Pop-up stores to increase in Hong Kong as rents for retail space continue to rise
Analysts say pop-up stores allow retailers and mall operators to gather customers’ response quickly and adjust their business plans to capture opportunities
Pop-up stores are not only the answer to shopping malls striving to meet ever-changing customer demands, but they are also for new retailers to test the water without having to pay exorbitant rents as the retail market recovers from a three-year decline, say operators and analysts.
“Local consumption demand is growing, but it’s mainly focused on lifestyle, health, food and beverage sectors, which require smaller size retail shops. A popular format we see around shopping centres is pop-up shops,” said Nigel Smith, managing director at Colliers International Hong Kong.
The real estate service company said major shopping malls had shifted their expansion focus from traditional luxury labels to lifestyle, food and beverage (F&B) and premium accessory brands that target affluent millennials.
“Demand from customers is different now. Instead of just the buy and pay, we see local shoppers wanting the experience,” said Fiona Shiu, deputy director of Hong Kong retail at Swire Properties.
“Wellness and happiness is the new trend reflected in consumption patterns. For example, a typical shopping day for a group of people or family always includes a tea or dessert break.”
F&B retailers, which accounted for half of all new retail entrants into the market in the first quarter of 2018, are expected to remain active throughout the year, according to CBRE.
Pop-up stores that bring in new menus, such as The BonBonist’s, a confectionery, and Dalloyau, a French brand known for its pastry and Parisian coffees have opened up in Swire’s Pacific Place and Cityplaza malls.
“New brands can use the pop-up format as a stepping stone into a new market at a comparably low cost,” said Lawrence Wan, senior director of advisory and transaction services for retail at CBRE in Hong Kong.
Wan said retailers and shopping malls were able to gather customer response relatively quickly and adjust their business plans. This is particularly important for small operators, who have operational and financial limitations.
“New concept sometimes means uncertainty and risk. Pop-up stores in big shopping malls can give a chance to small operators to test their innovative ideas at a prime location with smaller investment,” he said.
For landlords, pop-up stores are a means to adjust tenant mix and draw traffic, promote the retail experience that customers can only gain in bricks-and-mortar stores.
“We like the uniqueness and innovation that such pop-up stores can add to the shopping mall,” said Kitty Choy, director of retail at Hysan Development.
Choy said an earlier pop-up store of fruit tea shop Cha Long at Hysan Place, complete with an Instagram sharing zone for customers to snap photos with the brand’s mascot, attracted crowds of customers, especially young people.
Market observers said more pop-up stores were expected to sprout up as rents for retail space continue to climb this year. Savills had revised its 2018 forecast for rents in prime malls to a 5-per cent rise from a previous decline of 5 per cent.
In March, New World Development’s K11 Design Store collaborated with Dutch artist Mike Frederiqo to launch a pop-up store that translates the illustrator's work into prints on T-shirts, notebooks, tote bags and caps. The store will run till the end of May.
Pamycarie, a floral handicraft jewellery brand established by a mother and her two daughters from Hong Kong, has expanded to stand-alone store in K11 after receiving positive feedback from a pop-up in the mall’s experimental zone for stores promoting wellness and nature.
“Pop-up stores inject refreshing elements to our malls … and also allow us and our brand partners to understand the shoppers and the market more,” said Bella Chhoa, director of leasing and management of Hang Lung Properties.