It is no secret that the retail landscape has changed in recent years. Amazon.com and other retailers disruptors have made customer expectations very high. This puts pressure on legacy retailers who often have very different business models and can’t meet these expectations.
What are legacy retailers to do about it? David Jaffe, Chairman and CEO of Ascena Retail Group., the parent company to leading brands like Ann Taylor, LOFT Lane Bryant, Justice and more, said yesterday to 150 attendees at the Retail Leaders Circle conference in New York City that it was time for the “empire to strike back.”
Jaffe stated that “all of us legacy brick and mortar retailers must create a new business model to meet the changing expectations of our customers” and “new competitors are entering the industry, so we have to keep up with them.”
Jaffe says that legacy retailers have three strengths they can leverage to be strong leaders in today’s retail environment.
How Pop-Ups Can Save Retail Real Estate
There are many vacant storefronts in American cities. There is more retail space available than there are retail stores so new brands have a lot of potential. Pop-up shops are a great way to help landlords fill vacant retail space. It also helps new brands reach their target audience and stays within their budget. Let’s look at some examples of pop-up shops that have helped both brands and the real estate industry.
Denise Troy founded Wunderkid in Huntington Beach. This is a charitable company that sells stationary and prints by emerging artists from around the globe. Wunderkid donates a portion of every sale to the artist’s tuition fund.
Troy saw a potential in vacant storefronts to spread Wunderkid’s vision throughout the U.S. This move transformed her business.
Retail rents are on the rise with a nearly 25% increase in office space prices compared to last years. This makes it more difficult for new brands and retailers to purchase storefront properties. Even once-luxurious retail areas like New York City’s SoHo have empty storefronts, a result of high rents. These rents are too high for newcomers to even consider.
Pop-up shops are the latest trend thanks to these shifts. Pop-up shops are temporary retail events that take place in short periods of time. This allows brands to save money, build brand experiences and even make sales.
Brand Building on the Fly
Wunderkid believes that the 10 pop-up stores it plans to open each year offer it benefits that permanent retail spaces cannot.
Wunderkid’s operations manager Jennifer Van Valkenburgh stated that pop-ups add a freshness and excitement to an otherwise stale retail experience. Pop-ups have already gained momentum and we expect this trend to continue.
Wunderkid is a similar brand to these two brands, which have had great success using pop-up shops.
Hot As Hell – Wunderkid agrees that pop-up stores can offer customers something unique and more exciting than traditional retail outlets.
“Pop-ups have a cool technology that makes them cooler than traditional retail (e.g. iPads, ordering clothes to your dressing room on screens etc.),” stated Kelsey Farrer of Hot As Hell, creative content and marketing manager. Pop-ups offer so many opportunities to test these products!
Cabanna Anna swimwear: This brand of swimsuits has experimented with pop-up shops to add an extra dimension to the customer’s shopping experience.
Anna Finch, creator and founder of Cabana Anna Swimwear, said, “We love to tie something interactive to make it more than just shopping. Sometimes we offer a complimentary glitter ‘mermaid makeup’ station or gift bags to give guests that experience and show them how the brand lives — fun, free-spirited and creative.”
Cabana Anna Swimwear makes use of pop-up shops in order to communicate directly with customers, something that it can’t do through an online shop.
Finch said that this brand building is happening on the fly.
Finch believes that pop-up stores are a better way for her company reach customers than permanent retail.
Finch stated that “we don’t have any plans at the moment to open a storefront.” A store is not the best investment because retail is moving towards online and ecommerce.
Not only small brands are benefitting from pop-ups
Pop-ups are a great way for brands to start out, build their consumer base, and offer a creative, affordable sphere of retail. However, big brands can also benefit from the new retail economy.
Hermes, a luxury goods manufacturer, opened a temporary shop in Causeway Bay in Hong Kong. Reebok used existing space to open a month-long pop-up shop at the CVZ art gallery in New York City. Kate Spade, a purse designer, got creative and opened a pop-up shop in New York City’s Bryant Park. Hot chocolate was served to the chilly customers.
Pop-ups are a great way for well-known brands to increase their customer base. It’s hard to imagine anyone not stopping by the igloo to enjoy a warm drink in the cold winter months. Pop-up shops are proving to be a great way for retailers of all sizes, regardless of whether they make food or clothing, as well as those who produce beauty products.
How pop-ups benefit the real estate market
Pop-up shops can provide benefits for brands such as saving rent money, maximizing empty retail space, and offering interesting shopping opportunities. These shops don’t just help brands, experts say that they are also saving retail real estate one event at time.
Hundreds of retail stores closed their doors in 2017 alone. American Apparel shut down its remaining 110 stores. 379 Teavana shops went under. Industry giants Macy’s as well as J.C. Penny also closed their storefronts. If they don’t learn quickly how to make the most of the space available, these closures can be a nightmare for commercial retailers. Pop-up shops are a great solution. Commercial retail space owners are looking for vendors to replace them after the closings.
These owners might see higher returns with pop-up shops that they would from traditional retailers. The International Council of Shopping Centers reports that in 2016, sales at small businesses outpaced those of larger retailers. This makes small business an attractive revenue source for shopping centres which offer unique and local experiences to consumers.
These businesses are the ones revolutionizing retail realty through the use pop-ups. Over the past six years, niche brands have surpassed large CPG brands by transferring $20 billion of market share. These niche brands, with sales of less than $100 million per year, like Hot As Hell and Cabanna Anna Swimwear, are taking over retail. Small brands saw a 3.1 percent increase in sales, which is $1 billion, while larger brands experienced negative growth of 0.5 percent or just over $5.5 billion.
Pop-up shops will continue to be popular due to the popularity of these brands and the economic stress retail real estate is currently facing. Grab your wallet and check out the unique shops you might find on streets or at poolsside in hotels near to you.