When Brazilian-born sneaker brand Cariuma was planning on their launch in New York, the company set their eyes on SoHo, a neighborhood known for its designer boutiques. They furnished a 450 square foot space into a Rio-style bar, put sneakers on beer crates, and played soothing Brazilian music nonstop in the background. Dozens would stop by on a weekday, and over 100 on weekends.
Cariuma is a startup that primarily focuses on online business. However, while high rent in prime places like SoHo make opening a permanent brick-and-mortar storefront unpractical, the company has sought help from an acquainted real estate company for a short-term lease to open a pop-up.
“At the end of the day, it’s super important to have a brick-and-mortar space at least for a period of time,” said Dorielle Hadar, head of partnerships for the sneaker company. She admitted that about 80% of their customers who tried shoes on in the pop-up ended up purchasing. “Online, all you could do is to create digital ads, or banner images that kind of speak to the person, but it’s not being a physical experience.”
First used by big brands to create “stunts” and to do advertisements, pop-ups have been increasingly used by e-commerce-oriented new brands to break into the market. Instead of seeking a long-term rental from a traditional real estate broker, or putting their products on the shelves of department stores, these small businesses are coming to websites like Appear Here and Storefront, both considered “Airbnb” of retail space known for offering short-term leases.
“The average duration is 15 days,” said Mohamed Haouache, CEO of Storefront, whose lease can be as short as one day, all the way up to 18 months. The company now has business in 10 countries.
“Rent is very high in all the tourist or retail cities, the vacancy rate is getting higher and higher, and it is mostly due to the fact that listing owners and space owners are neglecting the fact that every retailer is moving online,” explained Haouache.
“There is this mismatch today between the cycle of real estate and the cycle of sale,” Haouache’s company takes the opportunity to become the go-between for landlords and many small businesses.
Even though traditional retailers are moving online, a place in New York’s commercial area is still coveted by startups. “Being able to have a physical presence in places like New York where the consumers wander around the retail areas and looking for interesting places to go in, is a more cost-effective way of actual advertising than other means being available to them,” said J.P. Eggers, an associate professor in the Management & Organizations department at NYU Stern.
With no big commitment, startups can use the short-term opportunity to have a “trial marriage” with a brick-and-mortar storefront. They take advantage of the glamor in prime retail areas, without paying a retail markup, which usually cost about 50% of their revenue in New York City, and see whether it would be worth the cost to “tie the knot”.
For some other startups, it is not really about testing water. They use the temporary brick-and-mortar storefront to get feedback about their products. “You can get a lot of data online, you can get even more when you see them face to face,” says Eggers.
That is what was behind the pop-up of Dagne Dover, a direct-to-consumer handbag and accessories startup selling women’s carryalls, who is also in SoHo for the upcoming holiday season. The store has arranged a packing station, providing props ranging from makeup, laptops, to even shoes. Customers can grab what they usually use, try them out, and decide the size of the bag they want. The feedback from customers at the packing station will also be used to modify the company’s products.
“They are not only trying to sell products, they are trying to connect with their end users,” said Haouache, whose website keeps close touch with temporary storefront seekers.
During their brief stint, Cariuma occasionally invited influencers to its store, and put pictures on social media, to take full advantage of their short existence in SoHo. “There’s no long-term commitment, less risky, and at the same time, we get to project an image that resonates with people in the short term,” said Hadar.
It is effective publicity. “I was attracted by the sneakers on the window outside,” said Brent Kuennen, who walked into the shop on a recent Sunday morning. He said he didn’t have much knowledge about Cariuma, and the pop-up helped him know about this brand.
Some startups keep using pop-ups despite having the opportunity to open a permanent store, observed Eggers. “It always provides a fresh experience, fresh rhythm to come in, and something that is newsworthy to attract customers, as opposed to saying, we are open as we always are,” he said.
A new retail landscape?
Pop-ups are also impacting neighborhoods, according to real estate experts. High rents have made vacant storefronts a common sight in some areas like SoHo, but an increasing rotation of pop-ups have helped to bring back a vibrant retail landscape.
For consumers, shopping is no longer translated into bringing dozens of bags home. Since the pop-up stores of online retailers tend not to stock their merchandise, but only display it, customers have to order from the shop for delivery or mark down a product code to purchase online later.
“For a lot of time, retail was offline and advertising was online,” said Eggers. “Now walking around SoHo is the physical version of browsing websites.”