How Pop-Up Shops Can Save Retail Real Estate

By Amy Zhou

In cities across America, there are vacant storefronts. With more retail space than retail stores, there's opportunity for new brands. Pop-up shops help retail landlords seeking to fill their space, and it helps new brands find their audience and stay within budget. Let's explore a few examples where pop-ups have saved both a brand and the real estate market.

Revolutionizing Retail

Denise Troy is the founder of Wunderkid, a do-good company based in Huntington Beach, Calif., that sells stationary and prints designed by up-and-coming artists around the world. Every sale from Wunderkid contributes to a tuition fund for that artist.

To spread Wunderkid's vision across cities in the U.S., Troy saw an opportunity in vacant storefronts. The move has transformed her business.

Retail rents continue to rise, with an increase of nearly 25 percent compared to last year's prices for office space, making it much more difficult for new brands to afford storefront property. Even one-time luxe retail havens like New York City's SoHo neighborhood have vacant storefronts now, casualties of high rents — too high for even high-end brands to afford, let alone newcomers.

Thanks to these shifts, pop-up shops have become the new wave. A pop-up shop is a short-term, temporary retail event that's deliberately "here today, gone tomorrow.” Brands choose to snap up vacant storefronts, booths or kiosks in malls for the short term, as well as gallery or event spaces or space within already existing stores/hotels to use as their pop-up locations. This saves money and offers a way to build the brand experience — as well as make some sales.

Brand Building on the Fly

For Wunderkid, the 10 pop-up shops it aims to open annually offer it advantages that a permanent retail space cannot.

“Pop-ups bring a level of freshness and excitement to what some consider a ‘stale’ retail experience," said Jennifer Van Valkenburgh, Wunderkid's operations manager. "There’s already significant momentum for pop-ups, and we believe this will continue to grow.”

Similar to Wunderkid, here are two other brands that have seen great success by using pop-up stores:

Hot As Hell: Another up-and-coming brand, which specializes in intimate apparel for women, agrees with Wunderkid that pop-up shops can offer customers something more unique and exciting than traditional storefronts can.

“The technology that pop-ups are using makes them so much cooler than traditional retail (e.g., iPads, ordering clothing to your dressing room on screens, etc)," said Kelsey Farrer, creative content and marketing manager at Hot As Hell. "There's so much room to test these things in pop-ups!"

Cabanna Anna Swimwear: A swimsuit brand that experimented firsthand with the ways in which pop-up shops can add a little something extra to a customer's shopping experience.

“We love to tie in something interactive to make the event more than just shopping — sometimes we offer a complimentary glitter ‘mermaid makeup’ station or gift bags, drinks, etc., to give guests that fun experience and show them the lifestyle behind the brand — fun, free-spirited, creative,” said Anna Finch, founder and creator of Cabana Anna Swimwear.

Cabana Anna Swimwear uses pop-up shops to interact directly with consumers, something it cannot do simply through an online store.

“We're able to better explain our brand mission and ethical production to each customer, which I think helps form a greater sense of familiarity and appreciation for the workmanship that goes into our pieces,” said Finch of this brand building on the fly.

Finch also believes that pop-up shops are the more logical way for her company to reach consumers vs. more permanent retail options.

“We don’t currently have plans to open a storefront," noted Finch. "With the way that retail is shifting towards online and e-commerce, a store doesn’t make the most sense in terms of an investment.”

It's Not Just Small Brands That Are Benefitting From Pop-Ups

While pop-ups offer brands that are just starting out and working on building their inventory and consumer base an affordable, creative sphere for retail, big brands are also making the most out of the new retail economy.

Luxury good manufacturer Hermés opened up a pop-up shop in the form of a temporary silk bar in Causeway Bay, Hong Kong. Reebok made use of existing building space and opened a month-long pop up shop in New York City's CVZ art gallery. Purse designer Kate Spade got creative with a pop-up shop, creating an igloo-themed store in New York City's Bryant Park where hot chocolate was served to chilly shoppers.

For these big, well-known brands, pop-ups afford them the ability to take the shopping experience to a new, exhilarating level, which in the end draws in even more customers. Who wouldn't stop by that igloo for a warm drink during the freezing winter days? As you can see, all types of retailers, whether big or small or whether they manufacture food, clothing or beauty, are reaping the benefits of pop-up shops.

How Pop-Ups Benefit the Real Estate Market

Saving rent money, capitalizing on empty retail space and providing intriguing shopping opportunities are all benefits that brands can enjoy from pop-up shops. However, these shops aren't only helping brands; some experts believe that pop-up shops are saving retail real estate, one event at a time.

In 2017 alone, hundreds of retail stores permanently shut their doors. American Apparel closed its remaining 110 stores, 379 Teavana stores went under, and industry giants Macy's and J.C. Penny both closed storefronts. These closures are a commercial retail space owner's nightmare, unless they learn quickly how to make use of the newly available space on their hands. That's where pop-up shops come into play. With the closures, commercial retail space owners want to secure vendors to take their place.

As it turns out, these owners may experience higher returns from pop-up shops than from their typical retailers anyway. According to the International Council of Shopping Centers, in 2016, "sales at small business retailers outpaced their larger competitors, making small business a valuable revenue source for shopping centers which provide localized and unique experiences for consumers."

It's these businesses that are revolutionizing retail real estate through the use of pop-ups. In the last six years, $20 billion in market share value has been transferred from large CPG brands to niche brands. These niche brands, which make less than $100 million a year like Hot As Hell, Cabanna Anna Swimwear and Wunderkid, are the ones that are taking over retail. In 2016, small brands grew about 3.1 percent (or $1 billion) in sales altogether, while large brands actually had negative growth (negative 0.5 percent, or a little over $5.5 billion).

As a result of these brands, plus the economic stresses retail real estate now faces, pop-up shops are likely to continue to grow in popularity. So, grab your wallet and go check out all of the unique shops that may be popping up on street corners or poolside at hotels near you.

Amy Zhou is the COO of Brandboom, a B-to-B e-commerce platform.