Though the coronavirus pandemic did a number on the U.S. economy as a whole, it hit the retail sector particularly hard. Many retail stores, in fact, have shuttered on a permanent basis in the wake of the health crisis, leaving malls and shopping centers with vacancies to fill -- and leaving real estate investors to wonder when their portfolios will manage to recover.
But while things have improved with regard to the pandemic itself, foot traffic at retail stores isn't what it was before the health crisis began. At this point, shoppers are so used to ordering goods online that they may just stick to that habit even once the idea of entering a store is no longer scary.
But some retailers might struggle with that model -- notably, those without a large online presence. And that could, in turn, result in enough of a revenue decline to force the closure of more physical stores.
One tactic, however, might work to save retailers -- and spare malls and shopping-center landlords a world of pain.
Introducing pop-up shops
Pop-up shops aren't a new concept; they existed well before the pandemic began. But given the way the coronavirus outbreak has changed shopping habits, they're worth exploring in the near term as consumers are slow to get back over to shopping centers and malls.
Pop-up shops are retail spaces that stay in place on a short-term basis. Generally, when retailers sign a lease to rent mall or shopping-center space, that lease is signed on a longer-term basis. A pop-up store, on the other hand, could last just weeks or months. These shops also tend to offer special promotions and other discounts to entice customers.
The lure of the pop-up shop is rooted in its exclusivity and fleeting nature. It's the same psychology as sticking the "limited edition" label on common food products. The offering may be largely the same as it is year-round, but seeing those words tends to trigger a sense of urgency in consumers to buy those products now, before they're no longer available.
Pop-up shops create that similar sense of "must buy now" in consumers. And they could be just the thing that gets customers more engaged -- and more eager to spend. Furthermore, pop-up shops are a good option for smaller brands that are looking to expand their physical footprint but want to test the waters before committing to longer-term leases.
Not only might pop-up shops save retailers that have been starved for revenue, but they could drive more foot traffic to malls and shopping centers in general. Shoppers who head over to pop-up shops may be driven to make purchases in other stores once they're already out and about, and that could be pivotal to helping the retail sector recover.
All told, pop-up stores are a strategy worth considering at a time when consumers need to be motivated to leave the house in order to shop. And since there's always the potential to convert shorter-term leases into longer ones, it's an option mall and shopping-center landlords alike should be open to.