Look What’s Popping-Up This Year

Major retailers have launched pop-up stores this holiday season to take advantage of the expected increase in holiday traffic.  Continuing the trend seen last year as a result of the large amount of vacant space available, more retailers are using pop-up stores than ever before.  What is new this year is the growing number of well-known brands that are utilizing pop-up stores.

Examples of Pop-Up Stores Planned This Year
  • Toys”R”Us / FAO Schwarz – 600 Toys”R”Us Express and 10 FAO Schwarz brand stores
  • Build-a-Bear Workshop – 10 stores
  • Harry & David (gift seller) – 16 stores called Harry & David Orchards
  • Forever 21 – Signed a 6-month lease this year to test the waters on pricey 5th Avenue in NY
Vacancy Rates are Still High by Historical Standards

According to Bloomberg, vacancy rates in the 3rd quarter at retail centers remained at 10.9%, the same as the 2nd quarter, which is the highest vacancy rate since 1991.  Regional malls had less vacancy at 8.8% in the 3rd quarter, slightly improved from 9.0% in 2nd quarter.

Benefits of Pop-Up Stores for Retailers

Pop-up stores can make business sense for retailers where it may not make economic sense to open a permanent store.  These stores are generally a scaled-down version of a retailer’s regular or permanent stores.  For example, pop-ups can enable a retailer to:
  • Capture a larger piece of peak season sales (such as Halloween, holidays, Valentine’s Day and back-to-school periods);
  • Test a new concept or new store locations in a low risk/cost way;
  • Promote demand for their goods and produce profitable business at permanent locations;
  • Take advantage of the void created by the bankruptcy of a competitor (e.g. Toys”R”Us using pop-ups in malls after the liquidation of KB Toys).

Pop-ups can also provide a flexible, attention-grabbing way to showcase a retailer’s goods or build buzz for an established brand (for example, the Pop-Tarts pop-up store in Times Square). More significantly, they provide these benefits without locking retailers into long-term leases with terms that could significantly hurt, or even end up putting them into bankruptcy.

Benefits of Pop-Up Stores for Landlords

Pop-up stores also benefit landlords that are looking for short-term tenants.  Customers generally prefer shopping in malls where a large majority of the stores are leased and open rather than in malls with many empty or closed stores.  In addition, landlords hope the pop-up stores will lead to permanent store leases.

What opportunities do you see for pop-up stores in 2011? Are they a holiday tradition or here to stay year-round?