The pandemic is challenging the status quo with reduced footfalls, disrupted supply chains, and a distant recovery. Retailers with a physical-only presence face greater challenges with customers shifting online at an unprecedented rate. The pandemic has transformed the entire shopping experience of a customer.
Ravi Shankar, President Director & Country Manager, ALDO Indonesia, throws light on how pop-up stores can bridge the gap to physical retail at the Seamless Asia 2021: The Future of Commerce in Asia.
Problems Faced by Retailers
With social distancing norms in place, gloves, masks, and sanitizers marking entries everywhere, customers are wary of returning to the stores. The brands and retailers are facing a lot of issues due to the pandemic:
- Restricted/ low footfall in physical stores due to lockdown and change in customer behavior. People are reluctant to go out, which is affecting footfall in the physical stores.
- As the businesses are not performing well, they are facing the issue of high operational costs.
- Higher exit cost due to long-term lease agreements.
- Unexpected lockdowns.
- Global brands are also facing delays in the supply chain because of congestion in ports.
- Consumer behavior has completely changed. Their purchase patterns have also changed as they are not coming out of their homes. For example: As people are working from home, as a result, ALDO’s formal shoe category is facing the heat.
- Volatile demand is a big concern for brands and retailers.
- Slow digital penetration and high aged stock are other few issues faced by brands.
Pop-up Stores: The Need of the Hour
To address the challenges faced by the brands and the retailers, pop-up stores are the need of the hour.
Touch-and-Feel - Consumers still prefer physical stores by a wide margin. Customers purchase from online retail websites at an average rate of 2.2 times per month as compared to the shopping centers, where an average purchase is 4-5 times per month. Similarly, the average time spent at a physical store is 54 minutes, but an average time spent on a single retail website is only 38 minutes. The touch-and-feel factor at the physical stores helps in converting consumer’s spending to a bigger basket size. Therefore, brick-and-mortar is still the dominant factor.
Small is the Best Bet - Department stores have higher operational costs as compared to exclusive brand outlets or smaller stores. In many countries, a lot of brands a shutting their department stores. So, small stores are better, and pop-up stores are the best solution to this problem. People are preferring a minimalistic lifestyle and sustainability leading to conscious consumption. Pop-up stores are a mini brand showroom where you can taste a bit of the collection, but the digital catalogs in stores can be used to order their entire inventory. These pop-up stores can also be used as e-commerce pickup and return centers.
Flexibility - Pop-up stores can be set up by location on-demand - per hour/ day/ week/ month/ season/ year and have a low operating cost. It makes testing a new market and new product launch easier. And since it is smaller, so it is flexible to build an omnichannel business and integrate technologies like AI & ML, VR, AR, and mobility-ready formats, providing a great brand experience along with spreading product awareness. Even collaboration with designers and complementary brands becomes easier.
Compelling Opportunity - Pop-up stores offer a compelling opportunity for existing physical retailers who want to expand their footprints; digital merchants who want to reach new consumers, and product manufacturers who want to explore D2C opportunities; service providers who want direct exposure to potential customers; and marketing agencies that want more exposure for their clients.
How to Start a Pop-Up Very Effectively
To start a pop-up store effectively, choosing the best location and optimum window of operation are of utmost importance, which will provide a low-cost structure, robust gross margin, and cost-effective exit.
The Experiential Retail Economy
Retail is not only about selling products, it is all about providing an experience. Once the customer and product experience are great, consumption or response to the product or service will grow significantly.
The brands should offer sensational retailtainment which includes sensory-rich experience, immersive engagement approach, interpersonal linkage, and virtual personal shopping.
Different Types of Pop-up Stores
Keeping the pandemic in mind, the brands can opt for different types of pop-up stores like:-
- Pop-up store on wheels provides easy mobility, try-and-buy service on the spot, lockdown-friendly, and overall offers a fantastic on-demand physical shopping experience.
- Drive-Thru Pop-up Stores are a good option for food retailers to explore.