Part 1: Pop-Up Retail Basics
Chapter 2: Formats and Functions of Pop-Up Shops
Chapter Overview
Over the last few years, pop-up retailing has gained popularity among retailers, from large international chains to small start-ups. As a temporary retail phenomenon, pop-up stores have emerged in shopping malls, urban street fronts, central business districts of small communities and other vacant spaces. Experts predict that the growth of the pop-up retail format in Canada will continue to gain momentum into the future, and that 2018 is the “Year of the Pop-Up”.1
Learning Objectives
Upon completion of the chapter, readers will be able to:
- Recognize and describe the different formats of pop-up shops
- Identify how pop-up shops are used as a marketing and communication tool
- Explain how pop-up shops may be used as a market entry tool
- Give examples of how pop-up shops may be used for inventory liquidation
Setting the Context
VIDEO
The following video presents a fictional meeting between a consultant and an entrepreneur who sells loose leaf tea online, but who wants to use a pop-up strategy to test the possibility of opening a permanent location, while building awareness about the brand and a great experience for new customers.
1. Pop-Up Shop Formats
1.1 Consumer Motivations & Pop-ups
From a customer’s perspective, a pop-up shop can be intriguing because its temporary presence creates a sense of urgency, making the customer feel that they should shop before the pop-up shop disappears. Businesses interested in leveraging the pop-up retail format, however, must think, plan and execute their pop-up store operations strategically. An important aspect to consider is consumer psychographic characteristics, which include those related to “individuals’ values, attitudes and lifestyles”.2 Many studies have assessed the effects of psychographic attributes on various aspects of consumer behaviours, such as retail format choice3, online auction behaviour4, shopping orientation and product/brand preferences5 and decision-making styles6.
When planning a pop-up retail experience, research suggests focusing on these three psychographic factors: consumer innovativeness, market mavenism and shopping enjoyment.7 These factors may help drive the choice of pop-up format to implement.
Consumer innovativeness refers to a customer’s predisposition to seek out new and different products/brands and/or shopping experience rather than simply adhere to routine consumption patterns.8,9,10 The unique and novel aspects of pop-up shops, such as limited-time operation, non-conventional location/store atmospherics and guerilla marketing approaches are appealing to innovative consumers due to the sensory stimulation provided in the shopping experience.
Market mavens are those influencers in marketplaces “who have information about many kinds of products, places to shop, and other facets of markets, and initiate discussions with consumers and respond to requests from consumers for market information”.11 In the world of digital communications, they are sometimes referred to as “Local Guides” as they are active reviewers of a large quantity and variety of products/services in the marketplace. Market mavens are of critical importance to pop-up retailers, who usually rely on word-of-mouth to promote a pop-up shop. In order to leverage market mavens, pop-up retail strategy should always include a devoted effort to monitor and manage social media communications.
Shopping enjoyment is a key factor that affects a customer’s acceptance of pop-up retail.7 A customer may derive pleasure from the entertainment, experiential, educational or interactive aspects of a pop-up shopping experience. The excitement of finding bargains may also contribute to a customer’s positive perception of a pop-up store.
1.2 Experience Co-Creation Map
Pop-up shops, as a new means of communication and type of distribution channel, offer great potential for value co-creation between a company and its customers.12 As Figure 2.1 below shows, pop-up shops provide the company with the ability to:
- learn directly from customer behaviour
- test new offerings
- build deeper relationships and trust with the consumer
- increase and maintain grouping and community
- keep in touch with the firm and brand
- have a unique experience
- gain membership to a new social network
- reduced communication costs and more effective communication
- reduced risk of product-services failure and misalignment with the market
- reduced risk of customer dissatisfaction
- test free products and treatments
- experiment with customized products
- identify with brand values
- increase reciprocity
In the value co-creation context, a pop-up shop is viewed as “a place of consumption, experience, customer interaction and cognitive and sensory involvement”.12 Thus, pop-up shops promote a two-way learning process between the company and customers. Through the process, companies get to develop more effective and customized relationships with customers, while the customers internalize their experiences with the company through high levels of involvement and participation.12
1.3 Typologies of Pop-Up Shops
Pop-up shops have been implemented in many different ways. Due to their temporary nature and short time span, pop-up shops face challenges and constraints in terms of limited budget, space availability, space setup, merchandise assortment selection and other factors related to operation and logistics. Meanwhile, pop-up shops also provide opportunities for new product/service incubation, inventory liquidation, as well as customer engagement. There are a few ways to categorize pop-up shops, based on design/structure, mobility/location and objectives.
1.3.1 Design/Construction
Short-Term Standalone Store: usually mobile or fixed, and oftentimes by an individual brand. May be located in an indoor structure, such as a mall or community centre, or outdoors. For example, Samsung created a short-term standalone pop-up store to promote the launch of the Galaxy S3 phone leading up to the holiday season. Billed as a “Premium Pop-up Experience”, this movable structure with two-way mirrored glass provided consumers a chance to interact with innovative Samsung solutions using the features of the Galaxy S3 phone. The design reflected the brand as a pop-up.
Short-Term Kiosk: often in the form of a cart, which is a non-permanent and portable unit designed to fit small spaces, and usually placed in a high traffic area. For example, the Barefruit Juice kiosk pictured here is situated under an escalator.
Pop-In Store: appears to be a “store-within-a-store”. For example, Google opened a pop-up within a PC World store in London to promote Chromebooks and related accessories for 3 months leading up to the holiday season.
Invisible Pop-Up: using augmented reality and geo-location technologies, businesses take a scavenger hunt approach to allow shoppers in the designated area to use their own mobile device to order virtually available merchandise for a limited time.
Example
Video
As you’ll see in the brief video, Airwalk created a virtual pop-up shop in New York City and Los Angeles for mobile-equipped consumers to pre-order special edition items. It generated $5 million in press, resulted in the busiest day for their e-store and re-established street culture.
Virtual Wall: a wall or floor in a high traffic area that is turned into a virtual catalogue page with 3D images of popular merchandise to bring QR-based shopping to life. Virtual walls allow shoppers to purchase select items using their mobile phones to scan a QR code from the walls and/or floor. For example, Walmart and Mattel formed a partnership and created virtual walls and floors for about four weeks leading up to the holiday season in Toronto’s Union Station and PATH as well as other locations in Vancouver and Montreal.
Collaborative Pop-Up: usually organized by a third-party company or trade association who rent short-term common area space and find small independent businesses to sublease the space as a co-op. The independent businesses oftentimes use the opportunity to test the market, promote brand awareness and expand their customer base with a goal to open a permanent kiosk of their own. For example, the Westfield shopping centre in Australia has created a collaborative pop-up space to incubate emerging designers, which in turn, adds diversity to the mall’s offering.
1.3.2 Mobility/Location
Guerrilla Store: its name comes from “guerrilla marketing”.13 A guerrilla store tends to employ non-conventional less costly guerrilla tools, “such as stickering, advertising on public transport, public relations, as well as mobile technologies using email and social networking sites”.14 Guerrilla stores are oftentimes strategically located in atypical urban settings, such as in front of a church or an art gallery, to engage the customers in a novel, hedonistic and exclusive shopping experience.14
Nomad Store: a pop-up shop that is mobile. A nomad store often uses a van, shipping container or store-on-wheels format (e.g., portable kiosk) and re-locates frequently. For example, Puma has 24 shipping containers that they send around the world, some of which combine and open up into a 3-story shop, cafe and office space.
Pop-Up in Shopping Malls: can be a short-term standalone store or a kiosk located in a high traffic area inside a shopping mall. For example, this Momo kiosk or standalone store is set up in the atrium of a shopping centre in Hong Kong and is made of recycled materials with apparel for sale on the inside.
Some independent retailers or small retail chains also take advantage of a short-term vacant store space in a shopping mall and operate a pop-up shop. In this case, the pop-up shop is not a permanent tenant, but holds a lease of a few months to a year at a significantly discounted rate. In other situations, a brand might use a pop-up shop as a marketing tool to bring awareness to its target customers while a long-term retail operation is in preparation. For example, Moose Knuckles launched its pop-up shop in Yorkdale Shopping Centre in Toronto, Ontario, Canada, a few months before opening its permanent branded store in the same shopping mall.
Event-Driven Pop-Up: format used by retailers for special events, such as the celebration of a milestone for the company, new product launches, etc. For example, ALDO is known for operating pop-ups within international department stores like Galeries Lafayette in Paris and Selfridges in London. But for their milestone anniversary, they turned their own Montreal flagship store temporarily into an event space to promote the vision, history and core values of the company and featured several speaker series for consumers to hear from the company’s founder, designers, stylists, fashion editors and more along with hosting a DJ’d cocktail party at night.
1.3.3 Objectives
Warnaby et al (2015) identified some strategic objectives that pop-ups might set out to achieve.15 We have added one further type of objective: institutional. This recognizes that institutional pop-up programs may serve an important additional objective where not-for-profit organizations and communities develop plans to revitalize economic engagement within a specific area by attracting and promoting multiple pop-up shops.
- Communicational: Pop-up shops with a primarily communicational objective focus on creating brand awareness, enhancing brand identity and influencing brand perception. Selling may be part of a communicational pop-up shop but it’s of significantly lesser importance. Companies also set up this type of pop-up shop to communicate key brand messages, such as a celebration of a company milestone, a new product release or a major event (e.g., Fashion Week). For example, to celebrate National Chocolate Day, Hershey’s operated a 10-day Chipits Bake Bar pop-up in Toronto, where people could design and take home their own free cookies. Furthermore, Hershey’s donated a meal to the Daily Bread Food Bank for each pack of cookies distributed.
- Experiential: Pop-up shops with an experiential objective devote significant effort to facilitating brand-customer engagement. The operation of experiential pop-up shops is usually an integral element of a firm’s marketing plan to build a brand community. Through a pop-up environment, customers get to interact with a brand and products in a direct and more intimate fashion. Experiential pop-up shops enable customers to learn more about the brand culture by immersing themselves in a carefully designed and executed pop-up experience, and to develop and enhance brand value perceptions through observing demos and being involved in trials and tests. One example is the pop-up IKEA cafe.
- Transactional: Pop-up shops with a transactional objective relate to the economic dimension of commerce activities, where sales are at the core of business operations. A good example of this type is Halloween and Christmas stores where merchandise sell-through is the main goal. In addition, transactional pop-up shops are often used in beauty, fashion and accessories and home furnishing sectors to clear out inventories of the past season at significantly discounted prices and they are commonly referred to as “warehouse sales”. Transactional pop-up shops usually utilize vacant streetfront locations in urban settings, a firm’s warehouse or a massive showroom/exhibit hall in a conference centre or fairground. What motivates customers are the opportunities for exposure to wide and deep product assortments and the excitement of “bargain-hunting”.
- Testing: Pop-up shops with a testing objective emphasize gaining shopper insights and testing markets’ responses to new products/brands. They are a relatively low risk and low cost option for companies to enter into a new market or launch a new product/brand that may lead to changed consumer habits. An example is when Well.ca, as an Internet pure-play company, opened a bricks-and-mortar pop-up shop to explore the potential of new distribution strategies in the marketplace and gain insights on shoppers’ cross-channel shopping behaviours.
- Institutional: An institutionally organized pop-up shop program contributes to revitalizing local communities and promoting economic redevelopment of the area while creating conditions that help to satisfy the business objectives of individual brands or retailers that participate in the program. This institutional objective has been used as a way of leveraging pop-up shops to reduce vacancy rates of commercial districts in neighbourhoods, re-engage local customers and stimulate the economies. These programs are often part of a community-building, not-for-profit initiative and supported by local shopper loyalty. One such project has been successfully implemented by WoodGreen Community Services along with the Danforth Avenue East Community Association (DECA) in Toronto. The Pop-up Shop Project resulted in 32 pop-up shops since December 2012, 15 stores leased, 100% of participating landlords recommend the project to others, and 6% commercial vacancy rate down from 17% in 2012.Pop-up shops can also play a vital role in community recovery after natural disasters. On February 22, 2011, a major earthquake destroyed a key shopping centre called CityMall in Christchurch, New Zealand. To keep retail alive in the area, a temporary mall named “Re:START” opened its doors only eight months after the earthquake with the original intention to operate for only six months. This pop-up mall was made with shipping containers and was comprised of restaurants, fashion retailers, a supermarket and even banks.16 This temporary pop-up mall became a great tourist destination, and after five and a half years of operation, it eventually transformed into a permanent mall, the Container Mall on Riverside17.
2. Pop-Up Retail as a Marketing and Communication Tool
2.1 Pop-Up Retail Affects Brand Image
The temporal dimension, the promotional emphasis and the experiential emphasis are three key characteristics of pop-up retailing.18 The experiential-oriented brand-customer interaction within a temporary pop-up shopping setting can influence customers’ perception of the products and retailer brand. In the context of omni-channel retailing, most customers are involved in multiple channels during their shopping journeys on regular basis and cross-channel shopping is common. Hence, a customer’s prior experience with the brand/retailer in other channels can influence their perceptions of the pop-up shopping experience and vice versa. If a pop-up shop is a customer’s first encounter with a brand, then perceptions of the pop-up shopping experience will play a critical role in creating awareness and developing an overall brand image. For well-established brands, retailers can leverage pop-up shops to enhance brand perceptions and test brand images in newer markets. However, it’s worth noting that a customer’s prior knowledge of the brand influences their expectations of the physical attributes of the pop-up store and the kind of experience they expect to receive within. Dissonance between the expected and actual experiences can result in damage to brand perception.
2.2 Pop-Up Retail Impacts Word-of-Mouth
3. Pop-Up Shops as a Market Entry Tool
3.1 Test New Products
A pop-up store offers unique and highly experiential experiences to customers. Research shows that aspects that attract a consumer to a pop-up retail operation include the following:
- Product Novelty/Uniqueness: factors related to an exciting shopping environment, new, unique and exclusive product/brand offering, opportunities to learn about the products/brands being offered
- Facilitators of Purchase Decisions: factors related to the return policy and service protocol of pop-up stores
- Product Trial and Unique Experience: factors related to unique and novel shopping experiences and opportunities to receive free samples and try out brands/products.22
The pop-up customers’ expectations provide golden opportunities for businesses to use pop-up retail operations as a prime vehicle for testing new products/brands and/or new business strategies. Because new product/brand/service offerings often require changes in shopping/consumption behaviour, pop-up shops allow retailers/brands to gauge the market’s reactions without having to incur significant investments.
3.2 Attract New Target Market
Pop-up stores can also help retailers/brands attract new target markets. Niehm et al (2007) found that although young people and females of all ages are the core target market for pop-up stores, there is potential for a much wider audience. When attempting to expand its customer base, a company needs to raise awareness and address the customers’ needs for novelty, innovation and trial. Pop-up shops provide the opportunity for the company to experiment and learn with reduced risk. In recent years, many businesses have used pop-up stores as a mode for entering foreign markets. In this case, pop-up stores serve as a cost effective way to explore the foreign market and test its acceptance of products/brands and/or a retail concept. Picot-Coupey (2014) identified three motivating factors for businesses conducting international pop-up retail operations:
- testing and adapting the brand and the retailer’s concept to foreign consumers who are unfamiliar with it
- raising and sustaining the international profile of a retail brand
- developing relationship networks with stakeholders in foreign markets
International pop-up retail operations can be a first step for a business to establish its long-term and permanent presence in a foreign market.23
3.3 Set Up Omni-Channel Retail Operations
In the context of an omni-channel retail environment, pop-up shops are often included as one of the channels through which customers engage with a retailer or manufacturer brand. Research shows that consumers consider each channel of an omni-channel retailer as a holistic and complementary experience.24 The cross-pollination of channels and shoppers is a critical factor for retailers to develop strategies to achieve customer satisfaction and loyalty. In other words, customer satisfaction is no longer built upon on evaluation of just one channel, but is an accumulated assessment of the experiences encountered in the multiple channels used, such as bricks-and-mortar locations, e-commerce, and pop-up shops.25 Pop-up shops, as a unique distribution channel, should be strategically implemented to enhance customer retention and participation in other channels.
4. Pop-Up Shops for Inventory Liquidation
Pop-up shops as a means of inventory liquidation is mostly seen in the beauty, fashion and accessories and home furnishing sectors, as it’s a common practice for these sectors to clear out past seasons’ inventory so stores have room to bring in fresh merchandise. Often referred to as a “warehouse sale” or “sample sale”, the pop-up stores can be run by the brands themselves in a select store or a company warehouse location. In this case, the sales are normally with limited assortment/brands. They could also be planned and implemented by a third-party agency who specializes in inventory liquidation sales. In this case, the sales usually include multiple brands and product categories and take place in a massive showroom/exhibit hall in a conference centre or fairground. When selling the end-of-season inventory at greatly discounted prices, a pop-up retail operation is a most appropriate choice. Due to its temporary nature, it communicates a sense of urgency (i.e., buy now or it’s gone) and provides a unique hedonic shopping experience (i.e., the excitement of “bargain-hunting”). Meanwhile, inventory liquidation pop-up sales also enhance sustainability (by reducing waste) and democratize consumption (by making goods more accessible to more people).
Key Takeaways
In this chapter, you learned:
- about the psychographics of pop-up customers and how pop-up retailing offers great potential for value co-creation between the company and customers
- how different pop-up shops can be categorized
- what functions pop-up retail can serve
Key Terms:
- Consumer Psychographics
- Value Co-Creation
Mini Case Study
ABC Inc.
Situation:
A European garment/swimwear manufacturer, ABC Inc., has no physical store, but wants to increase their marketing efficacy to gain awareness among their target audience. They have a limited budget and need to initially grow organically before considering major expansion.
ABC Inc. decides to take the pop-up shop route on their way to reaching their goals. With a pop-up shop, they could strategically invest their resources, and control both the overhead costs of the endeavour, as well as the market that is targeted. Yet pop-up shops can be risky ventures and popping up in various cities and towns across the country, at various times, and for varying durations can be costly and fraught with risk.
Additionally, ABC wants to know more about the major shifts in market trends, while making more people aware of their products. They need a way to both get their name out there and gauge their market to help predict future trends.
Solution:
ABC used their resources to open several pop-up shops with both a small format and large format. They used a communicational objective, focusing on awareness and communicating their value proposition rather than immediate sales and transactions. This strategy kept their costs down and allowed them to add a client-experience focus to each pop-up. ABC had potential clients trying on their apparel at the pop-up shops without the pressure to buy on the spot.
Results:
With a communicational pop-up strategy, ABC used an agile and focused platform to reach their target market, set up shop in their preferred areas and events, increase their awareness, gain insight into customer needs all toward creating more effective marketing plans in the future. The pop-up shops helped facilitate their intended organic growth, and has morphed into an asset, rather than a temporary cost
Consider the following questions:
- How might ABC Inc. go about identifying and understanding the best locations to set up and reach their target market?
- ABC Inc. utilizes a two-part format for their pop-up strategy. List these parts and explain why each is important or necessary.
- How can ABC Inc. use their pop-up shops to expand into new markets with a direct-to-consumer model or in partnership with boutiques?
References
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- Warnaby, G., Kharakhorkina, V., Shi, C., & Corniani, M. (2015). Pop-up retailing: Integrating objectives and activity stereotypes. Journal of Global Fashion Marketing, 6(4), 303–316.
- Re:START. (2014) Working Together for a Common Goal.
- Mcdonald, L. (2017, May 17). Christchurch’s container mall gets more food tenants and an extra summer. The Press.
- Taube, J., & Warnaby, G. (2017). How brand interaction in pop-up shops influences consumers’ perceptions of luxury fashion retailers. Journal of Fashion Marketing and Management: An International Journal, 21(3), 385–399.
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- Klein, J. F., Falk, T., Esch, F.-R., & Gloukhovtsev, A. (2016). Linking pop-up brand stores to brand experience and word of mouth: the case of luxury retail. Journal of Business Research, 69(12), 5761–5767.
- Niehm, L. S., Fiore, A. M., Jeong, M., & Kim, H.-J. (2007). Pop-up retail’s acceptability as an innovative business strategy and enhancer of the consumer shopping experience. Journal of Shopping Center Research, 13(2), 1–30.
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