It took just five weeks to transform the 1970s-inspired accounting office into a modern hair salon.
After covering the drab white paint with coats of gray and purple, and knocking down the wooden doors that had divided the space into offices, online beauty retailer Madison Reed opened its first physical shop last week.
The 1,500-square-foot space in Manhattan’s Flatiron District is just the latest example of an e-commerce start-up taking the leap from clicks to bricks. But it isn’t making the jump alone. It enlisted the help of The Lion’esque Group — a firm that helps digital-first retailers find vacant space and transition into physical pop-up stores.
Founded in 2009 by former investment banker Melissa Gonzalez, Lion’esque has helped brands cut the ribbon on more than 100 temporary stores. It also is one of several companies reinventing the role of temporary stores, which no longer merely plug holes in landlords’ portfolios. Instead, the tenant base is shifting toward trendy up-and-coming brands, and are increasingly seen as a way to bring excitement to a street or property.
«The landscape’s shifting,» Gonzalez told CNBC.
Not the same old pop-up
Though pop-up stores have been around for more than a decade, they’ve changed dramatically since their inception. That’s largely thanks to the growth of online retail, which has helped new brands build a following.
Even as online sales growth is handily outpacing that at bricks-and-mortar, digital start-ups recognize the role physical stores can play in growing their brands. Online brands that have planted a flag in the ground include Rent the Runway, Bonobos and Warby Parker. Temporary storefronts are often the first step for these brands’ expansion, as they provide an opportunity to test the waters at a lower cost, and with less risk.
«What you saw in the past was the same old name repackaged as a pop-up store,» said Naveen Jaggi, president of JLL’s retail brokerage. «As we know pop-ups today, it’s these hip, these cool brands.»
For their first foray into bricks-and-mortar selling, these brands typically choose dense, urban markets where there’s an influential shopper base. The potential to snag these consumers outweighs the higher rents that retailers pay to secure that space, according to JLL, a commercial real estate firm.
Although these temporary stores come with shorter leases — and therefore, lower costs — the monthly asking rents could be 25 percent to 40 percent higher than a 10-year rate, Jaggi said. The average asking rent for ground floor space in the Flatiron District was $377 per square foot in the third quarter, according to Cushman & Wakefield.
«From a visibility standpoint … you will get no better opportunity to capture that brand awareness than in New York City or San Francisco,» Jaggi said.
In many cases, it’s not only about exposing a brand to a new group of shoppers. For California-based Madison Reed, which specializes in professional at-home color care, Manhattan is home to one of its website’s largest existing customer bases.
Madison Reed’s store puts a spin on traditional pop-up locations in that it’s part beauty salon, part retail shop — meaning it can provide more than one revenue stream for the firm.
«We wanted people to have a physical experience with our products and with our brand,» co-founder Sabrina Riddle said of the six-month test. «We’d love for people to come back and get a service, but we’re just as happy if they want to do it back home.»
Still, diving into the world of physical shops can be a challenge for online start-ups, which are typically not well versed in real estate contracts or store operations. Many brands also struggle translating their strong marketing message from the web to the store, Gonzalez said.
«They never made that style guide,» she said.
But they also have advantages. For instance, because Madison Reed is rooted in the web, it’s seamlessly integrated its online capabilities into its physical stores. When customers go into the salon to get their color touched up, the brand builds them an online profile. That way, they can easily reorder the color if they choose to do their upkeep from home.
«Since these guys are often coming from the online world, they’re so adept at creating digital environments,» James Cook, director of retail research at JLL, said about online start-ups transitioning to bricks-and mortar stores.
Lea más en: CNBC
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