Pop-up shops are among the most buzzworthy retail opportunities of 2015. The idea of placing a shop within a shop is not new—department stores such as Bloomingdale's, Nordstrom (NYSE:JWN) and Macy's (NYSE:M) have been doing it for years as a way to highlight new designers and collections. But the pop-up of today has evolved into something far more sophisticated.
Since the beginning of human commerce, there has been a need for a temporary merchant location, often seasonal, that comes and goes as needed.
But the pop-ups of 2015 are a little different. Many of these temporary stores serve as the physical presence for retailers that previously only had an online presence. Either that, or the pop-up is a retailer's best way to test how a physical storefront might change brand loyalty. It seems e-commerce retailers of all kinds are testing pop-ups this year, and the concept quickly became a solidifed go-to strategy after e-commerce giant Amazon (NASDAQ:AMZN) launched a holiday pop-up at the close of 2014.
|Zappos' Las Vegas pop-up was a mashup of product and technology.|
A trend is popping up
So why are so many retailers turning to pop-up shops now? In 2014, brands such as Zappos, The Grommet, Crest & Co. and Boohoo launched their first temporary retail locations. According to Lance Eliot, VP of information technology for Interactions, a global leader in consumer experience marketing, the pop-up shop is a growing trend due to several crucial converging factors.
The first reason is that retailers are seeing pop-ups as a viable way to boost sales and presence in the marketplace. The second reason is that retailers can gauge consumer approval of a transition from online to brick-and-mortar by testing temporary physical spaces. And the third reason is that the cost of opening a pop-up is relatively low and offers little risk as retailers try and gauge best practices.
"Retailers can take a 'try it, see if they like it' approach, and either continue or discontinue with little out-of-pocket damage," Eliot said.
Beyond affordability and acceptability, pop-up shops are a great way to promote a brand.
"Pop-up stores are designed to create buzz and promote a brand," said Hana Ben-Shabat, a partner in the retail practice of A.T. Kearney, a global strategy and management consulting firm. "For e-commerce retailers who don't have a store, this is a great way to promote who they are and what they do. We're seeing more pop-up stores from e-commerce retailers simply because we have many more pure-play retailers than we had before."
And no retailer has created more of a brand buzz thus far in 2015 than Target (NYSE:TGT). The brand's launch of its spring Lilly Pulitzer collection sold out online and in stores within hours, and the success was supported by a unique pop-up shop in New York's Bryant Park.
Pop-ups first emerged as a way to add an element of surprise and novelty to a brand. Retailers experimenting with pop-ups were pushing boundaries. But today, pop-ups go beyond the wow factor, according to Pearse McCabe, CEO, North America, of Dragon Rouge, a global brand strategy company.
"While today's pop-up still aims to create an element of surprise, they are also targeted and purposeful in their execution," McCabe said. "It's less about being new and surprising and more about being true to your brand, and evoking a unique environment through which you can interact with and engage customers."
And finally, the pop-up is a chance for retailers to test and get feedback on new products from consumers, without fully committing to a full launch. Sports brands are particularly fond of this method. "Adidas and Nike use pop-ups all the time to let consumers 'test drive' their products or just celebrate a sporting occasion," McCabe said.
There are also examples of pop-ups that have helped to lift a brand facing a particular strategic challenge. Men's lifestyle brands Frank and Oak and Indochino, for example, have been using pop-ups to help men overcome their uncomfortability with apparel shopping. "While women tend to enjoy [shopping] more than men, the pop-ups create an environment for men to come in, meet with tailors, and get help with their measurements and receive personalized recommendations," McCabe said. "With this additional direction, the overall effect is that men will take this 'trace experience' with them when they go online next time they need something."
E-commerce embraces the pop-up
The advantage to the physical pop-up is just that: the physical world. After looking at products exclusively on a screen, a storefront is an opportunity for consumers to actually touch and interact with the product.
"The audience for virtual retailers is limited to those who shop online," Eliot said. "Whether it is a fear of secure online payment systems or simply preferring the in-store experience, there are still shoppers who choose not to make purchases online. Having a physical presence, even for a brief amount of time, can expand the customer base for an e-commerce retailer."
In the physical world, consumers are better able to establish an emotional connection to a brand.
"By creating a palpable impression that's inextricably linked with the brand, the customer will then carry that rich experience with them the next time they go online to transact with the brand," McCabe said. "It is what we call 'trace experience.' This can have a real impact on the way that the customer perceives and interacts with the brand after they have been in the pop-up. They may become more acutely aware of service culture or product offering or something far more indefinable."
Beyond the physical pop-up itself, McCabe believes there is value in the traditional and the corresponding social engagement that accompanies the temporary experience.
If you're going to launch a pop-up, Ben-Shabat has five tips to making it a successful endeavor for your retail store.
First, have a clear objective. Some shops are meant to just drive revenue. Others are for brand marking and to create loyalty. Set your goals before rolling out the store.
Second, location, location, location. If you're introducing your products to new shoppers, choose a high-traffic area to give more people an opportunity to interact and discover your brand.
"On a kind of selfie basis, some e-commerce retailers perceive that their location is global, i.e., anyone on planet earth can reach them. The notion that a pop-up shop is confined to a specific place, a small patch of land, can be difficult for the e-commerce retailer to accept," Eliot said. "In that sense, location is crucial due to the foot traffic that occurs in that location, and whether the wallets accompanying those feet are interested in the products that the e-commerce provider provides."
Third, McCabe says to avoid bad locations at a good price.
Fourth, partner with a physical store expert. "E-commerce retailers may not be as savvy about store design, so partnering with the right experts to create the right environment is paramount," McCabe said.
Finally, Eliot threw in one more piece of advice and that is that retailers should not just jump into hosting a pop-up because it is trendy. Instead, smart retailers will put together a comprehensive strategy.
"The journey toward pop-ups does need to start with a single step, but smart retailers are prepared to go the marathon to make it work and have put together a comprehensive strategy that will carry them across the finish line," he said.
The in-store pop-up
While some pop-ups are standalone storefronts, others exist within existing shops. There are both advantages and disadvantages to pop-ups that open within other retail stores.
One of the positives is the energy of feeding off of another brand.
"There can be tremendous synergy among the host and the pop-up, via hosting a pop-up, by essentially expanding the host into a new retail category that will drive added foot traffic into their normal retail categories, and the pop-up likewise benefits because they get the afterglow from the host as an added benefit to their presence," Eliot said. The in-store pop-up can be refreshing for the host retailer, adding something new to delight and attract the attention of shoppers.
But the host retailer should think carefully about what type of store to host, warns Eliot. If the pop-up is considered lesser quality, it can taint the loyalty of the host brand. Also, if the pop-up seems out of line with what the host is selling, consumers might see the host as desperate and change their shopping habits based simply on the pop-up.
The pop-up of the future will take into consideration new channels. Ironically, the experience is now being turned into a virtual one. According to McCabe, a new twist on the pop-up is the online or invisible pop-up. For example, Bonobos teamed up with Deron Williams to launch a pop-up offering items he specially curated for a one-month period, all online. Similarly, Samsung has also developed a strategy around creating virtual pop-up stores that are only accessible to Samsung users, creating a sense of exclusivity.
Pop-ups are emerging as more than a fad, becoming a standard way of doing business for e-retailers.
"Consumers are beginning to divide e-commerce retailers into those that are online only, and those that exist in both the online and physical pop-up world too," Eliot said. The latter, those retailers squarely in both camps, gain the confidence of consumers, and so the pop-up mania is now turning toward pop-up as SOP (standard operating procedure)."