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5 August 2019 0 Comments
Posted in Opinion, Retail & Leisure

Pop-up retail: the how-to guide to the high street trend

Author headshot image Posted by , Senior Associate
Contributing authors: Tim Gofton

Stories about pop-up stores seem to… well, pop up nearly every day now. And no wonder: in the modern highly instagrammable world, pop-ups might just be perfectly positioned where ‘click’ meets ‘brick’ and therefore set to revive UK high streets.

The plunge of the high street is no secret. This month, research carried out by a corporate restructuring specialist firm Duff & Phelps revealed that 15.9%, or a total of 50,578 retail units across the UK, stand empty. This is even higher than Retail Week’s previous estimate of 10%.

Another report, by property consultancy Cushman & Wakefield, identified the most resilient retail locations outside London based on 24 economic, demographic and retail property metrics. While three of the locations where Royds Withy King operate – Bath, Bristol and Oxford – made the top 10, closures of traditional stores are still inevitable as the structural shift in retail continues.

And yet, it would be a mistake to give up on physical stores. What we are witnessing is not a collapse of physical retail – instead, it’s a brick-and-mortar renaissance, and pop-ups are leading it.

Why so pop-ular?

Great for tenant retailers

A pop-up store is a fun and engaging way to get your brand noticed. By their temporary nature – here today, gone tomorrow! – they capitalise on our fear of missing out.

Even Amazon has been travelling from clicks to bricks; this month, the online retail giant opened its second Clicks and Mortar UK store in Cardiff. Its first store in Manchester has already proven to be a success, giving up-and-coming online British brands the chance to experience physical retail. The online giant has also recently rolled out train station kiosks in train stations with a view to driving deals offline.

Research by the International Council of Shopping Centres found that when retailers open new stores, they experience a 37% average increase in web traffic. Here’s just some of the other ways retailers can benefit from a pop-up store:

• launching a new product , business or range
• hosting a sale or seasonal promotion
• getting rid of old stock and saving on warehousing costs
• testing a new market or location
• build brand awareness and engagement
• reduced set up/fitting out costs

Pop-ups make all of these possible without the risks that come with committing to a permanent physical store and signing up to a long lease with little flexibility.

Great for landlords

The 50,578 empty retail units across the UK do not only create holes in our high streets and shopping centres, they also come with missed income and unwanted costs for councils and commercial landlords. Pop-ups can help plug that gap, provided that the landlords are prepared to be flexible and work with the retailer tenants to achieve maximum value for both parties.

Great for shoppers

By their nature, pop-ups sit right at the crossroads of online and offline worlds. They satisfy the demands of modern connected consumers by merging offline, online and social media into one all-encompassing omnichannel. Amazon Books – a physical store which organises displays according to Kindle readers’ preferences, allows shoppers to use in-store technology to price compare and check for discounts, and encourages social media sharing – is a textbook (pun intended) example. IKEA, who ran a Facebook challenge to invite winners for the Big Sleepover in its Essex warehouse, and included salons, massages and sleep experts, is another. Merging online and offline works particularly well when retailers add an element of experiential shopping where shoppers’ purchases are not simply goods, but mementos of time well spent.

In a survey carried out by OnBuy.com, 60% of consumers asked were interested in food and drink pop-ups, compared to only 40% for tech, or 50% fashion. The cleverest brands out there combine it all and set up temporary shops that offer goods, include cafés and use technology such as AI and VR to make the experience fun.

How to open a pop-up

Lease or licence?

There is no set formula for the lifespan of a pop-up shop: some are set up for just a day, while others stay in place for weeks or even months. Depending on how long you plan to use the space, you’ll need to negotiate a short term lease or a licence with your landlord.

A licence is a simple permission to use the space for an agreed purpose for a fee, while a lease will give you exclusive possession of that space in exchange for rent over an agreed term and with a number of agreed liabilities and responsibilities both for you and the landlord.

The term

Before you open up, you need to consider both the timing and the length of your pop-up. Do you want to open just for a short period, say, for two weeks before Christmas? Or are you looking to sell old stock and can’t be sure how long it would take?

You will need to build in flexibility into your lease, so that you can extend your stay and/or minimise your penalties for staying longer than originally agreed.

If the parties proceed by way of a short term lease, a mutual break clause should be considered in case the venture does not prove to be a success and either party wishes to terminate the agreement. If a long-term letting subsequently materialises or the landlord wishes to redevelop the area it requires the ability to terminate the agreement as quickly as possible.

Whether the parties proceed by way of a short-term lease or a licence, the landlord will want to ensure that it does not inadvertently grant security of tenure to the tenant.

The rent

Your short-term lease is likely to come with a fixed rent; however, the landlord may wish to incorporate the so-called ‘turnover rent’. This is a rent that varies according to trade and is calculated by reference to the turnover generated at the premises. Turnover rate can protect your cash flow and ultimately your profits; if you think that this method suits you, open the conversation about it early in the negotiations.

Service charges and insurance

Under short-term leases, your landlord will typically charge a rent inclusive of service charge and insurance. It is still, however, worth checking that you are adequately covered for public liability, product liability, employers’ liability, and accidental damage liability.

You should check with the landlord the position on rates and utilities in order to determine who is responsible for making those payments.

Repairs and alterations

As with any lease, you will need to make sure that you have inspected the state of repair and condition of the space that you propose to occupy. If, for example, the area is in a poor state of repair you should consider limiting your repairing obligations by way of a photographic evidence. That way, at the end of the term you will not be required to improve or put the premises into a better state of repair than when you took it at the start of the term. To make your pop-up store appealing and exciting, you may wish to install racking, paint walls, fix up lights and so on. Chances are the landlord would agree to alterations like these as ultimately they would show their retail unit in the best light and serve as free advertising. The landlord will however require you to remove the alterations at the end of the term so you should consider your initial expenditure.

Consents from other authorities

Your landlord should have information on the planning use permitted at the unit, so you can make sure that it covers your business. If you’ve chosen a unit that has previously housed a store, you should not face any issues. But what if your pop-up is intended to have some special features, like a coffee or juice bar? Or a bar that serves alcohol? Or a manicure and hand massage station?

As the law currently stands, obtaining planning permission takes time, and opening a pop-up store in a space that requires a change isn’t economical or practical. However, changes are afoot.

Planning law relaxations to help Britain’s high streets recover are currently under consultation. If adopted, new legislation could allow property owners to avoid the need for expensive, time-consuming planning applications when converting former retail premises into leisure, residential or office spaces.

The draft legislation proposals overseen by Secretary of State for Housing, Communities and Local Government James Brokenshire would soften the current requirement of filing to change a property’s ‘use’ in certain cases. Specifically, the current red tape between “A1” shop and retail spaces, “A2” financial and professional premises and “A3” restaurants and café sites would be replaced with a new, seamless “high street use” category – allowing a property to shift between all three classes without any requirement for planning permission and making it easier for retailers to create appealing experiences.

Your brand’s face

After you’ve gone through securing, designing and outfitting your perfect space, hiring staff may seem an afterthought – but not paying enough attention to staffing is a costly mistake. OnBuy.com survey respondents listed ‘not having staff to handle queries’ as one of the key factors that would put them off a pop-up store.

Your pop-up is a key channel for engaging with your customers, and staff play a crucial role in getting it right. However, your pop-up will be short-lived so your staff must be able to deliver your brand from the first second it is open. You’ll probably rely heavily on social media marketing to promote your store but that same social media can spread the poor service message just as quickly.

Hiring your staff: the practicalities

Staff selection and training are key to projecting a good brand in your pop-up. Any job description or advert you circulate should mirror you brand values. You need to identify in that job description or advert what you are expecting from your staff in order to maximise the chances of your staff identifying with your brand and values from day one.
The re-enforcement of your brand should continue through the interview stage and into staff training ahead of your opening. No staff member will know your business or product better than you. Take time therefore to get involved in staff training as your passion will rub off.

You obviously need to make sure that you pay staff the minimum wage. If your pop-up is in London, you may want to pay the London Living Wage. Depending on your finances, you may decide to pay more than the national minimum wage. This could attract higher calibre applicants and it may also help keep workers motivated and improve their reliability and loyalty to you.

It’s obvious but worth repeating: you need to make sure that you have any necessary written contracts of employment in place for your staff. And, finally, make sure that all your staff have the right to work in this country. A fine for employing illegal workers (currently up to £20,000 per individual) is not going to help your first week’s takings.

Got any questions on opening a pop-up store? Looking to change the permitted use for your retail space? Our specialist Retail team can help

0800 923 2073     Email usenquiries@roydswithyking.com

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