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News Release

Hong Kong and Macau

Pop-up Retail Increasingly Popular among New Market Entrants

Pop-up stores embraced by both brands and landlords amid high rents and tight supply of retail space in Hong Kong


 

HONG KONG AND MACAU, 17 October 2013 – With sustained expansion demand from brands, highly limited retail space and exorbitant rental levels in Hong Kong, the concept of pop-up retailing has been gaining momentum, with the trend expected to continue in the coming years, according to the latest Retail Atelier report released by Jones Lang LaSalle today.
 
Consumer sentiment in Hong Kong remained strong, supported by strong underlying fundamentals, including 3.3% real GDP growth in 2Q13, a healthy labour market and increases in nominal payrolls. Private consumption expenditure (PCE), an indicator in gauging local consumer spending, grew 4.2% y-o-y in 2Q13. Meanwhile, tourist arrivals recorded 13.7% y-o-y growth in 2Q13, with mainland Chinese tourist arrivals posting robust growth of 21.2% y-o-y in 2Q13.
 
The growing retail market in Hong Kong continued to draw the attention of retailers worldwide, enticing international brands such as Intimissimi and Topshop, both of which recently opened their first stores in the city in 2Q13. Underpinned by persistent retail demand and limited space in the supply pipeline, prime shopping centre rents registered new record highs.
 
In the face of continued high rents, cost-sensitive retailers are increasingly opting for non-prime locations, leading to the emergence of new retail districts such as Shatin and Tuen Mun. Riding on this trend, a more intriguing phenomenon is also gaining momentum these days—pop-up retail. This retailing format, also known as pop-up store or flash retailing, is a trend of opening short-term sales spaces, and is regarded as an attractive alternative to traditional physical shops for a growing number of retail brands and landlords.
 

According to Jones Lang LaSalle’s Retail Atelier, the trend of pop-up retail involves ’popping-up’ one day, then disappearing anywhere from one day to several months later. For retailers, a pop-up store, although small and temporary, lets them showcase their products without the significant upfront investment of a physical shop. Moreover, it allows retailers to create a unique environment that engages their customers, generates feelings of relevance and interactivity, and builds up interest through consumer exposure.

In addition, the advantage of presenting brands through pop-up stores is especially attractive for new market entrants as such stores allow a brand to enter the market much faster, without the hassle of waiting for available space. The pop-up store can also be viewed as a platform to test the merchandise among discerning Asian customers, particularly Chinese consumers. It is not uncommon for a well-run pop-up store to later turn into a permanent shop.
 
The concept is also being embraced by landlords because of its various benefits. First, the small space of the pop-up store is usually located in either an open void space or a vacant shop, or a shop that is undergoing alteration work. With the pop-up store, the landlord can maximise revenues and reduce vacancy levels in what would otherwise be deemed dead space. The landlord can also evaluate the brand’s operations, sales performance and customer service to assess whether the brand is worthy of a longer-term store in the mall. Considering all these, more and more landlords are seen starting to enhance their existing retail schemes by embracing the concept of pop-up retailing.
 
However, the paper also pointed out certain risks and disadvantages associated with this new concept. A relatively large amount of investment is usually required for pop-up stores, considering the relative size and tenure period of such stores. There is often limited time to recoup initial investment or produce any impactful marketing plans given the pop-up store’s temporary nature, and, as a result, it is sometimes difficult to fully reflect the brand’s core value in the short span of time. Although pop-up stores are often set up in areas with high foot-traffic, these locations may not always complement the retailers target audience profile. Conversely, pop-up stores are sometimes placed in isolated locations to save costs, and, as a result, the retailer may need to work harder on the store design, customer service and marketing to draw people into the pop-up space.
 
“With no let-up in demand from brands seeking to expand and with the extremely tight space availability in the coming years and the rents unlikely to subside any time soon, a pop-up store is considered a cost-effective and enticing option for both retailers and landlords. We believe the trend will continue in the foreseeable future,” said Tom Gaffney, Head of Retail at Jones Lang LaSalle.
 
“However, due to the limited time period and inability to truly showcase the brand’s value and its diverse products, pop-up retail can sometimes be detrimental to a brand. Nonetheless, we believe the benefits outweigh the risks, as long as the brands have a clear roadmap of strategy and goal for having a pop-up presence in the increasingly competitive retail market,” added Gaffney.