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Pop-up stores provide long-term retail and marketing prospects

The concept of pop-up retail originated with US fashion designers seeking to showcase new clothing lines. However with consumer spending deteriorating and as suppliers seek to cut the costs of product launches, pop-ups have become a growing phenomenon which have expanded into the Irish retail market.

Premium fashion brands such as Hermes, Jimmy Choo, Levi's and Prada are among those who have used pop-up stores while major international retailers include: Toys R Us who opened approximately 90 outlets in the US in 2009 and The Gap kicked off a 60's style tour using a school bus as a mobile pop up store.

In Ireland last year numerous retailers have introduced pop-up stores and Grafton Street has provided platforms to launch new products and concepts with brands such as Cadburys, Guinness, West Coast Cooler, Nokia among those using pop-ups.

Over the course of 2011, CBRE agreed pop lettings with Goodfella's Pizza, Xbox and Calendar Club on behalf of landlord clients with Grafton properties.

Furthermore with vacancy levels increasing on some of Ireland's prime high streets and shopping centres pop-up stores have started to become a regular presence.

There are a number of advantages for a landlord and a retailer to implementing a pop-up store.

Advantages for a landlord

The clear advantages for a landlord with a vacant property is that a pop-up store generates temporary rental income, albeit for a short term period.

In the circumstances that the pop-up store proves to be successful, this might present an opportunity of retaining the tenant on a longer term arrangement, thereby extending the rental income being generated on the property, and perhaps creating a more marketable investment.

It also reduces some of the landlord's outgoings on a vacant property, such as commercial rates and service charge. As part of their occupancy, a pop-up retailer may fit out the unit creatively.

This in-turn might be beneficial for a landlord who can use their fit out as an example of how the retail unit can be configured when speaking with other prospective retail tenants once the temporary pop-up store terminates.

Furthermore, in a shopping centre a temporary pop-up store may increase footfall to the benefit of other tenants.

Advantages for a retailer

Typically a pop-up store can be required for as little as two days up to a period of four to six weeks and during this period the occupier can test market the new product or brand and thus get first-hand feedback from customers. However the primary advantage is marketing costs compared to TV advertisements. Furthermore the retailer can test the retail location without having to sign up to an onerous long term lease.

Disadvantages for a landlord

On Grafton Street where a number of the retail units are owned by pension funds and private landlords, a short term pop-up store would not be the ideal scenario. Most funds would prefer to secure a good quality covenant with a guaranteed income flow on a relatively long term lease. The costs involved, such as legal fees, agent's fees versus the licensee fee being generated may prove unpalatable for a landlord.

In shopping centres, a pop-up store might give rise to estate management issues where the pop-up brand might be in direct competition with existing retailers.

Disadvantages for a retailer

Their short-time span means that the pop-up marketing campaign may not last as long as some media advertising campaigns.

The fees for a pop-up store will vary with location but usually include a license fee, ESB, rates and legal fees.

The future

Looking ahead we see the concept of pop-up lettings growing on both high streets and shopping centres.

Fashion designer Stella McCartney has even used pop stores designed by Giles Miller as a visual merchandising method to promote her fashion line by opening temporary stores across the globe including Galleries Lafayette on Boulevard Hausmann in Paris for three weeks, Hong Kong, Ireland and the USA.

With retailers experiencing huge growth in on-line shopping, pitching their products in conjunction with pop-up stores may make a product viral as consumers can touch and feel the product without having to commit to a long term lease. It could even replace some traditional sales promotions.

Natalie Brennan is associate director retail agency, CBRE

Indo Property