The role of the pop-up store in future retail

The Savills Blog

The role of the pop-up store in future retail

Pop-up retail shops are a bellwether of retail property health, and are here to stay due to structural change in Australia.

As opposed to casual leasing, which focuses more on common area leasing, a pop-up business occupies what is traditionally a leased tenancy.

Landlords are embracing pop-up and temporary arrangements in the absence of being able to secure long term covenants. Pop-up retail can exist for a variety of reasons, including:

  • Because there is a vacancy in the shopping centre and there’s no long term tenant wanting the space
  • If the shop is earmarked for development and the landlord wants some activation prior to the start of demolition 
  • More rarely, if the landlord has devoted some space to allow entrepreneurial activity and would like to try out a new business.

Originating in Los Angeles in the late 1990s, pop-up stores - or flash retailing - were originally designed as a cost-effective way to promote little known brands or products. Their immediate success caught the attention of major manufacturers and in recent years, no label was too old or too high-end to open a pop-up under the right circumstances.

In Australia, the current retail landscape is going through a period of reinvention as many traditional brands fail to differentiate themselves from the competition, and landlords are desperate to “keep the lights on” to receive at least some income rather than a vacant shop. 

What are the benefits of the pop-up shop?

To retailers:

  • They provide a low-cost, low-risk platform to try something new
  • They provide both low-rent and flexible duration to promote products

To landlords:

  • They provide an income stream instead of a vacancy
  • They provide a conversion opportunity to a long-term tenancy if the business succeeds

It’s important to remember that these pop-ups don’t operate just as a standalone alternative, and more often than not, they work in combination with traditional shopfronts as well as online retailing to help elevate brand recognition and target new audiences.

Why are pop-up stores so popular?

Consumers often visit the pop-up because it offers something different, more creative and available only for a limited amount of time. The fear of missing out also plays a huge role, with 61% of shoppers listing seasonal products as the main reason to shop at a pop-up store, according to a PopUp Republic poll.

Some examples of brands embracing the pop-up include French designer Louis Vuitton who showcased their winter men’s line in their first flash store in Milan, and Hermès who sampled the market in a historically significant space in Kyoto, and then took their brand of luxury to customers in Causeway Bay with its mobile pop-up Silk Bar. Other examples include Hello Kitty, Rue La La and which created pop-ups that provide sales and experiences not typically offered in traditional retail stores, whether through a shipping container that turns into a café, a two-day shopping event with a disc jockey, or a revolving door of different brands of footwear.

What is the future of pop-up retail?

In the future, it’s unlikely that the “online only” or traditional big box “brick and mortar” standalone approaches will be the most efficient - instead, pop-up shops are growing in popularity in combination with traditional and online retailing as a hybrid model to build more intimate relationships while creating unique, memorable 3D experiences that are aligned with the brand's values.

In an environment where retail property is under stress, we expect that pop-ups will become increasingly popular. Landlords may continue to market pop-ups as new and exciting opportunities, however an abundance of this type of store may also reflect a certain amount of oversupply of retail space in Australia.

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