Whilst not a new concept, pop-up stores are growing in popularity. This is in no small part due to the growing trend for start-up retailers to use social media and other online platforms as a means of marketing their business and selling goods, instead of an initial outlay on bricks and mortar. A recent article in the Retail Gazette suggested that 40% of e-commerce businesses plan to open a physical store in the next three years.
In this article, we will consider the benefits of pop-up stores for retailers and how the Brodies' retail and leisure team can guide occupiers through the nuances of short-term pop-up occupancy agreements.
The Concept
Pop-up retail spaces are typically in high-pedestrian traffic areas (whether within shopping centres or on the high street) and are designed to create a sense of urgency and excitement amongst customers. Many pop-up stores offer unique experiences to customers which tend not to be replicated under traditional models, giving brands opportunities to diversify their offering to customers. Recent examples include:-
- Online clothing brand, Arne, have opened pop-up stores at Liverpool ONE and in Covent Garden to great success;
- Similarly, Libre London, an online women's fashion retailer, opened its debut pop-up at The Yards, Covent Garden this month;
- Jägermeister opened a pop-up store on Oxford Street to launch and advertise their new ICECOLD alcoholic beverage; and
- Swimwear brand, Boardies, opened a "surf shack" pop-up within Selfridges.
The Benefits
The pop-up model offers clear benefits for retailers, both for those familiar with the traditional physical retail model and for businesses with an otherwise exclusively online presence.
For online retailers, pop-up stores provide a low-risk opportunity to offer a physical experience to customers. This can not only help to grow the brand's profile but also gives customers a unique opportunity to view or try products in person.
The opportunity to trial a physical presence may also appeal to retailers considering expanding into bricks and mortar who want to test the waters or trial different locations before committing. As the property tends to be fully fitted out, retailers can take occupation promptly without needing to invest in costly fit out works.
For retailers who have already established their physical presence on the high street, pop-up stores provide opportunities to explore new concepts or ideas.
While the benefits to retailers are clear, pop-up stores are not a one-sided offering. Property owners also benefit, as the short-term nature of the agreements enables them to fill spaces which might otherwise be vacant on a flexible basis and provide an income stream. The novelty factor of a space offering pop-up experiences also provides the locality with an innovative attraction which can help to drive footfall and interest, both from customers and other brands.
The form of legal agreement
Pop-up store agreements usually take the form of a licence to occupy, rather than a lease.
Under Scots law, a licence to occupy is a personal contract between two parties (meaning that it is not enforceable against successive property owners and usually cannot be assigned by the occupier). While this may be seen as creating a degree of vulnerability for the occupier, the licence model enables retailers to occupy the pop-up store without taking on the more onerous responsibilities of a lease, for example in relation to repairs, service charge and certain other monetary obligations.
The licence will be entered into for a fixed period in exchange for a fee, and there may be the option to extend the term if desired by both parties. This flexibility is beneficial: the occupier can respond to consumer demand, and the property owner retains the potential to convert a successful agreement into a longer-term tenancy or lease.
In some circumstances, the property owner may request that the pop-up operator enters into a more formal short term lease arrangement. That being the case, it is important that the pop-up operator seeks legal advice to ensure that their interests are adequately protected and that they do not incur unexpected costs.
Pop-up stores are an extremely useful tool for brands responding to evolving customer habits and the clear benefits suggest that we are likely to see an increased occupational demand for these types of deals for years to come.
Please get in contact with the either Danny George or Emma Barnett in our retail and leisure team if you would like to discuss in more detail.
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