Can department stores be reinvented with a pop-up approach?

Discussion
A Pop Box showroom, a similar concept that partners with online brands to expose shoppers to new products. – Photo: Pop Box
Jun 04, 2018
Tom Ryan

Neighborhood Goods, a start-up that just raised $5.75 million in seed funding, is seeking to reinvent the department store by infusing the model with the continuous discovery and community vibe of a pop-up space.

The first store opening this fall in Plano, TX measures only 13,000 square feet, well below a typical department store’s size.

Like a pop-space, Neighborhood Goods will have a rotating group of about 15 brands at a time with about four or five recognizable multinational, household names as well as a number of local, independent brands. The store will focus on digital native brands that don’t want to sell in a traditional department store setting and lack a broad enough product range for a full store of their own.

Some brands will stay for months and others for much shorter periods with expectations that a visitor will find something new on every visit. The mix will be apparel and housewares, but brands will be able to pilot new products or experiment with fresh ways to engage customers. Matt Alexander, co-founder of Neighborhood Goods, told Xconomy, “Some brands won’t want to sell anything; they may want to create a small cooking class or sponsor a reading area.”

Also, like many pop-up spaces, Neighborhood Goods will have a communal aspect. The format includes not only a bar and restaurant, but event programming, a speaker series, art installations, a publication and podcast. On the tech front, Neighborhood Goods’ app will enable customers to learn more about brands, text staff, have products brought to them and check out.

The store will make use of modular display forms so vendors can easily alter or expand their spaces. Point-of-sale systems and employees are provided if necessary. Lease terms are expected to run shorter and be priced below typical retail leases with terms that give Neighborhood Goods a portion of sales.

“For us, the goal is to create really good reasons for people to come back that aren’t to do with the transaction,” Mr. Alexander told Dallas Innovates.

The funding round was led by Forerunner Ventures and includes participation from Maveron, CAA Ventures, Global Founders Capital, NextGen Venture Partners, Revolution’s Rise of the Rest Seed Fund, Dollar Shave Club founder Michael Dubin and Retail Connection co-founder Alan Shor.

DISCUSSION QUESTIONS: Would the department store model benefit from a pop-up sensibility? What aspects of the Neighborhood Goods model make the most and least sense?

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"Small footprint, rotating national and indie brands, a community, and experiential vibe! What’s not to love? "
"“Retail as a Service” is another way to look at it. Providing the space, technology and merchandising expertise for the brands..."
"Experiential selling isn’t a tactic. It needs to be an organizational mindset. Buyers beware!"

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27 Comments on "Can department stores be reinvented with a pop-up approach?"


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Ken Lonyai
BrainTrust

This is absolutely an avenue forward for department stores that year after year offer the same experience to shoppers. The model described here is similar to what I call “fast turn stores.” The idea is that there is a certain amount of bedrock brands that shoppers know they can find at their local store, infused with constantly changing, limited quantity, unique finds. Neighborhood Goods has a different spin, but the same outcome is sought: motivation to shop the physical store, driven by unexpected discoveries. If however, the rotating brands/products can also be had through the company website, foot traffic won’t see too much of a rise.

Anne Howe
BrainTrust

Small footprint, rotating national and indie brands, a community,
and experiential vibe! What’s not to love? Bring it!

Bob Phibbs
BrainTrust

Macy’s already does this and they just purchased STORY which seems similar. It will be incumbent on their marketing and PR to brand the name Neighborhood Goods in shoppers’ minds as something other than a restaurant with pop-ups around it that “changes every month.” If it is a viable alternative to department stores — enough people have to actually purchase something to fulfill the shopper’s goal when they go shopping. Customers need to buy something, not just be studied or give feedback.

Lee Peterson
BrainTrust

Our latest research showed consumer fatigue with pop-ups, mostly because they were not done right (“just a bunch of stuff in a crummy space”). So this might cause more brand damage than good. It really has to be thought through, which has not been true of other efforts recently (beacons in-store, etc.).

Also, it seems to me that it would work the other way around. Department stores become more “popup-like”. I.e. more consignment of new-new brands, faster turn of staples, fresh associates with the popups, etc. You know, create a “popup alley” vs. racks and racks of apparel you never stop to look at. In today’s “fail fast” retail world, I’d try both.

Dave Wendland
BrainTrust

I’m definitely a fan of popups, food halls, and communal use of space. If department stores can thoughtfully and eloquently incorporate imaginative offerings into their wide-open buildings, I believe consumers will respond favorably. The keys to success will be resonance, relevance and reward.

I like the concept of Neighborhood Goods for its connection to the community, its revolving assortment strategy and the excitement and vibe such an offering should create.

Cathy Hotka
BrainTrust

What’s interesting here is the smaller footprint, along with product curation. I recently shopped in a national department store (not to be named) and was overwhelmed by the visual chaos — thousands upon thousands of products jammed into a huge space. The “less is more” principle may turn out to be highly appealing.

Mohamed Amer
BrainTrust
Mohamed Amer
Independent Board Member, Investor and Startup Advisor
1 year 3 months ago

The Neighborhood Goods model is worthy of our attention. The footprint is small enough to mitigate high fixed-cost investments yet big enough to test a new set of relationships with brands, big and small, as well as executing on a new consumer experience.

Two key execution points moving forward: how well will Neighborhood Goods deliver on the vision and can the company create a consistent and differentiated brand and image in the mind of consumers independent of the vendors that make up the fluid assortments?

Brandon Rael
BrainTrust

Experimentation in the department store space is the key component to staying relevant in today’s experiential-first model. What better cost containing and low-risk strategy than to deploy experiential and local pop-ups?

Storytelling, connecting with your local communities and building an experience that extends well beyond the retail transaction, are the main ingredients as to why the brick-and-mortar shopping model is far from over. It’s fascinating to see the emergence and significance of the retail pop-up model.

With Macy’s acquisition of STORY, we should expect many other department stores and traditional retailers to jump on this moving pop-up train.

Art Suriano
BrainTrust

The best way to attract customers to any location whether it be a physical store or website is by appealing to their curiosity. Make the customer take notice of something that piques their interest and you’ll quickly have a visitor. There is no doubt this is what Neighborhood Goods has achieved and why they will be successful. Customers like different experiences and when you have created an experience that plays into one’s curiosity you have a winner. I would expect other retail models to copy Neighborhood Goods in the future. When you have a winning formula, competitors always follow.

Lyle Bunn (Ph.D. Hon)
Guest

Popup retail is a fast-growing $50 billion industry in North America because it serves a range of brand needs so well. A recorded webinar describes this with some case study examples. Department stores must attract shoppers and intrigue those on occasional visit for which popup retail is an apt prescription. The Neighborhood Goods model, which brings events and a social element to the physical location, could potentially be a hub of buzz that defines a whole new level of customer experience. I like it.

Dick Seesel
BrainTrust
Macy’s has long experimented with the concept of pop-up space in its Herald Square flagship, because it has the space to be flexible. There is a constant stream of short-duration shops, especially on the main floor — but this is a luxury that most department stores (including Macy’s) can’t or choose not to afford. Department stores’ use of their square footage has long been dominated by the same businesses (starting with cosmetics and handbags on the main floor) or the same “prestige” apparel brands, supplemented by exclusive brands. It’s hard to shake loose from this mentality when it’s all about space allocation and vendor agreements instead of focusing on a shopper looking for newness. (And by “newness,” I don’t mean next month’s new shipment of product from the same old vendors.) There was an article in The Wall Street Journal over the weekend, with the scion of The Bon-Ton Stores (soon to close) regretting in hindsight his company’s failure to be more innovative. This is the problem in a nutshell: The “we’ve always done it… Read more »
Camille P. Schuster, PhD.
BrainTrust

For consumers who enjoy shopping, like treasure hunting, and are not time pressed this is a great option, especially if kiosks are available for purchasing items not seen in the store. If the activities at the location are so entertaining and compelling that consumers will be attracted to come back and try new things, the attraction could be strong. For those who are time constrained and need to shop, this is not likely to be an attractive option because they will still have to shop somewhere else to get items they could not find. Fun and excitement is attractive. Getting the job done might be frustrating.

Cate Trotter
BrainTrust

There’s a lot to like about this concept. I’ll be keen to see it in action to see if it feels like a department store or something very different – which is not necessarily a bad thing. I think it’s a good-sized space which will offer variety, but not too much, plus other experiences and reasons to visit. I think for brands this might prove attractive too, especially with Neighborhood Goods offering up a lot of support, as a way of doing something different at a lower cost or on a test basis. I look forward to visiting!

Phil Chang
BrainTrust

I love the experiential element in this. The caution I have is that experiential must be targeted and authentic. Macy’s has done a pretty good job with this, and what Neighborhood Goods is doing warms my retailer heart.

However, two concerns:

  1. if you’re going experiential, it must be catered to your audience and curated in such a way that makes sense. Throwing an espresso machine in the middle of a store doesn’t make it experiential, nor does adding products that don’t inspire your consumer’s trust.
  2. If you’re a department store and you’re going experiential, how much do you need to sell to scale? Most struggling department stores can’t afford to scale back without some sort of space rationalization. Macy’s will have the very same problem. The pop-ups they are doing are great, but do they move the merchandise in the rest of the store? Only time will tell.

Experiential selling isn’t a tactic. It needs to be an organizational mindset. Buyers beware!

Jeff Sward
BrainTrust

Points well made, but I would say that if the pop-ups are doing “great,” then mission accomplished. It’s up to the rest of the departments and the rest of the buyers to compete.

Neil Saunders
BrainTrust

Stripping away the definitions, this is simply about creating interest through a well-curated range of products which change regularly. Department stores used to deliver this. Now they don’t. Most throw loads of bland, undifferentiated product onto the shop floor in the hope some of it will sell. Seasons blur into each other; nothing is distinct or interesting. Changing that mentality and attitude is vital.

Doug Garnett
BrainTrust

This isn’t a reinvention of the department store, it’s Sharper Image expanded to other kinds of products.

What’s missing from the model seems to be having gone to consumers to sort out the question: “What DOES a department store provide?”

If we jettison all the department store ideas assuming they are merely to create a venture-ready pitch, what’s left? It’s a store where people can rent space for their products — like the antique store in my neighborhood?

I hope it works right for them. It sure sounds like they have a lot of learning ahead of them about what won’t work. And it would be a nice incentivizing addition to a mall.

David Weinand
BrainTrust

This is essentially The Marketplace at Macy’s model, which is rolled out in 10 markets for Macy’s. GoodGoods also did this last year in SoHo. “Retail as a Service” is another way to look at it. Providing the space, technology and merchandising expertise for the brands and not having to worry about holding inventory. It’s great for shoppers as the sense of discovery will always be there and it’s great for the department store model as it adds to the experience. It will be interesting see how the big brands that supply department stores will react as this type of model expands.

Jeff Sward
BrainTrust

” … find something new on every visit … ” Perfect! As opposed to “find something old at an ever-decreasing price.” New + Fresh + SCARCE. Sell out. Replace with new and fresh. Repeat. It’s impossible on a large scale but very doable on a small scale. There are sufficient seasonal events (Valentine’s Day, Mother’s Day and Father’s Day) and regional/local reasons for this to work. Yep, it’s same concept as Macy’s/STORY. Start the process. Experiment. Test. Find the evolutionary mechanism that can diminish the power of the word “sale.”

Dave Bruno
BrainTrust

I agree with many comments that this idea has great potential, however, I would argue that many of the critical principles of successful retailing still apply — even more so — in this model. Assortments, even when created via a rotating selection of pop-ups, must be strategically curated to appeal to local shoppers. Candidate pop-up vendors must be selected based upon their ability to both align to and enrich the experience strategy, and managing experience standards must be a high priority. I wish them luck and look forward to witnessing their contribution to the continued evolution of the store experience.

Ray Riley
BrainTrust

In-store execution in traditional retail is hard enough, and while pop-up shops have been in vogue, the in-store outcomes vary wildly. Each department store would benefit from having a part of a floor sectioned off for exclusive merchandise only available at this location, creating the “treasure hunt” element that has been so successful in discount and off-price. Ultimately, the customer decides based on the range of product, and level of service within the environment.

Ralph Jacobson
BrainTrust

This model can definitely thrive as the product assortment is constantly renewed. However, this model does not provide the assortment of a traditional department store. So… is the traditional department store still viable if so many are struggling? Perhaps the key is a non-traditional merchandising approach that looks new each time the shopper visits, rather than simply miles of apparel racks.

Adrian Weidmann
BrainTrust

Almost every aspect of Neighborhood Goods makes sense! Creating an immersive, experiential AND measurable physical retail environment for brands is what established retailers should have been doing for the past five years! Using a pop-up format to test and measure a broad variety of elements from product packaging all the way through to post-purchase communications would (should!) be invaluable to any brand marketing and selling their goods and services through a physical store.

James Tenser
BrainTrust

Like several others commenting on this thread, I’m a new fan of Neighborhood Goods too. Yes, it resembles the STORY concept in many respects — it’s not at all surprising that imitators would emerge. Well-curated, compact retail spaces with limited, revolving assortments have great potential. They should be welcomed by mall operators as traffic generators.

But is this really a story about department stores? This new breed of retail space is more of a showcase, gallery or physical medium for brands. They have an economic model that may de-emphasize product sales in favor of brand impressions. While over-spaced department stores have good reason to experiment with this concept, they might be a tough fit with their legacy sales-per-square-foot mentality.

Craig Sundstrom
Guest

I struggle to understand how this is in any way a “department store,” other than the superficiality of selling a few different goods. So in answer to the question, as I would interpret it, would a Macy’s or JCP benefit from turning its 100-200K sf stores into a kind of giant crafts fair? No. They might make use of it on a small scale — which is perhaps what is being suggested — but personally, I think the “discovery” angle is becoming overrated, particularly insofar as we’re often told that department stores are too big and hard to shop. How does adding even more uncertainty to that process help?

Ryan Mathews
BrainTrust

So first of all, this isn’t a department store — or at least it isn’t a traditional department store. It’s a rational retail space being consistently and, presumably, well merchandised by people who are focused on selling. All that makes sense, but if you had those sensibilities, wouldn’t you already be doing it yourself?

Christopher P. Ramey
BrainTrust

Let’s dispose of department stores rather than trying to reinvent them. Let’s think bigger and reinvent retail. Besides, why would a company burden themselves with a category nearing irrelevance?

Anything that creates interest and fascination is a positive move. The trick is replicating in a world where you often only get one chance.

wpDiscuz
Braintrust
"Small footprint, rotating national and indie brands, a community, and experiential vibe! What’s not to love? "
"“Retail as a Service” is another way to look at it. Providing the space, technology and merchandising expertise for the brands..."
"Experiential selling isn’t a tactic. It needs to be an organizational mindset. Buyers beware!"

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