20 August 2010

Retail revival will make it harder to benefit from pop-ups

John Spindler, CEO of Capital Enterprise, helps small firms find their feet. He speaks to Sean Lightbown about the difficulties facing those looking to the pop-up for inspiration        
John Spindler: CEO of Capital Enterprise

A pop-up shop provides numerous opportunities for new and small businesses.

Firstly, it’s ideal for testing new products, as it provides proof that your business can get off the ground. When potential investors ask if your idea works, showing them the success of a pop-up is proof.

Secondly, it’s an opportunity for emerging enterprises that don’t have a face. It’s relatively easy to set up an e-commerce site, but it’s a lot harder and more expensive to get public visibility. Internet-focused businesses can use short-term lets to have a tangible presence for a short time.

However, as the retail market bounces back, it’s becoming harder for starting businesses to do pop-up well.

Landlords don’t like letting their properties on a short-term basis to small businesses. They have to pay full business rates if the property is empty for more than three months, so they much prefer longer leases.
it is hard to compete with established and leading businesses that can often get discounted rates. 

New businesses also find it difficult to get prime space from landlords. They have to pay an extra 20 per cent on top of a deposit to get space. This means it is hard to compete with established and leading businesses that can often get discounted rates.

On top of this, a big investment is needed to make the pop-up look good. To have a well-designed temporary store and great quality stock costs money. Some businesses are preferring long-term step-rents, whereby companies get discounted rents in the first few years to make it easier to get the investment back.

There is a market for the use of temporary space in the high street. As the retail industry recovers, pop-up may not necessarily be the way to do it for small businesses. 

Capital Enterprise runs an Empty Property Scheme which deals with pop-up practicalities.

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