Brick-and-mortar retail seems to be experiencing a revival, but even at its lowest point, key online brands – Amazon and Warby Parker leap to mind – were moving into physical, brick-and-mortar stores. Many of these etail to retail migrations took place using pop-ups through TheStorefront.com, a technology company that connects vacant, retail real estate with erstwhile retailers looking to create a short term presence for their business – either to test a product, concept, or location, or just to create buzz for their brand.
I had a chance to speak with Mohamed Haouache, CEO of TheStorefront.com, to discuss the interactions between online and offline in modern retail, some tips for creating successful pop-ups, and how an oversupply of retail real estate inventory is creating opportunities for firms like his.
Mohamed Haouache, CEO, The Storefront : [00:02:42] I’m from France. I’ve been living in the US for a total of ten years. I’m spending my time trying to visualize the product of tomorrow and trying to create the right tool in order to provide accessibility for retailers. And the mission statement of Storefront is to make retail accessible. We really are working super hard in order to connect every vacant space with the best retailers on earth.
David Zweifler, Gordon Magazine: [00:03:13] There’s definitely retailers — big retailers and small — who are leveraging pop-ups to create immersive experiences and to test product but there’s digital-only brands that are moving offline. And if brick and mortar is dead and why the heck is Amazon opening up stores, right?
Powerful Etailers Invest In Brick-and-Mortar
Mohamed Haouache, CEO, The Storefront : [00:03:38] Absolutely. Sometimes we discovering the trends while they’re happening. This startup that is sending a signal that physical retail is not dead. It’s changing.
[00:03:48]Now we are slowly observing different type of trend. First one is that yes, ecommerce players have never been as strong as they are today, but they’ve never had so much appetite for physical retail and the idea that was highlighted last year in a very interesting report from the ICSC is that there is what they call a “halo effect” — the stronger you are in physical retail the more impactful it’s on your ecommerce sales and it’s creating what I call a virtuous circle.
[00:04:24] There is absolutely no success story today without the combination of the two elements — physical and online and what we discovered also is that the quality of the people behind these brands or initiatives is that they are more and more technical there are more and more data-driven. And the way we’ve seen retail changing is that retail is becoming a data-first business .
[00:04:53] You no longer sell you collect data that you recycle that you share the to resell and the sales per square foot is parameter up one viable or one metric. There are no longer, your “North Star metric” because there is obviously this omni-channel element like when you sell someone to someone you might have the first point of touch with this person in the physical retail or online and they might end up buying elsewhere which creates obviously bottleneck.
“The stronger you are in physical retail the more impactful it’s on your ecommerce sales.”
[00:05:28] How do you follow this person from an e-commerce act of acquisition down to the payment to a to a space in SoHo or Brooklyn? It’s becoming challenging but I’m super excited and super convinced that physical retail is actually going to grow again. But it won’t be the same type of retail.
David Zweifler, Gordon Magazine: [00:05:51] So, I would imagine that that data puzzle becomes all the more complex when you are talking about space that is temporary. Right?
Mohamed Haouache, CEO, The Storefront : [00:06:00] Absolutely.
Best Practices for Pop-Ups
David Zweifler, Gordon Magazine: [00:06:01] So, do you have any clients that you think are doing it really really well the with that and how are they how are they handling that because all of the data challenges of retail become so much more complicated with pop-ups.
Mohamed Haouache, CEO, The Storefront : [00:06:14] The best clients we have today all the most successful one because I don’t like work classify one versus the other is that the e-commerce players who are moving from online to offline, they come with a very strong team and they have applied their technical skills in the offline format.
[00:06:39] They’re coming from a world where they were collecting data through Google analytics. They were looking at heat maps on their e-commerce platform and they cannot conceive moving offline with not this equivalent of Google analytics, heat maps and initiative in order to bring the lifetime value or customer experience to its fullest, you know. We’ve been super privileged to work with the Warby Parker and Caspers of this world, you know, these companies tested their physical footprint through a pop-ups.
[00:07:13] Now unfortunately they’re not even a client anymore of Storefront. Because they became so powerful that they are moving right now into permanent lease.
[00:07:21]The best brands are striving in and physical retail that it’s because they’ve been able to understand the full upside and the full potential of their customers from the data point of view.
“Now unfortunately Warby Parker is not even a client anymore. Because they became so powerful using pop-ups they are moving right now into permanent lease.”
David Zweifler, Gordon Magazine: [00:07:34] Now, we talked a bit about digital brands moving into physical locations. And obviously there’s a there’s an important role for pop-ups there in terms of being able to test locations. It seems like the pop-up industry, if one exists, is maturing and it’s changing. Ten years ago pop-ups were boutique brands that maybe we’re kind of dipping their toe in the water of a brick and mortar location or in a different location. How has the role of pop-ups for retail changed? How is it changing?
A New Role For Pop-Ups In Retail
Mohamed Haouache, CEO, The Storefront : [00:08:13] Yeah, actually it’s a very interesting trend. Yes, this industry or this niche market was not perceived positively. Only a few years ago because even the word pop-up is not like sending a positive signal. What we believe is happening is that it’s becoming a tool at the disposal of retailers who need the flexibility, would like to hedge their risk by being able to quantify your starting date and end date.
“We are today what we call a two-sided market place. We are connecting empty vacant retail space to a network of retailers through technology.”
[00:08:44] And also it’s a tool in order to assess the viability of a product. And because of that, retailers have been sharing the benefits of expanding it to the pop-up store format.
[00:08:57] On top of that, what we believe is happening is that because the ROI associated with pop-ups or retail is no longer the sales per square foot to square meter, you’re entering into an age of what we call “experiential retail” and this element is basically pushing. not only the traditional digital native brands to move from online to offline, but even the blue chips and the big corporates are expanding into pop-up stores, you know.
Bit Players In Pop-Ups
[00:09:30] Nike is doing pop-up stores. Puma, Adidas, Vuitton, Chanel, Hermes, Samsung, you know, because what the at the end of the day what they want is to provide a sense of connection, or of connectivity with their end customers to give them the ability that they are treating them as the VIP customers and this is happening right now.
David Zweifler, Gordon Magazine: [00:09:56] So that trend is being driven by experiential and a desire to create a closer connection
Mohamed Haouache, CEO, The Storefront : [00:10:04] Absolutely
David Zweifler, Gordon Magazine: [00:10:06] So it seemed to me like the three major uses of pop-ups historically is that experiential and then you’d have promotional like a I don’t want to seem like stunts but like like the Friends (TV show) pop-up, you know that just closed in Midtown anniversary and then online to physical.
“What we realize as a company is that there’s almost as many user cases for pop-ups as there are clients today.”
[00:10:28] Are those the main tactics for pop-ups or are there others I’ve missed…?
Mohamed Haouache, CEO, The Storefront : [00:10:32] Frankly there are many more but I will use the word flexibility to combine most of them. Flexible pop-ups in order to test the geography of in UCD a new format a new product a new product launch there is obviously this extension of creating sales — very aggressive sales –through pop-up initiative when it comes to a leveraging the seasonality effect. What we realize as a company is that there’s almost as many user cases for pop-ups as there are clients today.
David Zweifler, Gordon Magazine: [00:11:05] You were talking before about established retail making greater use of pop-ups. Yeah, you’ve got stores like Lululemon, which have pop-ups all year round. They’ve got an established retail presence how we’re how do you see them using it? Is that a trend?
Lululemon Uses Pop-Ups For Location Testing
Mohamed Haouache, CEO, The Storefront : [00:11:21] They are actually a customer of Storefront. What they are doing — and I’m not talking on behalf of Lululemon — is that they are testing the city and the neighborhood. Once they find the right location the convert a pop-up store into permanent lease. So it’s a very agile use of retail.
David Zweifler, Gordon Magazine: [00:11:44] Just so I understand your business model you essentially a relationship between the landlord who owns the building. And you provide a flexible arrangement to the client?
Mohamed Haouache, CEO, The Storefront : [00:11:58] I’m going to introduce storefront first. We are today what we call a two-sided market place. We are connecting empty vacant retail space to a network of retailers through technology.
[00:12:13] Storefront is a tech platform and we are today compared as the AirBNB of retail. We are solving issues on both sides of the marketplace.
[00:12:24] We helped listing owners advertise the space through a unique online marketplace and we help retailers find and book a retail space as easily today as booking a hotel room. We are trying to make retail accessible through technology.
[00:12:41] But if you’ve been a user of Airbnb or Booking.com or Expedia, this is the same mechanism. We make a booking of a retail space super easy today.
How WeWork Impacts The Pop-Up Space
David Zweifler, Gordon Magazine: [00:12:54] To be sure the landlord owns the building there was a tremendous amount of overhead. Do you feel like the situation with WeWork is going to make landlords less willing to enter into a flexible arrangement with a storefront as an intermediary?
[00:13:14] Mohamed Haouache, CEO, The Storefront : [00:13:14] No. Because there is no risk associated with Storefront. We don’t take on a lease, we don’t promise anything, we are just out to maximize the usability of of an empty retail space. WeWork was contracting with landlords — sometimes contracting for many years. Storefront is an add-on opportunity. Nobody is forced to use Storefront and we not even taking a commission from the listing owner.
[00:13:41] Our business model is that our clients are booking.
David Zweifler, Gordon Magazine: [00:13:45] And so you basically are adding liquidity to the retail vacancies that exist…
Mohamed Haouache, CEO, The Storefront : [00:13:52] Absolutely!
Pop-Ups Are About More Than Foot-Traffic
David Zweifler, Gordon Magazine: [00:13:53] Are you seeing anybody who went into pop-ups the wrong way and blew it — any losers?
Mohamed Haouache, CEO, The Storefront : [00:14:01] What I can tell you is that we always tell our customers that booking a retail space with high foot traffic doesn’t create a successful pop-up store. They need to be able to communicate, to trigger appetite, to have a beautiful storefront, to leverage the social media activity, to use a PR agency because obviously in the world of retail, there’s always this element of asking for more foot traffic than less but foot traffic is technically not the only thing necessary.
[00:14:41]You not only need high foot traffic. You need a foot traffic that can be decent, combined with a PR activity, combined with a social media activity, combined with a few beautiful storefronts. Otherwise, if you don’t have one element, you might take the risk of overspending on a space with absolutely no people coming in because you need storytelling behind your pop-up store.
David Zweifler, Gordon Magazine: [00:15:08] It’s interesting because I’ve spoken to the proprietor of 180 The Store, and theh are a store mixed with a PR firm. Yeah, they were talking about the value of stories.
[00:15:20] Pop-ups are kind of like a double-edged sword because you have the urgency to buy because they may not be there next week, but because they may not be there next week, if you don’t get the floor store full the front, you know, you never you don’t get another chance…
Pop-up Success Is Online And Offline
Mohamed Haouache, CEO, The Storefront : [00:15:33] Exactly, but in order to get it full, having high foot traffic is not enough.
David Zweifler, Gordon Magazine: [00:15:40] So you’ve got to really maximize not just in terms of sales conversions and/or data, and/or social media benefit…
Mohamed Haouache, CEO, The Storefront : [00:15:48] …You need some kind of networking effects, you know.
David Zweifler, Gordon Magazine: [00:15:54] I think a lot of people believe that there is too much retail space now and they’ll probably be a reduction of stores. Even if there’s a resurgence of brick and mortar retail. Do you ever see a point where you have to take leases or buy property in order to have the space available ?
[00:16:18] Do you see this as being a temporary situation where you have so much vacant…
“There are so many empty vacant spaces that maybe the listing owner will offer them for free and turn their empty vacant space offered for free into a space where they’re sharing the profit generated inside the space.”
Mohamed Haouache, CEO, The Storefront : [00:16:23] We are exploring ideas, but we are trying to build what we call an “asset-light” business, you know, and it’s super challenging for us to turn Storefront as a real estate operator, you know. We are building a very unique model where every vacant space can be uploaded into the platform and be offered to every retailer.
[00:16:49] If we turn that into different model, it would mean that the way we finance our growth will be different. We may have to borrow a lot of money in order to finance long-term. So it’s it’s something that we exploring today. I’m not a big fan of it because I’m not sure that I would be comfortable about taking on lease risk. But my opinion or vision is that there are so many empty vacant spaces that maybe the listing owner will offer them for free and turn their empty vacant space offered for free into a space where they’re sharing the profit generated inside the space.
Empty Spaces = Opportunity for TheStorefront.com
[00:17:31] That’s that will be the ideal setup . You have too many empty vacant spaces too many listing owners struggling with with loss of revenue and at some point you entering into a phase where there is a commoditization of retail, you know, and maybe, maybe Storefront might be able to convince that enough distinct owners to enter… To disrupt themselves and stop thinking about revenues but starts thinking about sales per square feet that they could extract out of a space that is super active today.
[00:18:05] David Zweifler, Gordon Magazine: [00:18:05] Yes – if the plane takes off with an empty seat they don’t make any money off of it.
Mohamed Haouache, CEO, The Storefront : [00:18:08] Exactly.
David Zweifler, Gordon Magazine: [00:18:09] Well. Thank you very much. I really appreciate it.