pop-up shop

The emergence of pop-up shops

Pop-ups have gradually emerged out of a desire for convenience and exciting experiences on both the customer and retailer's part, and out of property owners' need to fill emptying spaces with new business.

Temporary retail locations have existed for centuries. Classic examples include farmer's markets and event-specific concessions, like food carts at sporting events.

However, the emergence of pop-up shops as they exist today -- a promotional corporate retail model -- can be traced back to the early 2000s, when the company Target rented a 220-foot-long boat on the Hudson River to offer Black Friday deals.

Several companies realized the value in providing these experiences to customers and adopted the method over the following years, but it wasn't until 2008 when the trend really gained momentum. The financial crisis of 2008 and the following retail apocalypse created many vacant buildings and mall storefronts where old retailers had previously operated. Flash retailers took advantage of these spaces, partially because malls needed someone to replace their vanishing tenants.

Soon, pop-ups spread to other services beyond straightforward retail, as well as becoming more sophisticated in their presentation. New types of pop-ups included restaurants and art galleries. The first underwater pop-up space was even introduced in 2015.

With companies becoming increasingly dependent on e-commerce channels, pop-ups are being used by online retailers to establish a physical presence in target locations. They use them to provide experiences that aren't possible online -- creating brand awareness, building relationships with customers and fostering brand loyalty.

How long do pop-up shops last?

Pop-up stores typically last anywhere from a few days to a few months, but less commonly can last for about a year.

Pop-up stores are often centered around a specific event, and only last for the duration of that event. One example is holidays -- the company Spirit Halloween rents out old abandoned retail locations to sell costumes for the month of October.

A pop-up store's timeline might also coincide with a product release or marketing campaign that the organization is using. Other times, the "event" might just be how long the company is interested in measuring customer engagement. Still others may simply stay open for as long as the retailer is able to afford or secure the lease.

Benefits of pop-up retail

Pop-ups aim to mix the efficiency of online retail with the social benefits of a physical location. The benefits of pop-up shops include:

• Customer engagement. Operating a physical store allows customers to interact with employees face to face. This allows a retailer to build stronger relationships with their customers, providing a feeling of relevance and interactivity.
• Data collection. With customer engagement comes the opportunity to collect customer data, which can be used to influence business decisions and optimize targeted marketing campaigns. Specifically, they can inform companies how to approach a more permanent store implementation in the future.
• Building awareness. Pop-up events build excitement and awareness around products and their accompanying brands by offering additional experiences alongside the shopping aspect. This drives both physical and online engagement with the brand. Companies may use these venues to attract the interest of cultural influencers, who can help promote the brand through social media.
• Cost efficiency. It is 80% cheaper to launch a pop-up shop than it is to launch a traditional brick-and-mortar retail location. They are also cheap to operate because they only exist for a short amount of time.
• Low risk. Because they are temporary, it is easy to use pop-up retail locations to test new markets. It is not as important for a pop-up shop to perform well as it is for a traditional store, because it's less of an investment.
• High reward. Despite the ease and abundance of online retailers, consumers do most of their shopping in physical locations. Pop-up stores allow retailers to take advantage of the most widely used purchasing approach, even if their business is primarily online.
• Flexibility. Because of the relatively low investment they require, pop-ups allow the retailer to present their brand in more creative ways that wouldn't be feasible long term. They also allow the nature of the venue to change by day. A pop-up shop could focus on selling product samples one day and then hosting a private networking event the next. Conversely, they can also specialize in specific products in ways that permanent stores can't afford to.

Additionally, apps like Storefront match renters to temporary retail spaces. Users can look through various unique spaces and negotiate short-term leases through the app. There are also companies that create temporary commercial spaces specifically for pop-ups, which can help mitigate some of the existing costs.

In 2019, the app conducted a survey of retailers that used their app. They found that pop-ups improved market visibility for 51% of respondents, increased sales for 46% of respondents and increased social media engagement for 46% of respondents.

Drawbacks of pop-up stores

Some drawbacks of pop-ups include:

• Cost. Although the pop-up model is cheap compared to operating a traditional storefront, and has less fixed costs, it is still a significant financial commitment. Renting an appealing and unique space can add to that cost. Additional unique costs include:
  • licenses, depending on city regulations;
  • insurance, which may be obligatory depending on the country;
  • security, for theft mainly;
  • human resources, in case extra workers need to be hired;
  • payment methods to process sales; and
  • transportation and maintenance for store materials.
• Loss of novelty. Part of the appeal of pop-ups is that they are short-term experiences that provide customers novel ways to interact with brands they like. Excitement and buzz come from the fact that the shop is temporary. They offer limited edition products and exclusive experiences. As this model becomes more popular, customers will be harder to impress, and companies will have to strive to find new ways to impress.
• Timing and location. Pop-ups usually depend on the hype they generate. Businesses need to time the event and its lead-up promotion so that potential customers can be aware of it. They also need to locate it where the customers who are aware of it can easily go. This can be tricky because it's difficult to account for all potential interferences, such as coinciding events or holidays.
• Legitimacy. To some customers, pop-ups may seem untrustworthy or low-quality, especially customers who are used to shopping in established brick-and-mortar franchises.

What does the future have in store for pop-ups?

Many speculate that pop-ups will grow in popularity in the coming years. One 2020 study from the University of South Carolina's Department of Retailing showed that over 80% of 600 retailers that hosted pop-ups the previous year said it was a success.

In January 2020, Amazon announced plans to implement a series of themed pop-ups with inventory being routinely adjusted to accommodate the themes. Some themes to be used include cameras, Marvel's Avengers franchise and curated holiday toy lists.

These specific themes allow Amazon to collect specific data on customer interests based on locations. The pop-ups also allow Amazon to collect detailed data on customers who aren't as engaged in their online business, and ideally convert them to Prime.

Other online retailers will likely continue to use pop-ups because they build brand loyalty. Shopping malls are also losing core tenants and need new businesses to fill the empty spaces -- a problem to which pop-up shops provide a solution. Malls could theoretically turn abandoned storefronts into spaces designed for temporary tenants to rent.

Developments like this would contribute to the continuous move toward a sharing economy, in which permanent ownership is less common than sharing and renting resources as a service.