The Staying Power of Pop-Up Stores

In late October, Rachel Petersen walked into a store on 57th Street in Manhattan down the block from pricey department store Bergdorf Goodman. She took in the neon lights and tinted windows and thought she'd stumbled into "a private event or something." The 30-year-old administrative assistant soon discovered that she was at Procter & Gamble's (PG) New York pop-up store. The 4,000-square-foot space had no cash registers because everything was free—including a full CoverGirl makeover or a Head & Shoulders wash and blow dry. Petersen tested some lotion and left with a Febreze scented candle. "I'm more of a try-before-buy person, so this is good," she said.

The P&G store, which drew 14,000 visitors in the 10 days it was open, represents a new iteration in the evolution of the pop-up. The first generation of stores, which cropped up in the early part of the decade, were often little more than shelving and cash registers in empty mall space with a makeshift sign draped over the old tenant's marquee. They opened for a month, then disappeared. Many retailers have since hopped on the trend and upgraded the format with more spending on in-store displays and fancy signage to blend in better with their mall neighbors. And while pop-ups can bloom in any season, the holidays remain an ideal time for temporary stores, given the heavy foot traffic.

With U.S. retail vacancy rates at the highest levels in a decade, there's no shortage of space. Toys 'R' Us, for instance, boosted its number of holiday season pop-ups this year to 600, from 90 a year ago, and hired 10,000 workers to operate them. Many of the 4,000-square-foot locations are in malls that formerly housed KB Toys, a toy chain that liquidated last year. Borders Group (BGP) has increased its pop-up count fivefold, to 25, most of them in malls where the bookseller used to have a presence.

Although pop-ups have moved up in the world, for some the term still has downmarket connotations. Nataraj Iyer, a P&G marketing executive, prefers "interactive experience." Pierce Smartfusion, the firm P&G hired to run the 57th Street experiment, describes itself as an "experiential" agency that tries to deepen the "conversation" with shoppers. With the P&G store, the goal was not to move merchandise but to build brand loyalty. "The woman getting her hair colored will remember this the rest of her life," says Christian Charapata, a pop-up veteran who managed the P&G store.

Levi Strauss also hopes to create a lasting impression with the "workshop" it opened last month at a former art gallery in Manhattan's SoHo district. The bright-white, 10,000-square-foot space is furnished with benches made from cargo pallets and focuses on the art of (pre-digital) photography. Visitors can rent vintage cameras and sign up for free classes. The theme extends the denim maker's gritty Go Forth advertising campaign, a celebration of craftsmanship and collaboration that features scenes of regular folk rebuilding a Rust Belt town. The company says the store has been drawing 3,000 visitors per week. The hope is that each will talk, text, and tweet about their experience. "Success is exposure," says Erik Joule, who runs men's merchandising, design, and licensing. Eventually, he hopes, people will say, "Wow, that's Levi's?"

Christina Norsig, a New-York based e-commerce entrepreneur, runs Pop-Up Insider, an outfit that brings together property owners and potential pop-up tenants. Norsig, who won't disclose clients' names, has listings in a handful of states, including Minnesota, Florida, and Maine, and plans to expand her geographic reach next year. "This whole notion of temporary retail is here to stay," she says. "It's going to be a marketing tool for retailers going forward, whether they are testing a neighborhood or marketing to the end consumer."

The bottom line: Procter & Gamble and Levi Strauss are using pop-up stores to connect with customers and build their brands in new ways.

    Before it's here, it's on the Bloomberg Terminal.