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Pop-up stores: what do they reveal about the future of retail

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I’ve received several interview requests during the summer to discuss the future of retail. In today’s article I want to share with you my thoughts about pop-up stores, a (relatively) new forms of retail that reflects changes in our world and changes in the way the consumers behave.

1999 : the start of the pop-up stores

It seems that the first pop-up store opened in 1999 in Los Angeles. The word pop-up meant at that time a “time limited” opening and had not yet the meaning we attach to it today (more to that later). This first attempt of a temporary store aimed at selling limited editions of products and the store would close after the stock was sold. As you can see there was a very basic commercial goal behind it.

You can still find that very type of store today. They sell for a limited period of time all types of little objects that come from overstock. A small surface is rent in a very good location and the goal is capture a part of the pedestrians walking by and sell them those low-price items.

What’s the very definition of a pop-up store today

Behind every POS (point of sales) there is a commercial goal. Pop-up stores are no exception. Yet, what we observe is that pop-up stores are less attached to this commercial pressure than traditional stores are. This can even go very far with some pop-up stores having no direct commercial goals but the mere PR impact. Look for instance at the (very) ephemeral store of Kenzo: the space was used to communicate a message but not to sell. However the press coverage was excellent and the ROI was here measured in terms of “brand valuation”, not in terms of direct sales.

Different types of pop-up stores but one goal : direct contact with the customer

A first dichotomy seems hence to emerge between pop-up stores used as such to sell stuffs for a limited period of time in a new area, and pop-up stores that are more “conceptual” and aim at enhancing the value of a brand. In the first case the commercial goal is the driver; in the second case it becomes accessory and efforts are put in the conception of the store to generate press coverage.

In both cases however the brand wants to initiate a direct contact with the customer. If you look at all the different pop-up stores we reported on in the last years, you’ll quickly realize that the brands which conceived them are usually distributed through third party and do not own their distribution channels. This has to do with the cost structure and the investments required to have its own stores. Don’t forget that in most big cities opening a store comes with substantial upfront expenses. In Paris for instance it’s not unusual to spend 1m€ before opening the store. A pop-up store is therefore an interesting alternative to lower those upfront expenses (and to lower also the barriers to entry : cf. the 5-forces Porter analysis).

Brands are looking for direct contact with consumers

The reason why brands are looking for direct contact with a customer is because intermediary rip off a big chunk of margin and build incredible bargaining power over brands. Take for instance the example of a brand sold in a supermarket. If this brand wants to touch its consumers and promote its products, how do you think it will do ? Until recently a limited number of option existed :

  • in-store promotion : the payment of a fee gave the brand the possibility to promote its product at specific highly visible places of the store
  • in-house animation : an employee of the brand comes in the supermarket to get in touch with customers and make them try the products

Pop-up store are the cheap variant of “dedicated mono-brand stores” to get directly in touch with customers and foster loyalty. That’s why they are so popular.

Pop-up stores enable to cover new “captation areas”

Interestingly pop-up stores are also a cheaper alternative to investigate the potential of new captation areas. Since consumers have limited abilities to travel to shops (for examples, in the case of food-over-the-counter shops most consumers come from 150 m around the store), organic growth of revenues is mainly possible through implementing new points of sales. This was for instance Starbuck’s strategy where one store was opened every 500m in the US.

Advices for your marketing strategy

If you are a big brand with deep pockets you probably don’t need any advices. Just spend (LOL).

If you are a startup in a sector that depends on third-party distributors, pop-up stores may be an excellent option for you to get into the market. Yet it requires that the consumers living in the area where you implement the store is aligned with your ideal targets. This require a little bit of market research. Even in that scenario the costs may be to high; another –even cheaper alternative- is to partner with a store in a different sector but whose clients share a similar profile with yours. With the current crisis retailers are more open than ever to hiring a part of their store and to attract some attention.

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Author: Pierre-Nicolas Schwab

Dr. Pierre-Nicolas Schwab is the founder of IntoTheMinds. He specializes in e-commerce, retail and logistics. He is also a research fellow in the marketing department of the Free University of Brussels and acts as a coach for several startups and public organizations. He holds a PhD in Marketing, a MBA in Finance, and a MSc in Chemistry. He can be contacted by email, Linkedin or by phone (+32 486 42 79 42)

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