Phillips Edison: Pop-Up Spaces, Showrooms Reflect Evolution of Retail

by Camren Skelton

Las Vegas — E-commerce has disrupted the market for retail real estate on a seismic level, but it has not obliterated the need for brick-and-mortar shops.

Instead, the online shopping craze has functioned as an evolutionary mechanism. E-commerce has forced retail operators and landlords to get both bolster their digital platforms and enhance their in-store shopping experiences.

“Much has been made of the need for brick-and-mortar retail to adapt to e-commerce, but we’ve also seen a shift in the other direction with a number of e-retailers opening brick-and-mortar showrooms to complement online offerings,” said Mike Conway, vice president of national accounts and retailer partnerships at Phillips Edison. “Overall, we’re confident that the future for retail is bright, and we can’t wait to see how these trends continue to unfold.”

For consumers, this evolutionary shift means that retailers are looking to interact more with shoppers in their stores. The manner in which retailers enhance the shopping experience varies from concept to concept.

But some trends are beginning to emerge, according to a recent report from Phillips Edison, a REIT specializing in grocery-anchored retail properties. And the use of pop-up spaces and showrooms are two of the leading practices for retailers to consider in 2018.

Retailers and the developers, investors, brokers and lenders who specialize in the space sank their teeth into this information at the 2018 ICSC RECon event in Las Vegas this week. The organizers of the event, which ends on Wednesday, are expecting about 37,000 attendees.

Pop-Up Retail 101

Deals for pop-up stores, also known as flash retail, involve short-term leases for small spaces in established retail locations. Pop-up retail represents a trial-and-error way of testing new products and assessing brand identity within a certain market. The American Marketing Association (AMA) currently values this segment of the retail market at more than $50 billion.

Pop-up leases allow for smaller footprints and therefore lower operating costs while a retailer tests a new market. The size of the space ensures that all shoppers will be in close contact with one another and the employees, which makes the visit more of an experience.

In addition, pop-up leases represent a means of establishing partnerships with major platforms — Target, Walmart, Best Buy — that are doing more online sales.

Brands like Adidas, Google and Amazon were among the major firms to embrace pop-up leases several years ago. In subsequent years, pop-up retail spaces have been leased to all sorts of users, from jewelers to restaurants to customer support for tech products.

Showrooms Take Center Stage

As shoppers have voiced their desires for more interactive experiences in stores, retailers have responded with an increased number of showrooms in their spaces.

Conceptually, showrooms offer a bridge between retailers’ online and brick-and-mortar sales platforms. Customers can enter the physical store and get a firsthand view and description of the item in the showroom, then purchase and have it shipped online. Apparel and accessory retailers like Bonobos and Warby Parker have been among the major firms pioneering the use of showrooms.

In this scenario, the presence of the showroom gives the shopper an incentive to visit the store in-person. In turn, when the shopper orders the item, he or she gets exactly what was expected. There are no surprises and no misleading information, just a clean transaction that makes use of both an interactive physical space and a convenient online platform.

F&B Here to Stay

The Phillips Edison report identified another trend that should figure into retailers’ strategies in 2018 as they continue to adjust to e-commerce. Specifically, the report suggested that more retail developments will feature food halls or other forms of communal dining.

Much like retailers that sell merchandise are experimenting with smaller spaces via pop-up leases, restaurants and bars are finding ways to operate in smaller spaces so they can access the crowds that come to food halls. That means fewer employees, a reduced menu and less equipment, all of which help keep costs down.

The growth of food and beverage concepts, which are generally resistant to e-commerce, shows no signs of showing down. The report projects that by 2025, roughly 20 percent of all American and Canadian retail space will be occupied by food and beverage concepts.

 — Taylor Williams

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