From Vacant To Vibrant: Meeting the Challenge of Filling Empty Stores

Pop-up stores, like pop-up restaurants, present an innovative way to test new concepts without a major outlay or long term commitment.

It may be a transitional answer to the decline of malls and main street shopping areas, or it may represent the next phase of how goods are bought and sold. JL

Jim Daly reports in Medium:

Half the nation’s 1,500 malls will fail in the next 20 years. As vacancies grow, one result is pop-up stores, with leases as short as a week, from malls and main streets, to galleries and grocery stores. A pop-up is temporary retail space, often to test new ideas without a big cash outlay. A platform connects those who have shops or empty real estate in areas with high foot traffic and visibility with merchants, an Airbnb for merchants. Retailers like the lower rents and reduced commitment. For desperate landlords, a short-term tenant is better than none.

As merchants abandon traditional retail outlets, sharing companies see an opportunity.

The ghost towns of today aren’t filled with tumbleweeds or creaky doors lazily banging in the wind. Instead, they’re main streets downtown, filled with empty stores. Or they’re vacant shopping malls, now devoid of the vibrant blend of people, money, and consumption that once made these centers pulse.

All across the country, physical stores struggle to compete with online commerce. The trend is hitting every town, large or small. Retail is in a state of upheaval, with record vacancy rates even on major shopping streets like Fifth Avenue in Manhattan. Recently, Ralph Lauren became the latest to leave, with plans to close its flagship Polo store in midtown Manhattan, following similar departures by big names like H&M, Juicy Couture and Kenneth Cole.

The ‘burbs are getting hit even worse. Howard Davidowitz, chairman of retail consulting and investment banking firm Davidowitz & Associates, Inc, recently told CNN that half the nation’s 1,500 malls will fail in the next 20 years. There’s even a photo book, called “Black Friday” by photographer Seph Lawless, which displays his haunting images of empty malls in the Rust Belt states of Ohio and Michigan. He calls his project an “autopsy of America.”

Online stores have permanently changed our buying habits — and now they’re beginning to change the habits of landlords as well. As vacancies grow, landlords are scrambling to bring in cash. One result is the influx of pop-up stores, with leases as short as a week, that are happening in places from malls and main streets, to galleries and grocery stores. A pop-up shop is temporary retail space used by one or more brands, often to test new ideas in an innovative way without a big cash outlay. Retailers like the lower rents and reduced commitment. For desperate landlords, a short-term tenant is better than none.

An Airbnb for merchants

This gap between supply and demand presents a ripe economic opportunity for several sharing companies. Storefront, for instance, is a platform that connects those who have shops or empty real estate in areas with high foot traffic and visibility with merchants seeking to peddle their wares — essentially an Airbnb for merchants.

Listings on Storefront vary quite a bit, from full retail spaces that can be used as full-blown popup shops, to shelf space in half-empty boutiques. Locations range from cozy neighborhood shops to wide open lofts, subway stops to hotels. Rentals range from several hundred dollars a day to several thousand.

Storefront is attractive for new brands in particular, and thousands of merchants have used the platform to open up shops in places like New York, San Francisco, Hong Kong and Milan. The broker works with both leading property companies and brands (including American Apparel, Microsoft and Google), giving access to a huge database of spaces. Storefront makes its money on commissions—for every booking they take a cut.

Storefront isn’t the only company to jump into this new niche. Appear Here, which recently raised more than $12 million in Series B funding, is another marketplace for short-term retail space. It also announced the opening of a New York office, adding one more broker to a retail market that has seen an explosion in vacancies in recent years.

Business as theater

All of these recent shifts suggest a more fundamental change in commerce. Digital assets inherently feel less like a possession than physical ones and, as a result, companies must shift from offering an item to offering a relationship with their customer. Done right, these new relationships can create even more long-term value than the old ones.

A key part of this change is a shift toward what’s called the experience economy. It’s a place where — as the Harvard Business Review put it — “a company intentionally uses services as the stage, and goods as props, to engage individual customers in a way that creates a memorable event.” These can be as weird and wonderful as setting up a store in a large ocean-going shipping container, or Adidas creating a pop-up that looked like a giant shoe box. Last year, Appear Here converted an abandoned men’s restroom in a London subway station into a trendy menswear shop.

In other words: your business is a stage, and people want to get absorbed in the wonder of the performance. Good theater works wonders. In today’s service economy, many companies (even large ones like Nike) simply wrap experiences around their traditional offerings.

Merchants often frame their pop-up services as a creative palette, a chance to create bold concepts and unusual ideas in a fresh ways. Regardless of how successful a brand is online, nothing can replace the physical experience coupled with human interaction.

Pop-ups can also serve as powerful forces within neighborhoods. Popuphood is a small business incubator aiming to revitalize downtrodden neighborhoods by activating vacant retail space. Popuphood’s program currently gives businesses six months of free rent in formerly vacant spaces, with the hope that the stores will become self-sustaining after this period. The organization has garnered much attention for their work in the San Francisco Bay Area, where they are working to revitalizes neighborhoods that receive little daytime foot traffic. Several of their temporary stores become permanent.

Creative retailers, from old to young and large to small, are once again learning the wisdom of the old sales adage: “If you are not taking care of your customer, your competitor will.”