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Have pop-up shops peaked?

While the torrent of temporary stores shows no signs of abating — the format continues to be popular with a wide range of brands, from Gucci to Yankee Candle — there are signs of pop-up fatigue and doubts about the concept are seeping in after 20 years of proliferation.

“The term pop-up has become so diluted, it’s almost irrelevant,” said Mai Vu and Dimitri Koumbis, cofounders of Bishop Collective, a 2,700-square-foot temporary space in SoHo. “What’s important to us, is that we’re trying to create an experience. We took on a space with other brands and we’re trying to move away from a system where everything is a pop-up. Nothing has an edge anymore.”

But Paco Underhill, founder of research and consulting firm Envirosell, believes the trend still has legs. “If sales were a 20th-century solution that got tired, pop-ups may be a 21st-century solution,” he said. “Maybe there could be a designation in stores for seasonal displays. The pop-up could become a replacement for seasonal displays.”

Long before the term pop-up shop became overused and abused — think sample sales with endless supplies of designer duds and vast Halloween emporiums — the platform was the domain of scrappy emerging brands lacking the funds for permanent digs, and burgeoning shopping-cum-entertainment experiences such as Ritual Expo in Los Angeles, a one-day mash-up of fashion, DJ culture, art and the web, that surfaced in 1998.

Like any form of real estate, pop-ups are subject to the laws of supply and demand. A glut of retail space as a result of  2017’s retail bankruptcies and store closures, along with a dearth of new openings, has made some landlords more amenable to temporary concepts and spawned a cottage industry of technology-driven, short-term real estate aggregators.

“The reason we’re seeing more pop-ups is because that’s what the consumer is demanding,” said Yashar Nejati, cofounder and chief executive officer of Thisopenspace, which connects entrepreneurs with short-term retail space. “They’re really shopping at these temporary stores. We grew 300 percent year-over-year in New York in 2017. I don’t see that slowing down.”

The surprise of coming upon a retailer in an obscure location or finding a little-known brand occupying a prime piece of real estate has always been part of pop-up shops’ appeal. Limited-edition collections and the evanescent nature of the format communicate a sense of urgency to consumers: buy now — or risk everything selling out.

Brands have taken advantage of the fleeting nature of pop-up shops to experiment in ways they never would at permanent locations. For example, when Marc Jacobs in 2014 unveiled a pop-up shop in SoHo for his Daisy fragrance, the only financial instrument accepted was “social currency,” including posts on Facebook, Instagram and Twitter, using the hashtag #MJDaisyChain.

International retailers hoping to make an impression and gauge interest in their brands have embraced the pop-up shop’s take-no-prisoners approach. Between 2004 and 2009, Comme des Garçons opened multiple “guerrilla” pop-up shops in Europe and Manhattan. Uniqlo in 2006 broached the U.S. market with two pop-up shops made from 20-foot shipping containers that were deployed in several Manhattan neighborhoods.

Digital native brands such as The Real Real use pop-up shops to test locations. The brand in November opened an 8,000-square-foot store in SoHo after a successful pop-up run in the neighborhood. A recent San Francisco pop-up shop will likely lead to a full-fledged store. “We see a halo effect from our pop-up shops,” said Julie Wainwright, founder and ceo of The Real Real, adding that three to four pop-ups are on tap for 2018. “They enhance market awareness, sales and our ability to get supply. We see a measurable lift in both sales and consignment with a long tail when we are running a pop-up shop.”

According to Independent Retailer, pop-up shops generate about $50 billion in annual sales. Ross Bailey, founder of Appear Here, an online marketplace for short-term and pop-up rentals, said the format is going mainstream. “They’re no longer this thing that’s on the fringe,” he said. “Brands sell online and use every channel to build an experience. The pop-up shop is becoming another channel.”

The proliferation of pop-up shops has pushed the platform in a more commercial direction. “We have Amazon pop-ups in seven of our shopping centers,” said William Taubman, chief operating officer of Taubman Centers. “They’re enjoying success with new consumers and driving traffic, which is great for the centers.” Pop-up shops at Taubman malls also feature emerging brands and up-and-coming artisans. “The formula for maintaining the quality of the pop-ups is pretty self-regulating,” Taubman said. “Those that perform well stay or return during key time periods.

“The perfect example of a highly successful short-term tenant that became a permanent inline tenant is Peloton at Cherry Creek,” he added.

Target Corp., one of the most creative and prolific pop-up shop practitioners, launched its first in 2002, a 220-foot-long boat floating in the Hudson River and docked at Chelsea Piers, to preview its Black Friday collection. It then turned an old Bridgehampton, N.Y., hotel into the Bullseye Inn, with immersive experiences in every room. Target’s pop-ups for limited-time collaborations with Missoni, Liberty of London and Lily Pulitzer were free-for-alls, the Supreme drops of their day.

Target Wonderland in December 2015 was the retailer’s last pop-up. A spokeswoman said while the retailer has no plans for future pop-ups, “it’s always something we’ll continue to consider. It really comes down to our focus on continuing to innovate and introduce fresh, new takes on experiences for our guests.” 

Luxury brands fully embraced pop-up shops. Hermesmatic, a chic laundromat with orange washers and dryers, visited several cities to dip-dye consumers’ old Hermès scarves, giving them a new vintage-y look. Louis Vuitton’s pop-up shop for its Masters series collaboration with Jeff Koons, imitated an art gallery, just as Koons’ paintings reproduced Leonardo da Vinci’s “Mona Lisa” and Vincent van Gogh’s “Wheatfield With Crows,” among others, on handbags.

Appear Here’s Bailey, who counts SupremeLoewe, Coca-Cola, Net-a-porter and Kanye West among his clients, pointed to New York’s vacancy rate of 40 percent. “Fewer retailers are coming to market,” he said. “In London, short-term leases are being signed at 1.9 times the rate of long-term leases, and on some streets, it’s three to five times the amount.”

While there are arguments on both sides of the pop-up shop debate, Alan Napack, senior director of retail services at Cushman & Wakefield, summed up the sentiments of many landlords and retail real estate brokers. “Pop-ups are the bane of my existence,” Napack said. “Pop-ups appeal to younger brands, especially those that are digitally native. You try to lease a space long-term and they end up leasing it for three months.”

Here’s more of what retailers, property owners and brokers had to say:

PROS

Mark Triton, executive vice president and chief merchandising officer, Target Corp.:

“Pop-up shops done right are a great way to create energy and excitement. Some people have overused them and they’ve become ubiquitous, but they can still be done well and have a lot of relevance. It all depends on what you do with and how you bring them to life.”

Ross Bailey, founder, Appear Here:

“We need to accept that pop-up shops are not going to go away. Twenty years ago, the average lease was 20 years, and now it’s less than five. The highest vacancy rate, 40 percent, is in New York. Less retailers coming to market. The idea that somehow long-term leases are going to come back to me is crazy. Like any business, it’s supply and demand, and right now I see a lot of supply.

“To me, pop-up shops are about taking a space and doing something that’s not cookie-cutter.  There’s a percentage of relevant pop-ups, but it’s higher than the percentage of retail shops that are interesting and relevant.”

David Stark, founder of David Stark Design:

“There are items in the newspaper about the pop-up shops of the week, so you realize it’s hit a certain regularity. When I think of all the temporary shopping in the West Village or SoHo, I don’t think of it as the same kind of pop-up shops that we did for Target. I think of those as temporary retail opportunities. Target’s pop-up shops have been very much about creating theatrical, immersive experiences and going down a rabbit hole with a collection or brand. I’ll always have a soft spot for the Bullseye Inn, and I also loved the bodegas, which were a chic play on the corner convenience store with fashion.

“Real estate all over the place allows for there to be all kinds of opportunities for what can be done in spaces. Those who are forward-thinking, are coming up with ways to make temporary moments work for them. It can be polishing the halo of love for a brand or a heritage experience such as Hermès’ scarf-dying. There’s always going to be opportunities to come up with ways to make magic within the four walls of a space, where anything can happen.”

Paco Underhill, founder of research and consulting firm, Envirosell:

“For landlords, the idea of the pop-up is to be able to start making some money at locations where they can’t find long-term tenants. It’s also a way to build some form of excitement. Pop-ups make sense where there’s traffic to start out with. If you do a pop-up, a lot of the infrastructure issues that plague permanent retail are simplified.

“If sales were a 20th-century solution that got tired, pop-ups may be a 21st-century solution. Two dominant trends in retail are going global and going local. The holiday fairs at Grand Central Terminal and Union Square are examples of that. They’re filled with pop-up shops manned by people who know about the products.”

Yashar Nejati, cofounder and ceo, of Thisopenspace:

“We’re seeing a lot more global brands and a rise in Shopify entrepreneurs. Even with a short-term lease, rents have made retail space inaccessible, so they’re getting together with multiple brands to open stores. One way we’re facilitating that is to have our own stores, where 40 different brands can book the space together. We like to get spaces by bringing landlords a deal. We’re able to quickly show landlords that this a more profitable revenue stream than a 10-year lease. Once we form a relationships with a landlord, we’ll lease space ourselves.”

Mai Vu and Dimitri Koumbis, cofounders of Bishop Collective, a 2,700-square-foot temporary space in SoHo:

“We kind of picked up on this immediate purchasing behavior associated with pop-ups, and call designers and say, ‘What do you have,’ then make adjustments to our buy. We can really dictate to our designers what’s relevant. We’re testing the market, we’ve been online for four years. We wanted to see how the neighborhood would be on ground rather than online. The store is temporary and will determine what our next move will be, whether it’s getting a permanent brick-and-mortar store or continuing to test the market.”

Merve Gunduz, owner of Merve’s Kitchen and Bakery in Glen Rock, N.J.

“Supriya Kapur, founder of Rock Road Jewelry and I got the idea of hosting pop-ups at Merve’s. Most of our pop-up participants are artists, designers and makers, who sell through craft fairs. We charge them a nominal fee for the entire day. All sales proceeds go directly to the artists. The pop-up shops have started bringing outside traffic to downtown Glen Rock. Merve’s has become a meeting place to grab a cup of coffee or something to eat and explore the world of a new artist every week.”

CONS

Mike Slattery, senior vice president of research at the Real Estate Board of New York:

“Pop-ups are in some ways experimental. Could they really succeed there? If they were really doing well, would they stick around a little longer? That’s a little bit of the expectations. Landlords aren’t putting out money to make improvements in spaces they rent to pop-ups. It’s hard to say that one day’s sales can foreshadow future long-term success. They’re good for stores in that they’re able to get more revenue, but they’re not part of secular trends.”

Rick Friedland, principal, Friedland Properties, the largest landlord of Gold Coast property along Madison Avenue, amount other assets:

“How amenable we are to pop-up shops is a function of general market conditions, and right now they’re favorable for pop-up shops. Sometimes, [pop-up] tenants tend not to pay as much as a longer-term lease nor do they offer the same level of security. They fill a void for a prescribed period of time and offer the brand the ability to test the market. It’s an interesting time in retail now. If you talk to landlords and brokers, and even tenants, there’s some uncertainty, but also optimism that whatever cycle we’re in right now will shift back upward.”

Chris Conlon, executive vice president and chief operating officer, Acadia Realty Trust:

“It’s setting a bad precedent. The pop-ups have become the norm because so many young brands aren’t willing to commit to a long-term lease. As a landlord, do you want to stand on ceremony and not do anything? We’re open-minded. Younger brands all talk to each other. There might be a permanent need for temporary stores in the future. It’s supply and demand, and what can the tenant afford to pay in order to be profitable.”

Jeffrey C. Paisner, partner at Ripco:

“I don’t know if landlord and tenants know if we’ve seen bottom yet. That’s what gave rise to pop-ups. If the market corrects itself, landlords would rather have long-term leases with credit tenants and use them to leverage other acquisitions. The other problem for pop-ups is it’s very hard for traditional brands to do them. It takes a lot of capital to make a pop-up look like the expectations consumers have from knowing what a brand’s permanent stores look like. There’s not enough demand for pop-ups to reduce the vacancy rate.”

Rachel Shechtman, founder of Story on Manhattan’s far west side, which changes its theme 6.6 times a year:

“It’s a moment. Is it going to stick? No one knows. It’s less of a trend and part of our new retail vocabulary now. The pop-up shop’s definition is being stretched. The problem is, short-term lease isn’t an attractive, descriptive term, nor is it consumer-friendly. Short-term leasing — there’s nothing sexy about that as marketing language. Nordstrom doing pop-ins is example of adding to the vernacular. It’s almost like you hear pop-up shop so much that it doesn’t stand out as something new or different. The original intention was to serve as a short-term attraction.”

Webber Hudson, executive vice president of Related Cos.:

“My position on pop-ups is the wave you’re seeing now is nothing more than supply [minus] demand, and the distance between the two equals pop-up shop. In a situation where you have a vacancy rate that’s systemic like on Madison Avenue or SoHo, that’s retailers taking advantage of a weak market. We want to test-drive concepts. Before this pop-up craze began, we did some for Moleskine, Burberry and Fendi, which brought in a truck. We had a holiday installation from Hennessy. It’s important for us to maintain those relationships. Those aren’t necessarily big money-makers for us, but they’re on-brand.”

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