Legacy retailers are opening pop-up shops, but are they worth the cost?

Jacques Penné, a J. C. Penney Holiday Boutique. Photo by Mark Von Holden/Invision for JCPenney/AP Images.

For two days last December, shoppers in New York City’s SoHo neighborhood entered a sleek boutique with a vaguely French-sounding name, “Jacques Penné.” There, they encountered holiday gifts curated by celebrities and influencers presented in a millennial-friendly, pared-down environment—think geometric wood shelving, copper accents, and tiny houseplants. If they didn’t look closely at the signage, they might have missed that the store was a pop-up by J. C. Penney.

Jacques Penné might not have been exactly the sort of thing you’d expect from a big-box department store chain like J. C. Penney—which was exactly the point of the retailer’s pop-up venture. “Overall, [we] wanted to inspire customers to rediscover J. C. Penney. ‘Jacques Penné’ showcased our amazing value and unexpected newness, therefore updating the perception of J. C. Penney during the holiday season and beyond,” a company spokeswoman told IBM.

JCPenney is just one of many legacy retailers that have organized a pop-up shop in recent years, marking a big shift in the pop-up sphere. Once the domain of small upstarts and online retailers wanting to experiment with a physical presence, pop-ups are now a go-to tool for retailers and consumer brands that have been doing business for decades. “Pop-ups are no longer one of these trendy kinds of things. It’s really become a mainstream alternative model for doing retail. You’d be hard-pressed to find a really iconic brand that isn’t doing pop-ups,” Larry Baras of the pop-up industry service provider PopUp Repbulic told IBM.

Pop-ups can serve multiple functions for big retailers. Some open pop-ups to test new markets and products, drive online business, or attract new segments. Others are simply looking to generate buzz, or, like J. C. Penney, change the company image. At a time when empty storefronts are plentiful and short-term leases are relatively cheap, a pop-up is an appealing option.

Last summer, in an effort to “defy the conventions” Ikea Canada operated a Play Café in downtown Toronto, where visitors could play with a giant pinball machine, compete in a dance-off, and shop with RFID- activated wooden spoons. In February, Nike created a pop-up in LA to promote its new “90/10” collection. That same month, Macy’s debuted a pop-up marketplace, “The Market @ Macy’s,” that gives temporary space to brands and companies on the retailer’s ground floor to promote or sell products. The initiative is designed to “drive customers to stores by giving a constant break of discovery.”

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In 2016, PopUp Republic valued the pop-up model at $50 billion. But is the expense worthwhile? Pop-up shops, clearly, present multiple benefits for retailers, but they’re not huge profit-generators. They’re also big logistical undertakings.

“Whether you’re a big brand or small brand, you think that creating a pop-up shop might be easy. Then you start getting into it and realize virtually element associated with opening a permanent retail establishment—rent, staffing, design and fabrication, insurance, point of sale capability, PR and marketing—applies to a pop up, just at a smaller scale,” Baras said.

The Market @ Macy’s. Photo courtesy of Macy's.

The Market @ Macy’s. Photo courtesy of Macy’s.

But for many legacy retailers, the reasons for opening a pop-up outweigh the cost. As a slew of digital stores disrupt the industry, retailers are learning that innovation in the brick-and-mortar arena is pivotal to generating interest and sales. Opening pop-ups, incorporating food and beverage programs in stores, and exploring cutting-edge technologies like AI, IoT and blockchain, are all part of that strategy.

What does the future hold for the pop-up industry? If the past five years are any indication, Baras said, it’s likely more growth, and undoubtedly more change.

“When I look back five years, it’s like we’re in a totally different industry. There are shifting sands underneath our feet, and we need to change what we do as more people get into it,” he said.