Across the United States and the globe, pop-up shops are literally “popping up” everywhere. What started as a novelty concept has become an increasingly popular and smart way for small business owners to test-run business ideas and create buzz for their brand.
What is a pop-up shop?
A pop-up shop is the term for businesses that “pop up” or appear somewhere they typically aren’t. A pop-up shop may be a small stand at a local street market, a shipping container store that travels from location to location, a store-within-a-store event hosted by a large retailer, or a pop-up restaurant or “supper club,” that uses the kitchen of an area restaurant on days it’s closed. Essentially, a pop-up shop can take any form the owner imagines.
The growing popularity of pop ups
In recent years, pop-up shops have exploded across the U.S. and other countries. While an abundance of vacant retail space following the recession may have, in part, spurred this trend, Samford University entrepreneurship professor Dr. Franz T. Lohrke says there’s another important reason for the pop-up shop’s growing popularity. “Pop-up shops provide a way for entrepreneurs to test-market an idea without investing a lot of money into a business,” says Lohrke. “These shops are low-cost, portable, and provide a way to gather valuable information directly from customers to improve a product.”
Benefits of the pop-up shop
The pop-up concept appeals to entrepreneurs and small business owners for different reasons that are usually tied to short- and long-term goals. Pop-up shops allow business owners to:
- Test-run a business idea before opening a brick-and-mortar store
- Create buzz for their brand before opening a storefront
- Operate a side business in addition to full-time job
- Pick up and move a store to different locations
- Appeal to an audience that jumps on “buy now or lose the chance” experiences
One of the most attractive aspects of a pop-up business is the ability to limit risk. “A new venture’s financial risk is directly related to how much it has to sell before it becomes profitable, often referred to as its ‘breakeven point,’” says Lohrke. “Pop-ups lower a new venture’s fixed costs because expenses like rent can be lower, and, as a result, they lower the risk of a new venture failing.” He adds that “having lower operating costs may allow [the pop-up shop] to reduce its prices relative to what it would have to charge in a brick-and-mortar location, which may make the new business more competitive against established companies.”
Flexibility is another major benefit. “Steve Blank, a Silicon Valley entrepreneur, famously said, ‘No business plan survives first contact with customers.’ New ventures can fail for a lot of reasons, which include choosing the wrong location or offering a product that isn’t exactly what the customer wants,” says Lohrke.
The ability to pick up and move the store or to make adjustments before launching a product on a larger scale can be valuable for the business’ long-term viability.
Potential costs of running a pop-up shop
While the costs of running a pop-up restaurant or shop are significantly lower compared to a brick-and-mortar, “the key thing to remember, though, is that a popup shop will be a scaled-down version of most businesses,” says Lohrke. The same costs apply, just on a smaller scale. When making a business plan, account for the following potential costs:
- Internet (for mobile/tablet pay)
- Point-of-sale systems
- Business licenses
- Marketing (flyers, Facebook ads, etc.)
- Short-term employees
Getting the right licenses and insurance
Before “popping up,” securing a business license and insurance are essential first steps. “The licenses needed will depend on the type of business and where it plans to operate,” says Lohrke. “Entrepreneurs also need to check out local zoning requirements and other rules to make sure they don’t violate any local laws by setting up shop in a particular location.”
For insurance, a company that specializes in event insurance is an option for keeping costs low, and the plan can be applicable only to the dates of the pop-up event.
Depending on the business, a pop-up shop also may need a health insurance permit, food safety certification, and liquor license if selling alcohol.
Finding the right location
A pop-up shop’s location largely determines its success. And the style of pop up should also influence the decision:
- A mobile cart/stand or shipping container store should aim to park its pop up in high-traffic areas that will garner plenty of attention.
- Small businesses that want to try the store-within-a-store concept should pick a store that complements (not competes with) their goods and would attract a similar audience.
- Pop-up restaurants should look for local eateries that are closed during certain hours or days. During these times, the restaurant’s kitchen may be available for use. If transporting food is an option, entertainment venues or breweries, that do not offer a regular menu may make for an ideal partnership.
In some situations, pop-up shop owners can even get site owners to agree to a rent free arrangement. They too can benefit from the buzz generated by pop-up shops and may be thought of favorably for supporting local makers.