Thursday, October 24, 2013

Pop-Up Stores: Here to Stay?

Online retailer Etsy opened its first pop-up store
over the 2013 holidays in Brooklyn, NY 
Furniture retailer Crate and Barrel is now doing temporary pop-up stores? Yes, in fact, they are. In Las Vegas, C&B recently leased 6,700 sf in a local mall for a temporary showroom. Keep in mind that their typical stores run between 25,000 sf to 30,000 sf or more. According to the retailer, these small temporary stores help them "test the market" and determine whether a long term investment in permanent space is worth it. A recent WSJ article (Pop-Up Stores Raise a Question for Landlords, 10/22) covers some of the issues and concerns that landlords are raising as the pop-up store becomes more popular.

More and more downtown organizations are exploring the use of  pop-ups as a tool in revitalization efforts, and for good reason.  For downtown, pop-ups can be especially good for spaces that have been vacant for a while. When a vacant site has no recent tenant sales figures, neither the landlord nor the retailer are in a position to appropriately and fairly price the space. This is sometimes why a space can remain vacant for longer than necessary...and this is where a pop-up can come in to play. Instead of leaving the space vacant, which produces no cash flow for the owner, a landlord may be open to renting the space short term for a lower rent (almost like a teaser rate). This gives the landlord cash flow they wouldn't otherwise have, but does not tie them down in a long-term lease they consider too low. It also gives the retailer a low-risk way to test the market. With sales figures in hand, a retailer would then have more information and data to negotiate a lease term and rates that are sustainable over the long term. And if the downtown organization is involved, it gives the organization the sales information necessary to potentially lure other retailers downtown.
Circa 2010. A Toys-R-Us Pop Up Store in an
old bank on Fulton Street, Brooklyn, NY

Pop-ups may also serve retailers who are looking to avoid permanent space altogether. When you consider that most retailers only turn profits during the holiday season, opening up stores just to capture those sales makes good business sense, especially if your business does a lot of internet sales. Hence the Etsy Holiday Shop - a pop-up store in the Dumbo neighborhood of Brooklyn, NY. Expect to see more of these types of establishments in the future. Union Square in New York was among the first, but now many Business Improvement Districts enliven their public spaces with temporary craft markets during the holidays. These markets are basically open-air pop-up stores...before the term pop-up was popular of course!

Is your Downtown organization exploring pop-up stores? If so we'd love to hear more about it!

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