Pop up retail as a concept is here to stay and it works because it serves all parties. For consumers pop ups provide variety, for landlords they represent additional income and a point of difference, while for the pop up retailers themselves they offer a low risk, low cost platform to launch products and increase brand exposure.
From a proptech perspective, the immediate opportunity was seized in 2012 when a number of US/UK based platforms launched platforms best described as Airbnb for retail. Storefront (US) and We Are Pop Up (UK) were two of the big names in this space, raising $8.9m and $2.7m respectively. The concept was simple: find spaces willing to rent on a short term basis, whether whole shops or just a hanging rack or table, list them on a marketplace website and charge a small commission for making the introduction/executing the lease.
Asia joins the race in 2015
In mid-2015 there was nothing happening in Asia, then by the end of the year 3 almost identical platforms had launched. Popscout (HK), Spaces Genie (HK) and PopUp Angels (Singapore) were online with literally a handful of locations listed. The spaces were usually an empty gallery in a trendy part of town, but they have grown to include retail mall ‘casual leasing’ space (empty spaces usually used for events or sales).
The challenge for these platforms in Asia is that the retail scene is different from that in the West. Retail is dominated by shopping malls, whereas in cities like London and San Francisco there is a more dominant ‘high street’. Shopping malls have high rents and high set up costs (fit out design, construction, licenses etc) making quick turnaround pop ups more difficult. They are often owned by REITS which prefer a guaranteed, ongoing rental income with less concern about who the actual tenant is.
Street retail, on the other hand, is often owned by individual landlords who are more flexible and want to avoid an empty shop front. Good locations command daily foot traffic (unlike the 4th floor of an under-performing mall) making them better suited to pop ups wanting maximum exposure. There is also something more original and uniquely ‘pop up’ about unexpected spaces or street front retail.
The other challenge for these Asian platforms the pop up concept remains relatively immature here so it requires a high level of education. Running a pop up marketplace will require significant time to identify potential spaces, get access to the landlord then explain how the whole thing works. The head of leasing at Capitaland will get it, but the owner of a suburban coffee shop could take more convincing. Furthermore, companies like Storefront found that tenants typically want only the best locations with very high passing traffic. This reduces the number of potential sites.
Back in the West, both Storefront and We Are Pop Up announced they had ceased operations in early 2016. This suggests the scale needed to generate serious revenue was out of reach, even for funded pioneers in more conducive locations. This doesn’t bode well for their younger, Asian cousins. The chicken and the egg then, to scale quickly needs investment but VC backing only increases the pressure to grow more quickly.
The need remains to connect landlords with parties wanting space, but the potential to reach scale and generate significant revenue is questionable. If a platform is able to cover the whole of Asia, including China, it will become interesting. If you think about a brand owner sitting in Paris thinking, how can I test appetite for my brand in Asia? This could be the answer and there is value in that. But this raises the challenge faced by every tech startup in Asia. Acquiring the capital and resources to truly penetrate countries so different is a challenge only few have accomplished.