Pop-up retail was made for the pandemic
If a business opened its doors just before the coronavirus-related lockdowns swept across the globe, you might consider that bad timing. But for a pair of shop owners who opted to launch their store as a pop-up late last year, the pandemic has hardly been a setback.
Fredrik Lindfors had worked for years at a fish shop adjacent to London’s Kensington Place restaurant. When both closed, Lindfors and a business partner, Chris D’Sylva, decided to open their own seafood business in nearby Notting Hill. Rather than commit to a long-term rental agreement, they got a three-month rolling lease via Appear Here, a retail real estate intermediary that helps brands find locations for pop-ups, or temporary storefronts. They opened the Notting Hill Fish Shop last October.
D’Sylva says that opening as a pop-up removed the pressure to lock in a strategy right away. “I was able to treat the space as a lab,” he says. “You can’t do that with most other stores under classical, long-term leases. You’ve got to go and tell the landlord what it is: It’s rigid, you’re stuck.”
That freedom of experimentation continued after the two business owners locked in a long-term lease in February—right before the pandemic began to sweep across the U.K.
On March 18, Notting Hill Fish Shop shared a post to Instagram that read: “Hiring. Experienced fishmongers. Chefs & customer services people.” Five days later, U.K. Prime Minister Boris Johnson imposed a lockdown in response to the pandemic. But that didn’t slow down the fish shop, which was allowed to stay open as a purveyor of essential items.
Lindfors and D’Sylva quickly adjusted to the new normal. With a slowdown in fishing as a result of the coronavirus, the fishmongers expanded their menu while promoting other local businesses, such as farm-sourced Flourish Produce. They hired chefs who’d been laid off from nearby restaurants to serve as “chaperones” for customers inside the Notting Hill Fish Shop. And they turned the process of queuing up outside their store, necessary for social distancing, into an event.
“Rather than put out markers like Scotch tape or cones, we put out these black folding chairs to allow people sit and socialize in the line,” says D’Sylva. “It became iconic, and it reinforced a need beyond the functional need of buying produce from us—the need for customers to talk and see other people.”
In May, Lindfors and D’Sylva took a three-month lease on another nearby location and launched a grab-and-go version of their fish shop—a pop-up offshoot that is likely to become permanent. “We have no intention of leaving,” says D’Sylva.
COVID-19 has forced retailers around the world to adjust their operations and rethink strategy. As Fortune has reported, national U.S. chains such as Macy’s and Gap saw their sales drop 50% in the first quarter of this year because of store closures. Meanwhile, online shopping is up 31% year over year, and in the first six weeks of lockdowns, e-commerce platform Shopify saw a 62% increase in first-time users. Overall, consumer retail spending in the U.S. is down 6.1% year over year, despite increasing month over month from April to May as the initial shock of the pandemic wore off and reopenings began.
Consumers, meanwhile, are adapting their shopping habits to a reality in which choices are more limited—to what’s in stock, what they can get delivered, and, in many cases, what happens to be open down the block. As a result, the ability for businesses to operate with a makeshift physical presence has perhaps never been a bigger opportunity. A temporary lease is less of a financial gamble than a long-term commitment, so a pop-up can be a lower-stakes springboard for refining everything from product offerings to store protocols.
“During this pandemic, retailers that have made up a lot of their sales by being online have seen those sales coming from an area around their physical footprints,” says Appear Here CEO Ross Bailey.
He cites two trends that have been brewing in recent years: One is a growing correlation between local brick-and-mortar shopping and a consumer’s investment in the person, or story, behind a product. The second is that pop-ups are becoming fixtures in sleepier neighborhoods, versus the shopping corridors in city centers they’re typically associated with. Amid the public health crisis, Bailey says he senses that “people now care about community and have a respect for the independent even more so than before.”
Add it all up, and the incentive for retailers to experiment with pop-ups has never been stronger.
Popping up everywhere
The definition of a pop-up is hard to pin down, because so many different types of brands have used them for a range of purposes. Halloween or holiday stores that only occupy a strip mall space a few months out of the year are technically pop-ups, as are brands that cycle through a kiosk or installation within a larger store or shopping center. A food hall is a pop-up marketplace, as is a fleet of food trucks. To broaden the definition, you might say a farmers’ market is, too.
Today, among the most prominent examples is the temporary storefront or stand that an emerging or trendy brand—often one that has made a name for itself online—operates to generate buzz. Examples of such brands that have popped up include skin care line Supergoop and lingerie startup ThirdLove (which closed its Manhattan pop-up during the city’s lockdown), along with countless others. Even more established brands with permanent brick-and-mortar stores sometimes do pop-ups in new cities for exposure, as New York City–based beauty brand Glossier did last year with a stint in Austin.
In areas that were under lockdown this spring, pop-ups that sold nonessentials couldn’t operate as physical stores or booths, so some retailers found alternatives. Pop-up space provider Storefront has been helping tenants experiment with creating virtual reality showrooms that present customers with a 360-degree view of a store from the comfort of their homes, then direct them to make purchases online.
The town of Fort Erie, Ontario, hosted an hour-long “Virtual Pop-up Market” via Instagram Live on June 18, in which local businesses showcased products and offered giveaways. Similarly, Ruddington Village Market of Nottinghamshire, England, has been live-streaming “virtual stalls.” New York’s Buy Local East Harlem is another group that has tried this. It might seem like a stretch to call these broadcasts “pop-ups,” but it’s the closest some businesses have been able to get to their customers lately.
Meanwhile, regions are in various phases of reopening. In the U.S., just under 8.6% of SBA Paycheck Protection Program (PPP) loan recipients were retail businesses. Some have already shuttered, while others are struggling and eager, albeit cautiously, to welcome customers back in person. Depending on government orders, retailers in some areas already have been allowed to do so.
Faire, an online wholesale marketplace, took a survey of the retailers on its platform on June 10, and 42% reported they have seen foot traffic return to moderate or original (pre-pandemic) levels, according to Faire CFO Lauren Cooks Levitan.
“We’ve seen our business recover very quickly as the retailers have adapted,” Cooks Levitan says of Faire, highlighting strategies such as offering curbside pickup (80% of retailers that use Faire have the option) or new products such as candles and masks to meet the needs of largely homebound, socially distant consumers. And while the retailers that were new to the Faire platform this spring were mainly online businesses, Cooks Levitan, a former retail research analyst, says she sees great potential for growth on the brick-and-mortar side as things reopen.
“It’s possible that you’re going to see a lot of entrepreneurs emerge out of this. We’ve seen that in the past: People lose their jobs, and they go and create a job for themselves by starting a business,” Cooks Levitan says. “And there’s probably going to be an availability of real estate, possibly in very high-quality locations, potentially at lower costs,” she says, freed up for nascent or surviving retailers.
Pop-ups often serve as testing grounds for newcomers and legacy players alike looking not only to try out a particular space, but “to refine their retail concept,” writes Garrick Brown, VP of retail intelligence, Americas retail services, at Cushman & Wakefield, in his December 2019 report, Experiential Retail: Pop-Up-A-Palooza. He lists Samsung, Amazon, Everlane, and Warby Parker among the many brands that have gone this route.
One fresh idea for this not-so-new use case, as the threat of the coronavirus looms, is using temporary spaces to test new health safety protocols, such as social distancing and contactless payment, says Melissa Gonzalez, founder and CEO of The Lion’esque Group, a pop-up retail strategy firm.
“Brands and retailers are going to have to find that balance of what are the right safety protocols, how has consumer behavior shifted, and how do we still make it feel good?” Gonzalez says, describing a recent visit to a local coffee shop as too “clinical” for her comfort. “You can buy something with a click of a button, but shopping is an emotional experience. So, how do we make sure we continue to remember that side of it and layer that back in?”
Surely, retailers can and will dream up ways to use temporary space to gather data and gain exposure. But even if there is a glut of vacancies on the market in the aftermath of COVID-19, the question that remains is whether landlords, whose best interests often lie in longer-term arrangements, will be willing to extend short-term leases.
“I think we’re going to be in a phase where the pop-up isn’t going to be about experience, it’s going to be about rescue,” Cushman & Wakefield’s Brown says. “The leverage is undoubtedly on the tenant side right now, and landlords, I think, would be foolish to not consider every option.”
Especially in cases in which landlords have multiple properties or storefronts in one area or shopping center, they will be more likely to lure back lost foot traffic if they keep spots filled. Landlords also might consider loosening restrictions on, for example, tenants setting up stands in parking lots, as Canada’s Real Estate News Exchange reports.
Brown wrote in his December report that “typically, if the pop-up is not related to an event or seasonal in nature, and is for a user that plans to utilize the space for traditional physical retail, roughly a third of pop-up deals eventually translate into a longer-term commitment.”
Going forward, there will be no one-size-fits-all model for a leasing structure, he says. A landlord might decide to charge a discounted rate for a temporary lease, then raise the price if and when the tenant decides to transition to full-term. Or they might charge a premium in the short-term and incentivize a conversion to a longer-term commitment with a deal. “It’s going to be like throwing spaghetti against the wall,” Brown says. “I suspect that there won’t be one correct strategy. It’ll really be a case-by-case basis.”
And in cases in which pop-up retail requires a city permit, Brown stresses governments should also be generous and open-minded. Doing so may be in a municipality’s best interest as it struggles to recoup the tax revenue from businesses that fell victim to the pandemic.
Making flexibility work
Another not-so-new practice that may gain steam, Gonzalez predicts, is pop-ups as a permanent strategy. Streetwear brands are the kings of this tactic, which they use to generate hype and faux scarcity periodically. As businesses tighten their belts and bolster their e-commerce, they might decide they don’t need year-round stores in every market. Some markets might be better suited for summer or holiday pop-ups, for example.
But if more retailers opt for this sort of flexibility, where does that leave a workforce that is experiencing a near-record level of unemployment?
It’s in the best interest of retailers to take a “holistic” approach to staffing, Gonzalez says. When The Lion’esque Group helps hire staff for pop-ups, she says, it prioritizes versatility. But training, too, goes a long way in setting up someone to be a long-term or recurring staffer, even if they work at a brick-and-mortar location or event for only a short time. As Gonzalez says she’s heard from one retailer she’s spoken with recently, instead of resorting to layoffs or furloughs to bear the financial blow of the pandemic, his store “repurposed” people.
“Even for those who had just opened pop-up stores, as things hit in the beginning of the year, those people understood talking points of the brand in a firsthand way,” Gonzalez says. “They’d been in the stores, they’d talked to customers, they knew what the pain points were. They became the best equipped for call centers and customer service online.”
Retailers often aren’t alone in training their workers, however. Elevate, a global staffing agency, has a database of tens of thousands of people it helps to pair with brands across the world to work events, pop-ups, and more. Over the past three months, the company has been thinking about what more it can do to foster safety and security, building off its existing role as a benefits coordinator.
“We’re now requiring all of our workforce to go through varying levels of health and safety training, which we run digitally through our tech platforms,” says Elevate COO Carina Filek. “We’ve got a couple of different levels, and we work with our clients to ascertain what their needs are and make sure we’ve got the right level of training in that person for their activity.”
Elevate also advises clients to make sure they have the appropriate number and type of staff, and that employers are on the same page as staff when it comes to aspects such as headcount restrictions, or how to greet customers or event guests to mitigate the spread of the coronavirus.
Despite protocols and optimism, Cushman & Wakefield’s Brown warns that retailers must balance this optimism with caution this summer and beyond, and not read too much into month-over-month growth.
“Is there pent-up demand, and do people want to get out? Sure. But don’t fool yourself into thinking this is over,” Brown says. “If you want to be effective in risk mitigation, you have to look at this and plan for the worst, hope for the best. And in the retail space, it is critical that you create the safest environments possible.”
Pop-ups may be temporary. But winning the trust of customers is critical in the long run.