Could Popup Shops Increase Cash Flow for Your Business?
by Scott Westcott
In Homewood, Ill., the traditional farmer’s market now has a twist – temporary or “pop-up” shops where retailers sell a wide range of wares in a nearby 2,500-square-foot vacant retail space. The set-up has a real win-win-win potential – the farmer’s market gets a bigger draw; the once-dormant retail space generates revenue; and local retailers reap the benefit of a built-in customer base at a low-cost location that doesn’t require a long-term commitment.
Pop-up shops such as those in Homewood are part of a trend that’s evolved over the last several years to fill the gap between online sales and traditional brick-and-mortar retail. Temporary retail stores have grown to an $8 billion a year industry, according to a study by Specialty Retail Report and Alexander Babbage, Inc. The trend spans the retail spectrum from large, established retailers such as Google and Kate Spade looking to cash in on an uptick in seasonal merchandise demand to small retailers such as OFabz Swimwear in Ft. Wayne, Ind. that want a physical presence without the financial commitment of a traditional retail store. OFabz participates in a holiday pop-up with other local online retailers
A farmer's market is one place where a pop up shop can take place – yet it is far from the only location for such ventures. Pop-ups exist in abandoned warehouses and vacant retail spaces at malls and strip centers, within existing stores or at a kiosk at the mall. The pop-up has several potential advantages when it comes to improving cash flow. Yet it is important to do your due diligence before jumping in. Key factors to consider include:
Rationale: Before entering the pop-up space, ask a simple question – why? There are plenty of good answers. Often pop-ups offer a quick and relatively easy opportunity to move excess inventory that otherwise would be sitting in a warehouse, cluttering a back room, or keeping more viable merchandise off your shelves. Pop-ups can also help you fully leverage seasonal opportunities or get you closer to your target market. For instance, if you sell specialty spices and seasonings, then spending a few months in a farmer’s market is going to help drive sales and boost name recognition. Pop-ups can also provide a lower-risk test run of a line of products or a new business model. Still, there are risks involved in terms of financial commitment and staffing demands. If you are achieving or exceeding goals with online sales or at a traditional location, think about whether or not the benefits of a pop-up makes sense for your business.
Cost: Getting a pop-up established typically involves far less capital than a brick-and-mortar storefront. Often spots can be rented for a fixed period of time in a converted warehouse or seasonal farmer’s market like Homewood. The rents are typically low, and because you are not locking into a long-term lease, you don’t run the risk of being bogged down by expenses if it turns out that business is not as brisk as you expected. Of course, there are still the costs of ramping up inventory, creating a storefront presence and, in some instances, hiring staff to consider.
Profit potential: Successful pop-ups can be highly profitable and have the potential to turbo-charge your cash flow. Consider that almost half of Spencer Gifts’ estimated $250 million annual revenue is generated by their pop-up, Spirit Halloween. If you carefully choose the right location or venue for your pop-up, you will likely end up where your customers already are, keeping marketing and advertising costs to a minimum. In addition, the lower cost and overhead of running a pop-up can provide the opportunity to operate at higher margins than could be achieved at a traditional retail store. You may also find more pricing flexibility with consumers who may not be as cost-conscious as they would be while shopping online or in a traditional retail environment.
Yet keep in mind that there are variables that can impact profitability, such as competition, location, and even the weather if the pop-up is connected to an outdoor market or event. And, of course, seasonality can be a critical factor in profitability. That ghost costume for sale at the Halloween pop-up rapidly loses value after October 31.
Strategic considerations: A pop-up shop might make sense as a short-term option to boost revenue, but it’s important to consider if it aligns with the long-term goals of your business. For instance, if you are trying to position yourself as a higher-end jewelry retailer, getting a booth at a rural farmer’s market might lack a solid concentration of your target market, while also risking devaluing your brand. Think about how the pop-up supports your existing business model and aligns with your long-term goals. If it makes sense, then go for it. It could well help grow your business and fuel positive cash flow.
About This Author
Scott Westcott is an experienced writer, content strategist and corporate blogger specializing in business, marketing, HR and consumer trends. Executive speechwriter with internal communications and PR experience.
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