Pop-Up Stores Provide Lucrative Alternative For Small Businesses

Here today, gone tomorrow. That’s almost how you could describe the latest retail store trend sweeping through New York and the rest of the nation.

Savvy entrepreneurs and larger retailers are opening up temporary stores, or “pop-ups” in empty storefronts, simultaneously boosting their brand and bottom line. The stores can last anywhere from a few days to a few months. And with the U.S. retail vacancy rate at 7.6%, for the third quarter of 2009, compared with 6.4% for the third quarter of 2008, according CoStar Group, Inc.– and the holidays just around the corner– now might be the best time to take advantage of the weak commercial real estate market.

“Normally a lease for retail space would span 12 to 36 months,” says George Ratiu, an economist at the National Association of Realtors. “Now landlords are willing to do 10 to 20 days.”

Pop-up stores are not new or uncommon in Manhattan, Paris, London, and Tokyo where the world of high fashion pervades. National brands with large marketing budgets have been utilizing the concept for years, but now that retail vacancies have increased and rents have decreased, smaller companies are starting to participate, too.

“Due to high vacancies in the retail sector this [pop-up] concept has taken on a broader appeal to a lot of merchandisers, particularly when landlords in the retail space are eager to fill space even on a short-term basis,” Ratiu says.

Curvel Baptiste, co-owner of MilkshakeNYC, a women’s sneaker manufacturer, launched pop-up stores in Washington D.C. and Brooklyn, New York, over the summer. At the Brooklyn location he rented a garage/art gallery for a little over $1,100 for three weeks, but grossed $1,200 a day.

“Retailers use pop-up stores to not only sell products … but to market their brands with promotional events and evaluate the local market,” Baptiste says.

Gucci, Target, the Gap, and Uniqlo are just a few of the many retailers that have launched pop-ups in New York in the past few years.

MilkshakeNYC, which doesn’t have a retail showroom, plans to open a pop-up store for two months in Harlem for the holidays.

Seasonal shopping aside, Baptiste, 30, says that the pop-up store concept is a tactic he wants to use at least 10 times a year to broaden the four-year-old company’s audience and liquidate excess inventory when necessary.

Yvonne Stafford, owner of Stafford International Realty, a commercial real estate agency in Harlem, is working with Baptiste to find a location. She admits that some landlords in Harlem are still hesitant to enter such agreements for fear of missing out on a long-term lease. Yet, in the time it takes to write out a long-term lease contract, a pop-up store could have been in and out, Baptiste says.

Stafford, who has been selling real estate in Harlem since 1993, says property owners should consider that a store with a tenant makes the neighborhood look better than a vacant storefront.

Here are five steps to think about when considering a pop-up store:

Outline your goals  and determine a location. The pop-up store is not a goal; it is a strategy to meet a goal. An entrepreneur can use a pop-up shop as a marketing tool to target specific audiences, a sales tactic to get rid of overstocked items, an on site focus group to gauge interest in a new product, or a barometer to test a neighborhood before opening a new store. “There is no time for people to find you so [the location] should be a high traffic area,” Stafford says.

Find a commercial real estate broker. A broker will help you narrow your search and put you in touch with property owners who are more willing to lease their property to you.

Don’t overpay. Base the amount you want to pay for a space on the length of time and the square footage of the space. If the monthly rent is normally $100 per square foot offer $50 per square foot, says Stafford.

Get insurance.

If you own a business but do not own the property in which the business is conducted then you need to purchase business renters insurance; even if you’re there just for one day. If you already have insurance at another location, you may be able to get a rider that will temporarily carry that coverage over to the pop up venue. Insurance protects you from lawsuits that arise from injury, but also covers the cost of any damage that might occur to the rental property.

Plan an event. “It is a great way to build a brand to get exposure,” says Baptiste, who hired a DJ for a MilkShakeNYC pop-up store launched during Howard University’s homecoming celebration in Washington, D.C. An event at a pop-up store should go above and beyond the normal shopping experience; that is part of its appeal to customers. Consider throwing after-hours private parties with free food and beverages or sponsoring an in-store signing with designers or celebrities.