Pop-up revolution: A $10B mall industry

It’s an unusually mild Saturday and the King of Prussia Mall is awash with shoppers seeking deals at traditional stores such as Neiman Marcus, Lord & Taylor and J. Crew.

While those retailers are capturing a certain segment of consumers, a portion of the mall’s future may lie in the kiosks, carts and other pop-up stores that line the property’s first floor corridors and sell everything from stuffed toy emojis, personalized ball caps, anti-aging elixirs and pierced earrings.

These temporary stores and kiosks, some of which seem to take on more permanency, have become big business. Some estimates have them generating anywhere between $8 billion and $10 billion in sales. PopUp Republic, a marketing company that focuses solely on pop ups, believes it is more like a $50 billion industry. Whatever the figure, there’s lots of money to be made in this retail niche.

It wasn’t always that way.

“The first time I went to the King of Prussia Mall and asked them to lease a space for two months, they looked at me like I was from a different planet,” said Joseph M. Purifico, president of JBC & Associates. Purifico’s company is based in Toledo, Ohio, and is involved in multiple parts of the pop-up industry. Purifico, who is locally based, teamed up with Jim O’Neill, who ran the seasonal kiosk business for Hickory Farms Inc. to start JBC & Associates. The firm represents tenants and handles negotiating short-term leases with mall owners and other retailers. It also oversees the hiring, training, and other operations associated with the kiosks or carts.

About 20 years ago Purifico represented Halloween Adventure, a now ubiquitous destination at malls and other storefronts during September and October and is a good example of a classic, seasonal pop-up. With a tenant such as Halloween Adventure, a mall landlord can temporarily backfill a vacant space and collect some additional rent, especially during what are typically the slow retail months of September and October (post-back to school and pre-Christmas). For Halloween Adventure, the space gives it visibility during the period when it makes most of its money.

From there, the world of tenants selling seasonal merchandise expanded into hundreds of different products and in a variety of ways. Even the name evolved to what is commonly used today — pop-up store.

“The whole concept of temporary leasing was developed for a number of different reasons,” Purifico said.

Sometimes there’s a company that has a new product but doesn’t want to commit to a long-term, expensive lease in a mall or other retail center. Rents for these spaces run anywhere from 25 percent to 50 percent of what a regular mall store might pay. Someone like Purifico will work with that client to identify cities and malls to test out a concept in a temporary space.

There are benefits to mall owners. Aside from filling vacancies, the leases are usually flexible enough so that if another long-term tenant comes along, the pop-up store can be relocated or the lease terminated. Sometimes it works out that the retailer’s product takes off and the retailer becomes a permanent tenant in the mall. Locals will recall that’s what ended up happening with EB Games, which started out as a kiosk in area malls and turned into not only a long-term tenant in retail centers across the country but a billion-dollar company.

While mall owners get an extra revenue stream from these temporary stores, the kiosks and other pop-ups also allow them to routinely introduce something new to shoppers who want to regularly see something fresh on each visit. One of Purifico’s clients is Lumber Liquidators, which is rolling out a series of pop-up stores to showcase and demonstrate its products. Another is a custom shirt and suit tailor and yet another is a line of handbags that are now being sold online but the maker wants to test out brick-and-mortar sales.

Pop-ups have expanded to include restaurants and even what is called a store-within-a-store concept. In another twist, companies are using them also to market their brands or even an event.

Originally from bizjournals.com

Natalie Kostelni covers real estate and economic development.