Retailers are being buffeted by many crosscurrents. Online shopping continues to penetrate brick-and-mortar’s dominant domain. Millennials are displaying different buying habits, opting to spend their money on experiences rather than material possessions. Shoppers are increasingly joining the “buy local” movement, exemplified by the growing popularity of urban boutiques, farmers markets, and local designers. The implications are starting to show in real-life terms — well-known retail chains are reporting markedly slower sales and are closing stores to try to stanch the bleeding. In turn, strip malls are suffering from decreased foot traffic, with even the upscale “A” malls losing some leverage in negotiating leases.
On the other hand, some of the deficiencies of online shopping are starting to be exposed as it continues to establish itself. For one thing, there are a large and unsustainable percentage of “returns” that many online retailers experience, far larger than when consumers buy products at physical stores. It has almost become a habit of online consumers — buy more than you are actually planning to keep, because the return policies of the e-retailers have to be liberal in order to induce buyers to buy products sight unseen. Which leads to the other big problem online retailers face — consumers still want to see what they are buying, try it on, engage with human brand representatives, and simply enjoy the shopping “experience.”
So what’s a retailer to do?
We don’t want to suggest that pop-ups are the solution to all of the above — at least, not publicly. But these at-times-conflicting trends are certainly a basis for the expansion of the pop-up sector. Pop-ups began as little more than outlets for off-loading inventory. They grew to be an important sales channel for local artisans and designers. Now, big brands are not only joining the bandwagon, they are driving it.
Case in point is a certain client with whom we are dealing. This big brand is an online retailer that also sells its apparel through big box stores and other third-party outlets. It does not have any of its own branded stores. It recognizes that having a branded offline presence would greatly enhance its identity and public exposure, but the cost and commitment of launching and operating a national chain of physical stores simply makes no sense on an ROI basis. So it is now testing the feasibility of using pop-ups, maybe even hundreds of pop-ups throughout the year, as an offline alternative to permanent stores.
By doing so, this company is able to do a lot of cherry picking. It is electing to open in prime locations that might be out of an acceptable price range if it involved a full and multi-year financial commitment. This is analogous to why companies often use expert consultants to accomplish a particular objective rather than keeping a permanent in-house team to do it — the hourly rate might be higher, but you are able to secure otherwise unaffordable expertise, and you keep costs lower by using them only when necessary.
This company also not only picks where it’s going to open, but also when it’s going to open. For example, it recognizes that a significant portion of its sales takes place during the Christmas holiday shopping season from mid-November through the end of the year. Its slowest season, by far, is in the first quarter of the year. So rather than keeping its doors open year-round, including during off-seasons, it is able to be open only during high seasons through the strategic launching of pop-ups.
The third benefit that this pop-up strategy is affording the company is that it is able to try different types and sizes of physical retail options. For example, certain malls experience heavier foot traffic than others and put a special emphasis on kiosks and RMU’s. In such a setting, our client is opting to use a kiosk versus an inline store as its retail outlet. In another shopping center, it is using a highly visible storefront that is temporarily vacant and has great exposure on the main floor as its offline retail base of operations. And in a third location, it is utilizing a more unorthodox setting that not only will produce sales, but will create a good amount of publicity and generate brand awareness.
We are seeing more and more national brands adopt this retail strategy in one form or another. If the world of retail were to start today from scratch, this flexible yet pinpoint retail strategy would be far more pervasive — because it makes sense. There will always be traditional retail, with major malls and permanently-leased stores. It’s now clear that there will always be online retail, with its convenience and competitive pricing. But there is certainly room, even a need, for a third leg — flexible leasing a la pop-ups that enables retailers to pick and choose where to open up, when to open up, and via what retail setting.