February 1, 2014
By Sarah Sluis,

E-commerce Parachutes into Stores with Pop-up Shops

Anyone who's purchased an item online only to discover that it looked cheap, felt scratchy, or clearly didn't fit knows the pain of ordering online. "The number one reason people don't buy online is because they want to touch and feel products. That's why ninety-five percent of products are still purchased in stores," observes Sucharita Mulpuru, a vice president and principal analyst at Forrester Research.

For e-commerce retailers, that presents an obstacle to finding customers. How can they get consumers to try on and experience their merchandise without the long-term costs of moving into retail? The answer, for some growing online businesses, has been to dip their toe into the offline world through pop-up shops.

BaubleBar is a costume jewelry e-retailer that opened a pop-up store in New York in 2013 in both February and June. In October, it launched TheBar, a small showroom at the company headquarters. One reason for the expansion to offline retail has been to woo people who may be uncomfortable buying online. "We are delivering an incredible product at a great value, and allowing first-time customers to touch and feel our product has a very impactful result," explains Daniella Yacobovsky, the company's cofounder.

Most pop-up shops work by finding a short lease on a storefront in between long-term leases but with a high amount of foot traffic. Those locations are limited, leading retailers to think of other crafty ways to execute pop-up concepts.

E-commerce site Zady, which sells objects curated with "conscious consumerism" in mind, set up shop in New York's LaGuardia Airport during the holiday shopping rush, while Indochino, an online men's tailoring service, measured men in New York's Grand Central Station. Eyewear company Warby Parker has a school bus of its products touring the country, offering a pop-up shop without the hassle of finding the perfect short-term storefront.

"It's a form of marketing that's way more expensive than a billboard but less expensive than a full retail build-out with a five- or ten-year lease attached to it," Mulpuru says. Pop-up shops have thrived in New York, where it wouldn't be unusual for a prime storefront to have $10 million in yearly sales, she estimates. For small e-commerce companies, even a few months of this earning potential can have a huge influence on overall sales.

Pop-up shops for e-commerce companies focus on letting consumers experience the merchandise, but they also tend to pay more attention to the retail environment. They marry shopping with entertainment, often offering little extras to drive buzz. Everlane, an online retailer that specializes in high-quality, well-priced apparel and accessory basics, had a Secret Garden pop-up shop in November to preview an invitation-only collection. BaubleBar's pop-up shops have stylists on hand to aid customers in their accessorizing.

Despite the success offline, BaubleBar's goal is to bring the two channels together. "We do think it's critical that we are driving that customer back to the digital site," Yacobovsky says, noting that many customers who buy in their pop-up shops become online customers. But given the success of its pop-ups, "offline will definitely be a permanent part of our strategy going forward."

Operationally, online still has an advantage. "E-commerce is a much more efficient way to distribute your product, but it's not the way most customers prefer. That's why you have stores," Mulpuru says.