This year has witnessed the closing of several big box retail stores. And with online retail's growing strength, the trend does not appear to be a phase, but a sign of a fundamental shift in the way that people purchase their goods. But, as the adage states, for every action there is an equal and opposite reaction. When big box stores leave, malls and town centers are often left with holes in their facilities. And those vacancies could symbolize a unique value proposition for smaller retailers who would never have had the financials to apply for those spaces in the past.
With retail chains closing, commercial retail space owners want to secure vendors to take their place. Pop-up stores, which originally started out as seasonal stores for Christmas ornaments and Halloween costumes, have expanded to opportunities for uniquely positioned retailers.
Why Pop-Up Stores?
According to the International Council of Shopping Centers, in 2016, "sales at small business retailers outpaced their larger competitors making small business a valuable revenue source for shopping centers which provide localized and unique experiences for consumers."
—Courtney Smith, owner, Courtsmith Basketball Industries
"Pop-up stores, or flash retailing, is definitely a trend that has become an international phenomenon," says Harold Johnson, a commercial real estate broker and developer at Cober Johnson and Romney. (Full disclosure: Johnson is a named partner at my firm.) "It basically is a short-term sales space, typically within larger retail centers."
Due to an increase in their potential negotiating power with commercial-real-estate owners or management companies, business owners have an opportunity to use these newly opened venues to start or expand their businesses. With shorter lease terms and reduced financial obligations, pop-up stores can offer previously unattainable space and access. I spoke to three business owners across the country who currently have pop-up stores and stories. They shared their retail strategies and successes with pop-ups.
Best of Both Worlds
Sophie Blake is a jewelry designer who started her retail arrangement with a Virginia-based retail town center in 2014. While she is pleased with the nature of her spaces, "I understand the value of online presence and I want to be adaptable to that long-term trend," she says.
Balancing the storefront facility with an online presence is the best of both worlds for Blake and her business model. "The best advice I would give to other retailers looking for spacing is to be agile and flexible and see the market as it is," Blake says. "Be weary of the dangers of growing your footprint too fast and having an 'over saturation' problem."
Unique Venue for Unique Products
Art Whino is a pop culture art gallery and retail store owned by Shane Pomanjambo. When time came to renew his existing lease, "I was approached by one of the largest malls in the area with the opportunity to enter into a short-term lease," Pomanjambo says. "The mall representatives were impressed by the unique toys, pop art merchandise and artwork that was unlike anything else in the space."
The uniqueness of his brand and products afforded him with an opportunity to grow in a larger market without the long term and financial burdens of traditional leases.
Great Way to Reach Target Demo
Courtsmith Basketball Industries owner Courtney Smith sells basketball uniforms and sporting apparel to youth and has used pop-up stores as part of his sales strategy. When asked what makes Smith's sales strategy unique, he stated:
"My first pop-up store was located right inside of a basketball recreational center," Smith recalls. "All the teams, parents and players were literally a captive market for me."
This strategic placement outside of a traditional mall space shows another facet of the flexible business model that is available to retailers. Smith's collaboration with the rec leagues and leasing agents made it a win-win for his business. Here, the leasing agent can receive a percentage of sales so that Smith does not have to face a steep monthly lease payment. The shared win makes the "landlord" open to being flexible on using a space that would have been unused previously.
As these owners' stories show, retailers can seize unique opportunities to take advantage of leasing vacancies with strategic insight, measured risk and agile timing.
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