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Spring 2013
Prime Time for Pop-Ups

Once a nascent field, pop-ups are increasingly becoming a permanent part of the retail landscape.

Temporary stores have been all the rage over the last few years with merchants “popping up” to sell everything from cosmetics to insurance. Retail industry veterans are quick to point out that temporary storefronts are by no means a new phenomenon. Mall and shopping center owners have been leasing space on a seasonal and short-term basis for years.

Perhaps it is the catchy name that has ignited interest among merchants and brands, but pop-up stores seem to be gaining even more momentum in a market where landlords remain eager to fill vacant space and breathe fresh energy, excitement and fun into their shopping centers. At the same time, the pop-up space appears to be growing as a viable alternative for both national and local retailers, e-commerce businesses, product brands and even non-traditional tenants ranging from dance studios to local artists.

Seasonal concepts are fueling demand for pop-up stores as businesses search for an outlet to sell merchandise ranging from back-to-school supplies and Halloween costumes to holiday gifts and trim-a-tree decor. “There continues to be a strong demand for temporary and pop-up space, especially heading into the holiday shopping season,” says Jennifer Adams, director of specialty leasing for Chicago-based Jones Lang LaSalle.

Toys “R” Us played a key role in launching the national pop-up craze when the retailer opened nearly 600 pop-up stores during the 2010 holiday shopping season. Although the retailer has since pared down its number of pop-ups in both 2011 and 2012, that move helped to push pop-ups into the spotlight. “That has been great for business. It just added a whole new excitement to a segment of the industry that has been around for many, many years,” says Adams.

More retailers are considering pop-ups as a way to test new markets and boost sales, particularly during the busy Christmas season. National retailers such as Target, Gap and Harry & David also have launched the occasional pop-up store to boost sales and generate buzz over new product lines. Even established brands such as Microsoft are testing pop-ups. The software giant opened 32 pop-up stores in the U.S. and Canada during November and December. Brands also are turning to pop-ups for sales and marketing promotions. For example, JanSport opened a temporary kiosk at the Mall of Georgia during th e back-to-school shopping season last year.

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Non-traditional uses

As pop-ups become increasingly popular, there is more demand for temporary spaces from non-retail users as well. United Healthcare Group is one national company that has opened multiple locations across the country. The company is using temporary inline stores to promote its services and reach out to customers.

Entertainment-based uses also are popping into shopping centers with temporary venues. Zumba studios are moving in to occupy space once occupied by now defunct tenants such as Borders and Steve and Barry’s. Jones Lang LaSalle even signed a short-term lease with a local game show, Sqrambled Scuares, at its Myrtle Beach Mall. The game show moved its headquarters from Boone to Myrtle Beach, and plans to film its game show in the 3,700-square-foot space. The company signed a one-year lease for the space.

Jones Lang LaSalle signed another short-term deal with a local playhouse for a 4,600-square-foot space at ShoppingTown Mall in New York. The tenant plans to produce entertainment shows such as cabaret, improv and murder mysteries, as well as offer singing and acting lessons. “Owners love it, because we generate a ton of income for our properties with these types of uses,” says Adams. “Customers love it because, in many cases, it adds some fun or variety to the existing shopping environment.”

Popping In For Tax Prep

SmartTax1-copySmart Tax is rolling out pop-up stores in the New York area this spring to give its business an added boost during the busy tax preparation season. Smart Tax expects to open between six and 12 new pop-ups this year. The temporary locations will start opening in January and will remain open through the April 15th filing deadline.

“We are growing every year, and the pop-up locations represent a big opportunity for us,” says Nick Rizzi, founder and CEO of Smart Tax Franchise Group. “We are really excited about that this year.” Currently, Brooklyn-based Smart Tax has a total of 30 permanent offices including both corporate and franchise owned and operated locations in six states.

One reason that the pop-up format is a good fit for Smart Tax is because the company runs a “paperless” office. Essentially, the company uses digital technology to scan and store documents electronically. Customers even sign documents on electronic signature pads. “That lends itself to be able to take care of many locations at once,” adds Rizzi. The business is able to function in a compact footprint. The pop-ups are comprised of a roughly 7-foot x 10-foot kiosk. The typical set-up features a desk with a computer and scanner/printer, Smart Tax signage and Internet access. Each kiosk functions as its own mini tax office with its own IRS identifying number.

Initially, Smart Tax plans to locate its pop-up stores within check-cashing stores in the New York metro area. “Part of the reason that we target check cashers is because there is a built-in clientele right there,” says Rizzi. There is some synergy in bringing an added service to the check-cashing businesses. Customers are visiting those businesses to not only cash their checks, but also to get money orders, use Western Union services and buy pre-paid credit cards.

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How the pop-up model works

Kiosks are staffed with trained tax preparation specialists. That person meets with customers, takes information and begins filling out the return on the spot. All returns are reviewed by either an enrolled agent or registered tax preparer in the company’s main office. Once the customer reviews and signs the return, it is submitted to the IRS electronically from the kiosk. “You are definitely not getting a drop in quality with the tax preparation done there. The reason we set up there is to make it convenient,” says Rizzi.

For some customers, it is a fairly quick process that can take as little as 15 to 20 minutes to go through all of the questions. Generally, customers stop back to review their tax return later that day or the next day after it has been completed and reviewed by Smart Tax staff. The tax preparers or reviewers may call a customer back if additional information is needed.

One of the keys to bringing in new customers is simply “popping up” in the midst of a constant stream of foot traffic. Smart Tax also works to market those locations. The company runs promotions, such as coupons for referrals, uses Internet advertising, and also does mailers within a mile of its urban pop-up locations. Each year, Smart Tax also does a promotional giveaway to all of its customers.

Once a pop-up is closed, customers can still contact Smart Tax year-round if they have questions, or if they need to access a copy of their return. Smart Tax uses secure, digital storage that allows Smart Tax staff to access a customer’s information and provide answers that a client needs regardless of whether the return was filed in a pop-up or a permanent store location, says Rizzi. “It is actually a pretty simple way to service a lot of people in a lot of different locations,” he adds.

Smart Tax is considering expansion opportunities in other similar businesses, such as insurance offices, as well as more mainstream mall locations. Smart Tax has permanent store locations in New York, New Jersey, Pennsylvania, Massachusetts, Ohio and Alabama.

What’s in Store?

Storefront3-copyStorefront launches online listing service for pop-up space.

One of the biggest challenges for pop-up retailers is finding the right space and the right terms. Some landlords are reluctant to spend time negotiating deals with tenants for a lease that might only last a few weeks.

Storefront is the latest in a growing list of local and regional listing services around the country that specializes in matching real estate that is available for short-term lease with prospective pop-up tenants. The start-up company is promoting itself as an online marketplace for leasing short-term space for both retail and event tenants. “One of the inefficiencies that we are trying to solve is just making the search for short-term space more transparent,” says Erik Eliason, co-founder of San Francisco-based Storefront.

The Storefront website went live in early November and within two months the company had more than 250,000 square feet of available space listed on its website: storefront.is. Its listings include a variety of options ranging as small as 400 square feet up to 6,000 square feet across a variety of different types of properties such as malls, shopping centers and neighborhood shops.

Initially, the primary geographic focus is San Francisco, and Storefront is continuing to work with property owners to expand its list of available pop-up space in that market. “We have identified popular neighborhoods, such as Union Square, where brands want to locate,” says Eliason. Most tenants are looking to lease space for as little as one week or up to three months, although the leases can also extend longer. So far, the average lease is for a three-week period. “That seems to be the sweet spot for a lot of these retailers,” adds Eliason.

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Currently, Storefront is a bargain for both landlords and tenants. The company is evaluating different revenue models, such as web-based advertising and listing fees, but for now Storefront is offering free listings for property owners and free searches for those businesses looking for pop-up space.

Simplifying the site search

Storefront was founded with a basic premise of helping prospective pop-ups more easily identify the wide variety of space options that are available on the market and compare and contrast those choices based on cost, location and the condition of the real estate.

“Today, there is a lot of confusion in trying to find space, and once you find a space it might not work or might not be available,” says Eliason. “So, we are just trying to make it more accessible for all retailers.”

That process is even more challenging since brokers that specialize in helping companies locate retail space and negotiate lease terms typically don’t cater to pop-up tenants. Most tenant rep brokers earn fees from a landlord-paid commission that is calculated based on the square footage and length of the lease. Oftentimes, the size and term of a pop-up store falls below a broker’s minimum size requirements. Although pop-up tenants can hire a broker and agree to pay the fee out of their own pocket, most opt to search for space on their own or rely on the friends and family network to find a suitable space.

Prospective tenants can find and book space directly online at the Storefront website. Storefront works with a variety of property owners that are marketing temporary space, which would include traditional inline spaces, as well as common area or public space that is available to lease for a cart, kiosk or other retail merchandising unit. “We have a few exclusive partnerships with some of the larger mall operators and landlords,” says Eliason.

Storefront positions for growth

After its November launch, Storefront saw good demand from tenants looking to open holiday pop-ups. The company also is seeing tenants that are planning ahead for other seasonal stores in 2013 including Mother’s Day.

However, the biggest interest is coming from e-commerce companies. Retailers that are selling apparel, accessories and home goods in particular are interested in testing sales at brick-and-mortar stores. “I think most of these brands do pop-ups because they can test the market very cost-effectively,” says Eliason. “They can also build awareness for their brand.” Online retailers may have customers that are finding their website, but who might also benefit from a tactile experience, such as trying on clothes or jewelry. That physical store experience is still viewed as a very positive way to reach people and build a loyal customer base, he adds.

Storefront, which now includes six employees, is a natural fit for Eliason and his co-founder Tristan Pollock. Eliason has worked as a front-end designer on websites, and he has worked with different retailers, such as Coach and Target on e-commerce strategies. Pollock has a background in e-commerce and digital marketing. The two met about four years ago and previously worked together on creating another online platform, SocialEarth, a website for news and information that promotes social entrepreneurship around the globe.

Although Storefront is focused on growing its online marketplace in San Francisco, the company does provide information on real estate opportunities in Los Angeles, New York and Miami Beach.

Beth Mattson-Teig

Beth Mattson-Teig is a freelance business writer based in Minneapolis, Minn. She specializes in covering the national commercial real estate industry.
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