Natasha Frangos, is partner and head of creative, media and technology at accountancy firm haysmacintyre. In this article, she explores the challenges and benefits of e-commerce business owners setting up pop-up shops.
According to reported figures, online sales are expected to have risen 16.2% in 2015, and show no sign of slowing down.
As well as growing sales, these figures also point to growing competition, with a number of online-first businesses now looking to take their first steps into the offline world in a bid to both cement and broaden their customer base, particularly in a cut-throat retail industry.
Increasingly, virtual businesses are turning to pop-up shops as a means of tapping into the world of offline sales. Even major global brands have adopted this route, with Spotify, for example, launching its first offline venture with temporary floor space within Topshop’s flagship store in December.
Pop-up shops seem to offer online retail businesses the best of both worlds: direct consumer engagement without the burden of long-term overheads. However, while the opportunities are undeniable, there are a number of fundamental issues to address before rushing out to set up a shop
Location, location, location
The physical location of a pop-up shop is critical, but is something that owners of a purely online business would possibly not have had to contend with before. As well as cost and lease considerations, business owners need to choose a space that fits well with the brand and one that is practical and convenient for customers.
Travelling pop-up shops can be a good option, providing exposure to new customers without capital-intensive expansion. They also have the added benefit of removing the need to honour a commitment to a longer lease agreement if things don’t turn out as planned.
Coming face-to-face with customers
Pop-up shops provide an opportunity for customer data gathering and audience interaction that is impossible to replicate online. However, it is important to remember that offline ventures must reinforce the values previously built up online.
In other words the look and feel of the website and overall customer experience should be mirrored in the style of the stall and the service on offer. One of the principal challenges of an omni-channel business model lies in ensuring that consumers’ online experience seamlessly translates in-store.
Finance
Businesses should seek advice on negotiating lease terms, premiums and their budget for capital works, ensuring these costs are factored into cashflow forecasts. Additional costs that need to be factored in include the cost of systems used to manage inventory, the recruitment of sales staff, staff training (especially if the team is new to selling face-to-face) and in-shop technology.
When moving offline, business owners should have a clear measure of sale conversion to cover the upfront investment that is required to set up this venture. Once the pop-up shop is up and running, actual performance must be closely measured against the budget with a strategy in place to drive sales if performance is not as expected.
Employment
For some e-commerce businesses the process of employing UK staff may be completely new territory. Putting in place employment contracts, operating a payroll and registering with HMRC are all essential steps, but can be easily be overlooked by business owners used to working on their own or with employees based abroad.
For example, pension schemes are now a critical overhead, with auto-enrolment affecting new employers either this year or next, depending on when PAYE income is first payable. Establishing a good working environment for staff is also essential in delivering a positive customer experience.
It is clear that pop-up shops can be a great way for online retail businesses to move offline temporarily and gain enhanced brand loyalty, customer insights and profits in the process. That said, careful planning is vital. Getting it wrong will not only be detrimental to the brand, but also to the bottom line.
Featured image via DrimaFilm / Shutterstock.com