One of the key trends that defined retail in 2023 was pop-up shops and how these experiential shopping experiences have taken hold over millennial and Gen Z consumers.
Midway into the first quarter of 2024, there are no signs of this experiential retail trend slowing down.
Just this week, American department store chain Nordstrom announced a unique collaboration with the British fashion brand Paul Smith.
From March 6 to April 20, the fashion label will open the Paul Smith Clubhouse at Nordstrom’s New York City flagship, a retail takeover that will include cocktails and bites in addition to apparel.
From the clothing to the drinks to the food, everything at the temporary retail location will be inspired by the designer’s mantra of “classic with a twist”.
The Clubhouse will feature the brand’s signature stripes along with special glassware, furniture, and solid wall coverings that replicate one of several colours found in Paul Smith designs.
The shop will also feature photography, art, and memorabilia collected by or sent to the designer over the years.
The shop is set to showcase Paul Smith’s spring collection, titled “What is a suit”, which tackles menswear staples in a variety of forms, from classic tailoring to military uniforms. The collection is inspired by 60s-inspired design details such as high-break points and elongated silhouettes. The line also includes unique spins on menswear fabrics such as polka dots, pinstripes, herringbones, and an orchid-focused floral.
“Sir Paul Smith’s menswear bona fides are self-evident, and he remains one of the most inspirational and important designers in the industry. He’s been able to sustain his longevity in the business through listening to his customers over the decades while successfully leading them through different eras of style,” Jian DeLeon, men’s fashion director for Nordstrom, commented.
“That balance of aspiration, accessibility and down-to-earth, conversational approach to fashion is something we’re equally passionate about at Nordstrom. At the end of the day, we’re both fully invested in helping customers look great and feel their best.”.
The founder of the eponymous brand highlighted another similarity between his business and the department store chain.
“I started my own business more than 50 years ago and I’m immensely proud of the independence and from-the-heart approach that we maintain today,” Smith said. “There are a lot of parallels with Nordstrom with Erik, Pete and Jamie [Nordstrom] still heavily involved in the running of the company and I’m delighted to be working together.”
As the Clubhouse opening showcases, retailers are still heavily invested in the concept of pop-up shops, especially big-box retailers like Nordstrom that have been struggling in recent years to get back to pre-pandemic profits.
In the company’s third quarter 2023 earnings report, net sales decreased 6.8 per cent versus the same period in fiscal 2022, gross merchandise decreased 7.1 per cent, and third quarter net sales included a 270 basis point negative impact from the wind-down of Canadian operations.
Pop-ups are one way Nordstrom has been trying to drive sales and draw in younger, more trend-savvy consumer groups. By collaborating with brands that have a strong millennial and Gen Z consumer base and by offering interactive experiences to create organic user-generated content, Nordstrom is helping modernise its image.
Marie Driscoll, an expert on luxury retail and the founder and chief analyst at Driscoll Advisors, noted that Nordstrom has been using pop-ups since the 2013 launch of Pop-in@Nordstrom, based on themed curated shops or a single brand partnership to bring these worlds to Nordstrom shoppers.
“In the past 10-plus years, I have seen Diptique, Zimmerman, Asos, Prada Cosmetics (currently in New York City), Etam, Pop-Up Grocer, London’s Topshop, and Parisian Coperni at Nordstrom pop-ups in New Jersey and more recently at the New York City flagship,” Driscoll told Inside Retail.
“These brands provide discovery, excitement, and newness at Nordstrom, features that department stores were known for in their heyday and that Nordstrom has brought back. The Paul Smith pop-in is the next iteration, providing shoppers the opportunity to engage or re-engage with the brand. The short duration creates a sense of urgency and fear of missing out, buy it while you can!”
In 2023, Nordstrom opened or relocated 20 stores, both Nordstrom and Nordstrom Rack, the company’s off-price alternative chain store, and it plans to open at least 20 new locations in 2024 and 2025.
As Nordstrom CEO Erik Nordstrom stated, “In the third quarter we continued to make progress against our priorities, and we’re especially pleased with the resulting improvements in gross margin and earnings. Given continued uncertainty and softening consumer spend, we’re remaining agile and focused on serving our customers.”
There are still a lot of opportunities for both direct-to-consumer brands and big-box retailers to tap into the pop-up space.
Research conducted by financial services company Capital One demonstrated that temporary retail spaces and pop-up shops generate up to $80 billion in annual revenue, with projections that indicate the market value will exceed $95 billion by 2025.
The same study by Capital One indicated that approximately 80 per cent of retailers that have opened up a pop-up shop considered the endeavour to be a success, with 58 per cent planning to open up another pop-up shop soon.
There are multiple benefits, including a positive cost-benefit outcome, the ability for retailers to experiment with store design and customer experience services, and to build brand awareness.
The cost of renting a pop-up space also tends to be significantly cheaper more permanent locations, averaging $23.70 per square foot for a pop-up versus $32.12 per square foot for a mall space. Not to mention, since about 44 per cent of pop-up shops cost less than $5,000 to open, they can be a more cost-effective way to promote brand awareness than a large-scale digital marketing campaign, and one that often leads to organic user-generated content to boot.
As Madelynn Ringo, founder and creative director of Ringo Studio, pointed out, “Testing a market with a pop-up is a smart business strategy because it enables the brand to learn the nuances of the particular customers in that market, what their shopping tendencies are, and what they gravitate towards.
“The brand can also gain experience with retail operations. Everything from hiring staff to ensuring inventory management is trialed and the ideal staff-to-customer engagement is tested. Launching in a new market with a pop-up can provide a valuable learning phase before taking the leap into creating a permanent experience, ensuring that the brand invests its money in something tested and allowing its team to have the necessary time to iron out all the kinks.”
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