. Her firm has deployed the pop-up strategy twice in Manhattan with very good success. She indicated that more will come in other selected markets.

BaubleBar has used temporarily vacant retail spaces to operate stores open between 6 and 12 weeks. Typically the rents paid are "found money" to the property owners, who may anticipate permanent tenants to occupy the spaces months later.

For this online retailer, the physical location is an opportunity to attract and capture new loyals, showcase product trends, create an event atmosphere, and sell through on merchandise that cannot be easily replicated by competitors.

We panelists asked the audience (all retail real estate professionals) whether they detect an emerging market for short-term, pop-up leases. Their responses (an unscientific sample, to be sure) suggested to me that the pop-up business is more opportunistic and less highly structured.

I wonder if a sharp retail real estate entrepreneur could create an online "dating service" to match up property owners with cutting-edge retailers. They might call it "One-Month Stand." — James Tenser, Principal, VSN Strategies

(Photo by abundantc.)


Topics: Consumer Behavior , Customer Experience , Merchandising , Specialty Stores , Store Design & Layout


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