The Power of Pop-Ups

As retailers embrace pop-up stores to boost sales and test new concepts, these temporary stores gain increasing traction in retail centers.

Pop-up stores have become a welcome addition to shopping centers in recent months as tenants step in to fill the void of empty space. And now these temporary tenants are angling to become a more permanent fixture in the retail industry.

Pop-ups are appearing almost everywhere that there is vacant space, from major malls and shopping centers to the streets of Manhattan. Retailers range from local Halloween and Christmas shops to major national brands such as Toys ‘R Us, Harry & David and Gap.

These temporary stores that “pop-up” virtually overnight and then disappear just as quickly after a few months, or even weeks, are not a new phenomenon. But the niche that has typically been dominated by holiday specialty stores is becoming more entrenched as a year-round strategy for tenants and landlords alike.

The recent proliferation of temporary stores is being fueled by the high vacancies plaguing the retail sector. Pop-ups represent an attractive solution for both tenants and landlords. Landlords are using temporary tenants as a short-term fix to fill vacancies and bring in some added cash flow while they work to re-lease empty space.

At the same time, tenants are looking for a low-cost, low-risk way to boost seasonal sales, as well as test new concepts, products and geographic markets. “So it’s a win-win for tenants and landlords to use this excess space that has become available.” says David Berliner, a partner at BDO Consulting in New York.

Moving Into The Mainstream

The typical lease for pop-ups might range from as little as a month to two or three. Retailers also save big bucks by moving into vacant shell space without any tenant improvements. “Basically, it’s just a matter of bringing in the necessary shelving and throwing up a banner and they’re open for business,” Berliner says.

National brands are pushing pop-up stores into the forefront for shopping center owners and consumers. For example, Toys ‘R Us took advantage of the lack of mall-based toy stores and opened 600 pop-up Toys ‘R Us and FAO Schwarz stores for the holidays, a huge increase compared to the 90 seasonal stores it opened a year ago.

Even non-retail businesses are experimenting with pop-up stores as a means to promote new products and brand awareness. For example, Procter & Gamble opened a pop-up store in New York for a month to promote several of its new products ranging from cosmetics to shampoo. Kellogg’s also opened a Pop-Tart store in Times Square in August with an initial lease that ran until this month.

Now that both retailers and landlords are getting comfortable with the concept, there is the opportunity to extend this beyond just Halloween and the holiday season” Berliner says.

For example, jewelry stores might launch pop-up stores around Valentine’s Day and Mother’s Day to take advantage of the boom in sales during that window, while other specialty retailers can take advantage of seasonal concepts such as swimwear shops during the summer, he adds.

The pop-up concept is a perfect fit for an industry that is constantly reinventing itself and looking for fresh ideas. “There will always be vacancies, and so I think even after the market recovers there will still be a need for pop-ups,” says Richard Hauer, a managing director at BDO Consulting. “Retailers are finding that they can provide an additional source of sales, and the opportunity to explore new markets and new products without signing long-term leases.” And malls are now tuned in to this new revenue source.