What's Next for Retail?

Long before COVID-19, the traditional retail landscape has been in a period of transition. Some called it an apocalypse. Several large retailers filed for bankruptcy in recent years. Many predicted the death of the American mall. And then came a once-in-a-century pandemic.

Long live the mall?

The increasing tendency of consumers to shop online seemed to be just one of the many trends that pandemic lockdowns accelerated. (McKinsey estimated that the pandemic accelerated consumers’ adoption of e-commerce by as much as 10 years within a few months.) We might have reasonably expected that to be the final nail in the coffin for malls. And the pain for mall operators is very real.

But data from Placer.ai showed that mall visits actually peaked right before the pandemic and improved more than expected from their lowest pandemic points in the summer and fall of 2020, then again in the post-Black Friday holiday season. Any significant mall attendance during these exceptional circumstances signals that we might see a strong resurgence of visitors in 2021 and 2022, even if it’s simply because people want to get out more.

And those data are just for indoor malls. Tangier Factory Outlet Centers has said that traffic during its fiscal fourth quarter was nearly 90% of 2019 levels, indicating that most retail tenants are hanging on through the pandemic. This isn’t just the case for America, but in Europe as well, where malls tend to involve more outdoor spaces. And we can expect to see more traffic in open air malls as the weather warms up.

A report on the future of the mall by Deloitte drove home the importance of 5 key changes these spaces must make. They note, of course, the importance of keeping customers safe while balancing their strong desires for social interaction and convenience. They drive home the importance of rethinking the role of the store and of anchoring these spaces with new kinds of dining, which cannot be done online. And they encourage malls to embrace technology, “capitalizing on digital tools to maximize productivity and efficiency and create experiences that are dynamic and engaging.”

As a creator of digital experiences within physical spaces, that certainly aligns with my philosophy. I look forward to “creating a multi-purpose environment” within more of the existing retail landscape, so that they can become new kinds of destination spaces. But that’s a long-range project. What about the near term?

Taking up space

This year retail vacancies may reach a 7-year high. And empty storefronts and abandoned buildings are not only a drain on landlords, but a problem for neighborhoods. One potential solution for vacant retail spaces is to use them for pop-ups. That’s been a common use of empty storefronts since at least the last recession.

A report by real estate services firm Cushman & Wakefield examined the pop-up trend shortly before the pandemic and concluded that it would be here to stay. That’s partly because they do a great job of delivering consumers a unique and personalized experience. But it also allows brands who operate predominantly online, as well as smaller and less established companies, the opportunity to try out physical retail. And even brands that might never sell something in a retail store can create pop-up marketing experiences to drive engagement or create buzz.

And there’s no reason to believe that rosy outlook should change post-pandemic. In fact, the coming re-opening transition should be even more conducive to pop-ups than before. The current increase in the inventory of retail stores will provide a greater number of compelling opportunities in terms of available spaces. And it’s only natural that people will crave something interesting and new after a year or more of quarantine measures. So both the supply side and the demand side would seem to be encouraging the creation of more pop-up experiences in the near future.

Commercial landlords have historically held out against lowering rents during past recessions, preferring to wait for conditions to improve. That may change if long-term working trends remake our city centers. Here in NYC, retail rents have already fallen precipitously, but that’s not true everywhere. In an economic downturn driven largely by temporary lockdowns, there remains a compelling case for strong demand in leasing storefronts in the not-too-distant future.

Many landlords realize that filling a space for a short time can be financially advantageous, especially when it allows them to continue holding out for longer-term tenants. Even high-end real estate landlords in NYC have become open to pop-ups, out of necessity. There is even a burgeoning business of real estate intermediaries that help brands find temporary storefronts. The conversion of these spaces into once-again-vibrant experiences can be a boon to a community. And it’s possible for a pop-up strategy to turn permanent in some cases.

Digital comes to town

Pop-ups are a great way for direct-to-consumer brands and digital-first platforms to break new ground. In recent years, a lot of shopping activity has migrated onto social media, as people spend more and more of their time of social platforms. In 2019 Facebook created in-store pop-ups at Macy’s featuring digital-native brands that were popular on its platform. It gave shoppers a chance to experience new products and gave the brands additional exposure.

Westfield’s Trending Store was another successful example of this when the 3-day pop-up took over London’s large Westfield Mall to test out Next Atlas’ AI trend-spotting algorithm. After tracking nearly half a million global influencers to find out what fashion was trending each day, they made lists of items that were given out to shoppers who could then hunt down the items in the rest of the shopping center.

Just last month, direct-to-consumer brand MakeSpace opened The MakeSpace Store in New York City’s Flatiron district. The brand decided to open a physical store in order to stand out amid an increasingly crowded digital ad ecosystem. That’s a reality for every brand competing for customers’ attention, so it’s not hard to imagine more brands making forays into retail pop-ups to test the waters.

Bringing experience back

Brands can also use pop-ups to create a more expansive experience. Italian-influenced jewelry brand Alighieri created a successful pop-up event when they built a Florence-inspired space in an empty warehouse in London where customers could book slots to have an Italian dinner and immerse themselves in Florentine culture alongside the brand’s jewelry. The ability to “travel” to Italy during the pandemic appealed to people enough to fill slots and sell plenty of merchandise, selling out within days.

When Farfetch-owned Browns Fashion opened their experimental pop-up in Berlin in 2019, they used an abandoned supermarket. The open space was perfect for retail and art installations as well as musical performances and allowed the brand to connect to not only their customers but the communities they live in, even if just temporarily.

After Toys R Us went out of business (a victim of the long-term decline of traditional retail) its lenders looked for new ways to leverage the toy retailer’s brand equity. One of those initiatives was a series of adventure pop-ups in partnership with Candytopia. These locations broke with the traditional retail model by truly engaging customers rather than simply stacking goods on shelves. Complete with theaters and event spaces, they allowed for engaging experiences, while Candytopia helps set the scene with life-size candy sculptures.

What next?

As we’ve seen, existing retail brands can utilize pop-up installations to create new and engaging experiences. And other types of brand can create installations that provide some of the benefits of launching bricks-and-mortar stores at a fraction of the cost. It’s hard to imagine a consumer brand that couldn’t benefit from a retail pop-up, given the right concept.

Deloitte’s survey found that before the pandemic, 45% of consumers planned their shopping around single-stop destinations. But 59% of those looking forward to getting out and shopping in the future expect to seek out one-stop shopping experiences. Frankly, the creators of retail pop-ups can win either way. If they rent space in a mall or busy shopping district they will get passersby as customers. If they build out stand-alone locations they can be seen as a destination.

With 59% of consumers saying they plan to make their shopping trips shorter in the future, it shouldn’t be hard to usher them into bookable experiences, so long as they’re planned with personalization and digital follow-up in mind. Pop-up retail experiences just might be the next trend (again) as we open back up and the economy resurges post-pandemic.