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Retail Law Advisor

Apple Pay and Google Wallet: Mobile Payment Going Mainstream

Posted in Banking, Finance, Retail, Retail sales, Technology

When Apple announced on September 9, 2014 that the iPhone 6 would be equipped with a mobile payment system appropriately called Apple Pay, the entire mobile payment universe woke up. Although competitors had existed for years, none had gained considerable traction. In fact, within a month of releasing Apple Pay, Apple proclaimed to be bigger than all mobile payment competitors combined, including Google Wallet.

Adoption

Google Wallet was launched on May 26, 2011 to minimal fanfare, due partly to the fact that it initially worked only with a Citi MasterCard or a Google prepaid card. Although that changed on August 1, 2012, when Google Wallet began to interface with all major credit cards, the downloads of Google Wallet three years later still had not crossed the 20 million threshold, despite there being 89.4 million U.S. Android users as of July 2014. (Google apparently does not release the precise number of Google Wallet users.) Apple Pay, on the other hand, boasts that it registered a million credit cards within only 72 hours of launch, with numbers rapidly increasing as the iPhone faithful upgrade their devices.

Functionality

Although Apple Pay and Google Wallet are similar in use, Google has a few extra handy functions. With each system, the user uploads debit and/or credit card information to their phone ahead of time. Apple works with most banks, and Google Wallet works with any bank. At checkout with either system, the user will hold their phone next to a near-field communication (NFC) tap-to-pay device and either put their finger on the fingerprint ID button (on the iPhone 6) or type in their Google Wallet PIN (on Android devices running 4.4 KitKat or higher).

But Google Wallet has two features that Apple Pay does not currently offer: the ability to send money at no cost to friends (like PayPal) and the ability to upload and use loyalty cards and gift cards.

Security

When it comes to security, Apple Pay has a unique approach. Like your bank, Google Wallet stores credit card and personal information on encrypted servers. However, Google also records information about your purchases, the stores you visit, and even your geolocation. Also, unlike Apple Pay, retrieving information from Google’s cloud-based servers requires wifi or cell service.

As we discussed in a prior post, Apple Pay achieves security by using a “token” system and does not store or share credit card information or track purchase history, making it less valuable to hackers and retailers’ R&D departments alike. Also, the fingerprint scanner on the iPhone 6 (while it is already being duplicated for Android phones) is more difficult to bypass than the Google Wallet PIN.

Holiday Surge (or not)

Partly because the iPhone 6 was often wrapped in a gift box up until the holidays arrived, the little data available do not seem to reflect a great surge in mobile payment usage quite yet. What research from ITG (Investment Technology Group, Inc.) does show is that, in November 2014:

  • Apple Pay was responsible for over 1% of global digital payment dollars. In comparison, Google Wallet accounted for only 4% of digital payment dollars despite a few years’ head start. The industry leader, PayPal, accounted for 78% and its most direct competitor for accepting (as opposed to making) mobile payments, Square, accounted for the another 18%.
  • In a good sign for Apple Pay, roughly 60% of new Apple Pay customers used the app on multiple occasions and on multiple days. That averages out to roughly 1.4 Apple Pay uses a week per customer and is better than the 20% recurring users logged by PayPal.

Despite what may seem like marginal holds on the mobile payment market, analysts view these numbers as quite promising signs that Apple Pay and Google Wallet will gain significant ground as each becomes more widely adopted by expanding internationally and by users upgrading their smartphones.

The Near Future of Mobile Payment

By Q4 2015, Apple Pay and Google Wallet are expected to receive a fortuitous bump in the number of retailers equipped with NFC checkout devices, all because of something called EMV. EMV technology is the combined effort of Europay, MasterCard and Visa (hence, EMV) to increase payment card security by installing small chips within the actual card, which you may have already seen on your own recently-received cards. JCB, American Express, China UnionPay, and Discover have all joined the initiative. On October 1, 2015, credit card issuers will shift fraud liability away from U.S. merchants that implement EMV, thereby incentivizing retailers to invest in NFC checkout devices. Fortunately for Apple and Google, the shift to EMV also ensures that the NFC infrastructure necessary for mobile payment will become widely adopted in the U.S. Because EMV is already used throughout most of the world, for the growing legions of Apple Pay and Google Wallet users, the world will soon truly be at their fingertips.

Retailing and Technology: Once an Afterthought, Now a Brave New World

Posted in Retail, Retail sales, Technology

In a post last month, we mentioned the continued debates over brick-and-mortar and e-commerce driving innovation in the retail industry. Ultimately, technology enhances a shopper’s experience but does not necessarily replace it.

Much has been discussed about the success of retailers who embrace the omni channel experience. Whether it be e-retailers such as Bonobos or Warby Parker who move into the bricks-and-mortar world to enhance their virtual business or bricks-and-mortar retailers, such as discount store Dollar General and off-price clothing and housewares retailer TJ Maxx, who expand their presence online in order to enhance their traditional bricks-and mortar business, it’s all about providing the customer with multiple options to look, buy and strengthen their connection with the brand.

These omni channel options arrive at the consumer’s hands in a variety of ways we would never have imagined just a few short years ago. Terms like personalized solutions, wearable technology, visual search and augmented reality are just a few. Personalized solutions can be as simple as pop-up advertising when a customer visits a website or a pre-visit questionnaire that allows the customer to input user preferences, which then guides the entire experience from that point onward.

For many people, particularly as we are barely out of the holiday shopping season, shopping is a transactional activity: search the site, see what you like, get in the store, make the purchase and be done. However there’s a whole new retail customer experience developing, inspired by a younger demographic, and it will be here before we know it. Visual search, taking its cues from facial recognition software used by security companies, allows a shopper to upload his or her own photos from a smartphone to the retailer’s site, in order to exact match a product or complement an outfit. Perhaps more futuristic, Lacoste has implemented an in-store augmented reality experience in which shoe customers can place their foot over an in-store graphic and pass their smartphone over their foot. In the process, the smartphone displays what the shoe would look like when worn, allowing the customer to decide if it’s worth flagging down an associate to try on the product. Regardless of the methods chosen, retailers continue to push the envelope when it comes to technology, which means privacy, security and strength of the technology backbone will continue to be a focal point of retail companies.

Peeling back the onion, it’s not just the customer experience that demands adoption of sophisticated technology. Retail is emerging as an industry that not only makes big investments in technology but even seeds early-stage innovation. Many big name brands such as Nordstrom, Walmart, Staples and Home Depot have all launched innovation labs exploring big data analytics and mobile technology in addition to the customer experience. Suddenly retail powerhouses are becoming incubators for next-generation technology. Imagine what groundbreaking applications might be developed in-store and how they could be commercialized? Some applications could give a significant competitive edge to a struggling retailer. What might this mean for the retail workforce? With creativity and persistence, what used to be a high-turnover industry may come to attract the best and brightest minds particularly in technology and engineering. Formerly slow to adopt new technology due to thin margins, retail may one day be on the cutting edge of technology investments, and the “back office” functions, as they are now known, may not be hidden away for much longer. They may become the showpiece of the stores in the future.

The bottom line? Retail companies must keep innovating because consumers want it. E-commerce has not caused the demise of retailers. Instead, retailers have wisely seen the consumer’s thirst for new and exciting experiences beyond showrooming, and they are starting to respond and even outpace customer expectations. As outlined in NYU’s joint report with IBM, Retail 2020, retailers need to make creative use of their space for consumers to experiment, play and interact with the products and brands. And, like the Boomers before them who inspired the original shopping mall experience, Millennials will drive a lot of the change occurring in retail through the next few decades. It should be interesting to watch.

Would You Like That Retail Purchase Take-Out or Delivery? The 2014 Holiday Season Saw Brick-and-Mortar Retailers and Shopping Centers Increasingly Offering Same-Day Delivery Services

Posted in Retail

Necessity is the mother of invention, as they say, and online retailers such as Amazon and Zappos (each offering free 2-day shipping to their Prime and VIP customers, respectively) are certainly driving traditional brick-and-mortar retailers and shopping center owners and operators to make in-store shopping a more streamlined and convenient experience. In addition to “shoppable windows”, same-day delivery services for purchases either fulfilled by or made at local stores provide traditional retailers and shopping center operators with some leverage against the online retail machine. Deliv is a young start-up company that provides such retailers with some ammunition to “out-Amazon, Amazon.”

Deliv is currently partnering with at least five of the country’s largest shopping center owners and operators and over 250 retailers, providing the customers of its partners with a less frenzied shopping experience, which is particularly attractive to consumers around the holidays. Deliv provides consumers with a couple more convenient alternatives to the quintessential mall shopping experience. For online shoppers, customers of participating retailers have the ability to shop online and have orders fulfilled at a local store (a benefit to the store’s landlord as well, assuming that such purchases factor into the base gross sales amount used to calculate percentage rent), picked up by a Deliv driver and delivered to the customer’s home that same day. Consumers who remain partial to the physical in-store shopping experience can spare themselves multiples trips to the car or the agony of lugging multiple bags and packages into cabs or onto buses or subways, by electing upon check-out to have their purchases delivered to their home by Deliv driver that same day.

In 2013, GGP was the first shopping center operator to partner with Deliv, offering its mall shopper the option of dropping off his purchases at a secure location within the mall as he shops, to be delivered to such shopper’s home later that same day after he finishes his shopping spree . By the 2014 holiday season, the number of shopping centers taking advantage of Deliv’s same-day delivery services increased from the initial GGP 2013 test group of 4 properties to approximately 30 shopping centers nationwide. The cost passed off to the consumer is typically comparable to standard shipping prices for online transactions, and around $5.00 per delivery for mall shoppers. For that small price (or even at no cost to consumers, if shopping centers and/or retailers run promotions covering the delivery costs themselves, which some did for their 2014 holiday shoppers), shoppers have free hands to maximize the amount of shopping they can fit into a single outing, as well as the flexibility to continue on with their days and maybe grab a bite to eat or a movie without having to lug bags into restaurants or theaters or make a dozen trips to the end of the parking lot to deposit their ever increasing loads.

For last minute shoppers, the same-day delivery services offered by Deliv and its retail and shopping center partners also safeguards against delivery delays that may be caused by inclement weather conditions between wherever the warehouse fulfilling orders may be located and the consumer’s front door, which was a major problem for many 2013 online holiday shoppers . Because orders are fulfilled locally – whether made online or in stores – the same-day retail deliveries provided by Deliv and its partners give those of us out and about or home online shopping on Christmas Eve the peace of mind that our goodies will be safely under the tree by Christmas morning, in spite of our own procrastination.

Projections for 2015 are that same-day retail delivery services, such as those offered by Deliv, will continue to be an upward trend. With the cost to retailers being relatively small – Deliv CEO, Daphne Carmeli estimates each delivery costs retailers approximately $5-$15 – it remains to be seen whether any retailers will endeavor to implement their own same-day delivery services directly to customers, or if it makes more sense for retailers to continue to use third-party, same-day delivery services, such as those offered by Deliv. More to come in 2015!

 

Happy Holidays from the Retail Law Advisor

Posted in Holiday

During this holiday season, we take the opportunity to recognize our readers. Thanks to retail industry leaders like you, 2014 has been a great year for the Retail Law Advisor. In the coming year, we look forward to continuing to provide you with a comprehensive legal resource for the retail industry.

We wish you a happy and successful New Year!

The Evolution of the Shopping Experience: Heard at ICSC Dealmaking 2014

Posted in Retail

Despite a terrible Nor’Easter that hit the first day of the conference, nearly 9,000 attendees – a record-breaking number and 26% increase over 2013 – joined the International Council of Shopping Centers (ICSC) for the 2014 Dealmaking Conference at the new venue, the Jacob K. Javits Center in New York. With a larger, better laid-out conference space and many participants displaying shiny new booths, conference attendees enjoyed the increased networking space and then settled in to hear from industry experts on what trends are impacting the industry.

Donald Trump, the keynote speaker, set up the crowd with the following soundbite that made its rounds on Twitter throughout the conference: “… to be successful in your chosen occupation you need to love what you do.” All it took was one lap around the exhibit hall to see the level of engagement and focus from all participants, including developers, retailers and the myriad of service providers. This year, we came away from ICSC with a few interesting observations, as follows:

A Very Good Year, According to Predictions

The important holiday shopping season, often viewed as an indicator for the upcoming year, trends upward. According to ICSC, the season starts earlier and earlier and is projected this year to hit 4% growth over last year. This year, 35% of shoppers started before Halloween and by Black Friday, 86% of shoppers had completed at least part of their shopping. Analysts believe based on consumer habits, we have nearly returned to pre-recession levels.

There’s also been a resurgence of traffic in leasing in the retail industry; last year’s tire-kicking has moved into next phase of execution as retailers get serious about expansion. During the economic turndown, discounters were typically the only anchor tenants shopping for space. Now, industry analysts are seeing more activity of this nature in the sporting/outdoor/lifestyle category.

The Evolution of the Consumer Experience

It was clear from hallway chatter and panel presentations that we are in the middle of a redefinition of the customer experience. Shoppers are active participants in their experiences, and they are, more than ever, driving some of the change. The retail cycle is changing, and analysts are seeing the typical holiday shopping season extending beyond traditional time boundaries of Black Friday to the end of December. Some retailers are seeing active “holiday” shoppers all the way through mid-January, which means stores will be working at the same pace for several weeks beyond the traditional slowdown to satisfy consumer demands. If this trend continues, shopping centers and their retail and hospitality tenants will need to maintain peak staffing and inventory levels for extended periods of time.

The ever-present debate over brick-and-mortar and e-commerce continued to make its way around the hallways. While it can be an impassioned debate, the consensus now is that technology enhances a shopper’s experience but does not necessarily replace it. Many now believe that the successful retailers will be those who embrace the omni channel experience. Whether it be e-retailers such as Bonobos or Warby Parker who move into the bricks-and-mortar world to enhance their virtual business or bricks-and-mortar retailers, such as discount store Dollar General and off-price clothing and housewares retailer TJ Maxx, who expand their presence online in order to enhance their traditional bricks-and mortar business, it’s all about providing the customer with multiple options to look, buy and strengthen their connection with the brand.

The customer experience does not stop with the retailer, however. Shopping center owners also realize that they must embrace this online experience in order to differentiate their centers from others and remain relevant. This means bringing entertainment and new, trendy restaurants to their properties but it also means investing in marketing technology to enhance the customer experience. Many shopping centers feature holiday e-mail and text campaigns to drive shoppers into the stores and manage various loyalty programs. Mobile apps are being developed to help shoppers navigate around the stores, toward available parking, and point them to flash sales at various stores during their visits.

What’s Hot

In the coming year, international brands will continue to expand in the U.S. due to their confidence in the health of the economy and low unemployment numbers. Sears’ recent deal with Primark, a U.K. based department store, is just one of many examples. Under the terms of this deal, Sears will lease more than 500,000 square feet of its current space to Primark to help fuel its expansion into the U.S. Currently, Primark operates in the U.K., Ireland, and France. In addition, Primark will lease on its own the space occupied by former U.S. retailer Filene’s, in downtown Boston, to create its flagship U.S. store.

Other “hot” sectors both domestically and internationally are men’s apparel, fast food, and grocery stores. Analysts have noted that European food store Lidl will copy Germany-based ALDI for its plans to enter the U.S.

What We’ll Be Talking About Next Year

Hopefully next year, we won’t be toting umbrellas and rain boots. Led by conference chair David Firestein, in 2015 we’ll be looking forward to seeing more record-breaking crowds, hearing inspirational keynotes and learning more about how the consumer continues to shape the industry’s future. Please take advantage of the momentum from this year’s must-attend event and join us in New York again in December 2015!

 

MAPIC 20th Annual International Retail Property Market Conference Impressions: Increased Focus on the U.S.

Posted in Real Estate, Retail

The week prior to our Thanksgiving, from November 19-21 , MAPIC (le marché international professionnel de l’implantation commerciale et de la distribution) hosted its 20th annual international retail property market conference at the Palais de Festivals in Cannes on the fabulous French Riviera. There were more than 8,400 participants from 75 different countries in attendance this year. Of the attendees, more than 2,400 represented retailers, 2,300 represented developers and 340 represented investment companies. At least 1,500 different brands were represented. The presence of approximately 520 new retail brands has been touted as a reflection of increased confidence in the retail market.

This year’s MAPIC conference offered more U.S. focused sessions than prior years. The USA panel discussion, moderated by G&S’s David Rabinowitz, “This Land Is Your Land: Tips from the Experts for Expanding Retail Into the USA,” was jam-packed, leaving standing room only for those later to arrive. The attendees who were lucky enough to squeeze in were treated to a robust discussion on different strategies for entering into the retail market here in the USA – ranging from initial occupancy of retail space on “High Street” of a large metropolis (namely, Manhattan), to entry by way of presence in U.S. malls.

The two primary considerations that appear to be driving foreign retailers’ decisions with respect to the preferred point of entry are:

(1) who is the U.S. customer; and (2) what is the strategic purpose of the first few U.S. stores?

The first issue is one that every retailer, be it domestic or foreign, must consider in deciding where to either set up shop or expand geographically. The central factors are where is the U.S. customer located (i.e., is the customer an urban or suburban dweller) and what is the customer’s price point. Is the U.S. customer willing to pay the higher prices that retailers need to charge to justify a location on “High Street” or, instead, is he or she more economically conservative or even a bargain shopper, which would lead retailers more toward a suburban mall entry plan? The second issue is more a consideration of foreign retailers that are already established in their own country (or continent). The question boils down to whether such a foreign retailer wants to enter the U.S. market for purposes of growing revenues or, instead, to “make a splash” by expanding its presence to the U.S. market. In other words, is the entry strategy more about marketing than direct economic aspirations? If so, our sense is that a foreign retailer will favor the showier “High Street” entry location over a mall. Alternatively, if the move is instead revenue-driven, suburban malls seem to be the favored entry point.

One general observation was that European retail professionals generally appear to view Manhattan as the preferred initial port of entry into the USA, while Asian retailers appear to prefer Los Angeles. Another observation, which is consistent with what we were hearing at year’s conference, was that many of the smaller retailers seem to prefer to enter the U.S. using a local operating and/or financial partner. European retailers are familiar with this model because they use it when expanding into neighboring European countries, fueled by an already “proven concept” (albeit not yet proven to the consumers in the newly entered nation). Help in finding domestic (i.e., U.S.) operating partners was often high on the list of topics that European retailers wanted to discuss with the U.S. retailers in attendance at the conference.

Each year, one of the countries represented at MAPIC is the “featured nation,” meaning the retail issues, projects and development sites specific to and/or within such country are highlighted and addressed in a number of presentations and panel discussions during the conference. The United States will be the “featured nation” at next year’s conference, so MAPIC 2015 promises to be even more U.S. focused than was this year’s conference. S’il vous plait, take advantage of the excitement surrounding U.S. retail felt by your international counterparts and join us next year in Cannes from November 18-20, 2015!

Consumers Looking For Deliveries at the Speed of Light

Posted in Holiday, Retail, Retail sales

With the holidays fast approaching, and sales during November and December accounting for an estimated 30% of retailers’ annual revenue, retailers are pulling out all the stops in the ongoing fight for customer dollars, with multiple retailers offering overnight and same-day delivery options and free shipping and one online retailer even offering a shipping guarantee backed by a credit reimbursement. As a result, retailers are in fierce competition for more and more demanding customers, who now expect purchases to arrive on their doorstep by a specified date and time, with little to no added cost for shipping. GeekWire, a technology news website, even went so far as to have a shipping competition among Google, Amazon and Postmates, an online delivery/courier service, to inform its readers which same-day delivery service was best.

Retailers generally only offer same-day delivery service in select urban areas, with the rest of the country relying on FedEx, UPS or similar delivery services, which can be delayed due to poor weather and overloaded systems, as they were last holiday season. FedEx and UPS stated that only a small percentage of packages were delivered late last year, but already there is some concern that FedEx and UPS will again be unable to handle on-time delivery of online orders during the upcoming holiday season. With intense competition for each sale, retailers cannot afford to have dissatisfied customers. As a result, some larger retailers have begun utilizing stores as mini-warehouses during the holiday season, shipping items from local stores, rather than from the retailers’ larger but more remote warehouses, in an attempt to both shorten delivery times to customers’ homes and also to decrease the possibility of weather-related delays.

Many retailers also offer customers the option to shop online and then schedule a time to pick up purchased items from a local store. Having a purchase and pick-up option can be attractive for repeat customers who know the retailer’s product, customers who do not have time to peruse a store but do not want to wait for delivery, and for customers who have procrastinated so long that they are unable to wait out even the greatly abbreviated delivery times being offered by retailers. However, as today’s time-stressed customers continue to push retailers to provide faster service than their competitors, it seems possible customers could eventually refuse to be inconvenienced by any visit to a bricks and mortar store.

Nevertheless, the high cost of free and same-day delivery service has been off-putting to some retailers, and the current competitive market may be providing customers with only a fleeting opportunity to demand that purchases be immediately available at low cost in the final days before the holidays. Smaller businesses are often unable to pay the upfront costs required to create shipping algorithms similar to those being utilized by the big box chains to calculate delivery routes that ensure packages arrive on schedule, and they also do not have the luxury of being able to ship items to other stores to shorten delivery or pick-up times for customers. Several local and regional malls are attempting to circumvent these disadvantages by collaborating with online delivery services such as Deliv to provide same-day delivery of merchandise in order to offer customers the opportunity to inspect or try on merchandise in a store and then have purchased items delivered directly to their homes. Customers can determine which size pants or shirt they need while at the store, and if certain sizes or colors are not in stock, they can order those items online when they arrive home–confident that they are ordering the correct size and any additional purchases will be delivered to their home later that day. Returns should be greatly reduced, and demands for efficient service would be appeased by customers not having to either make a second trip to the store to return items or contend with a multi-step return process on a website. Retailers also should see a commensurate reduction in return shipping costs. This type of collaboration could be a valuable weapon for brick and mortar malls as they continue to battle online retail giants–since time-constrained customers likely will continue to demand faster, cheaper and more convenient delivery options until that convenience results in additional costs to retailers that are substantial enough to compel an increase in prices.

What is abundantly clear is that consumers have now grown accustomed to fast and inexpensive delivery service, and that is unlikely to change. What remains to be seen is how retailers will meet these expectations and still maintain their profit margins.

Happy Thanksgiving!

Posted in Holiday, Retail

Thanksgiving is a time when many of us pause to reflect. We value the trust you have put in us as a resource for the fast paced retail industry. Thank you for reading our blog, the Retail Law Advisor.

Our wish for you and your families this Thanksgiving is simple. May the good things in life be yours in abundance, not only at Thanksgiving but throughout the coming year.

Warm Wishes,
The Retail Law Advisor editorial board

Are Plastic Shopping Bags Being Sacked?

Posted in Compliance, Green, Retail

No plastic bagsIn earlier blog posts, we reported on the growing trend in U.S. cities to pass bans on single-use plastic shopping bags and impose fees for traditionally free bags provided in store checkouts, including the status of legislation proposed by Los Angeles, Chicago and New York to ban free shopping bags as of last November.

A year later, we are pleased to report that the trend continues. While Los Angeles’s single-use plastic shopping bag ban went into effect as of January 1, 2014 for large supermarkets and big box stores that sell groceries (such as Target and Wal-Mart), it was expanded to include drug stores, convenience stores, as well as all markets and groceries on July 1, 2014. In LA, both large and small grocery markets and other affected stores can no longer offer free plastic carryout bags to customers, and recycled paper bags may be offered at a cost of $0.10 per bag.

Last April, with “self-congratulation but no debate,” Chicago also passed legislation banning single-use plastic shopping bags, with exceptions for restaurants and small “non-franchise” independent retailers. In Chicago, the timing of the law’s effective date depends on the size of the store. Stores larger than 10,000 square feet have until August 1, 2015 to comply, while stores 10,000 square feet or less have until August 1, 2016. Unlike LA, the Chicago legislation does not require a 10-cent per bag charge for paper bags.

A group of New York City Council members continues to push a bill, introduced last March, which would impose a mandatory 10-cent per bag charge for single-use plastic and paper bags provided by grocery stores and restaurants. As of September, supporters were six votes shy of passing this proposed legislation. This legislation was slated for review by the New York City Council again on November 19th, but was laid over by the Council’s Committee on Sanitation and Solid Waste Management for further consideration, so stay tuned.

Earlier this fall, California became the first U.S. state to pass legislation prohibiting stores from providing free, single-use plastic shopping bags. The new law goes into effect for large grocery chains and pharmacies starting July 1, 2015, and will be extended to convenience stores and liquor stores July 1, 2016. Similar to LA’s shopping bag ban, under the state law, affected stores will be required to offer customers recycled paper bags or bags made of compostable material at a cost of at least 10 cents.

If this current legislative push continues, single-use plastic shopping bags may soon achieve the same status as lead paint or McDonald’s polystyrene foam sandwich containers – they will become a product of our past.

A “New World” of Fashion and Food

Posted in Landlords, Real Estate, Restaurants, Retail, Retail sales, Tenant

In a world of Instagram, Facebook and SMS text marketing, being fleet of foot in an ever-changing world of retail advertising and sales is the name of the game. As retailers and restaurateurs navigate the treacherous waters of effective advertising, an amplified sense of haste has motivated these proprietors to explore additional means of creating a buzz around their products and food. These days, retailers are embracing and realizing the value of pop-up stores in providing a fresh and exciting approach to reverse the trend of retail ennui among consumers. Like a jack in the box, pop-up stores burst on to the scene – typically in small retail spaces – for a few days, weeks or months and sell merchandise with an ephemeral shelf-life. In many respects, pop-up stores serve as a prudent and business savvy way to test a product, a special dish, or a new clothing line in hopes of making a cannon ball like splash in a particular retail market.

Coupled with a well-tailored marketing campaign on social media, retailers and restaurateurs can generate fanfare and excitement around their brand. Given the palpable and increasing thirst among consumers to readily learn about and stay on top of in vogue brands, pop-up stores are a cost-effective means to build brand awareness and check the pulse of consumers. The concept of pop-up stores has evolved over the past few years. What was once considered a desperate attempt at advertising has now been widely accepted as the “New World” of retail marketing, bridging the gap between the “Old World” of big brick and mortar stores and online retail. One of the main virtues of pop-up stores is that they are much less expensive than your run of the mill television ads, which do not engage the customer in the same fashion and can fall on deaf ears. Pop-up stores, however, inject a certain spark into the brand and allow consumers to interact with the brand and its products in an innovative manner.

But before we sing paeans in full support of pop-up stores, we should mention that it’s not necessarily easy to set up a pop-up store. First, the lack of unoccupied retail stores in vibrant markets can be one of the biggest impediments for retailers looking for viable locations. Another inherent issue is finding landlords willing to lease space to retailers on a short-term basis. To assuage these concerns, there is a burgeoning market of online start-ups – for instance, Storefront – that connect store owners and landlords who wish to rent retail space for short terms to retailers, restaurateurs and artists. The true beauty of Storefront is that it allows retailers to dip a toe in a particular location without the pressures that come with a long-term lease. The other potential benefit of pop-up retail is that it may provide first-hand proof that a vacant space can become viable and profitable again. This certainly proved to be true in Buffalo and Detroit where numerous pop-up stores have sprung up and revitalized these once deserted downtown areas.

For small retailers who are just getting started, opening a pop-up store is an innovative approach to growing the business and increasing brand awareness. Although big box department stores will forever have a place in the retail market, these large retail spaces may be better suited for more established brands. For the up and coming retailers and restaurateurs, who must count every penny that comes in, leasing too much space may be fundamentally inefficient and too onerous from an inventory standpoint. A pop-up store is a happy medium that gives retailers and restaurateurs an opportunity to operate a retail or restaurant establishment, gauge future demand, and engage their customers with an intriguing approach.