Pop-up Shop

Ask any well-informed individual what they see as the future of brick-and-mortar retail and you’re likely to hear words like contraction, showrooming, experiential, and online-to-offline. Whether you think traditional retail will die completely, or just die as we know it, it’s obvious that the industry is in for some massive change.

One related industry that is still grappling with how to adjust to this change is commercial real estate. The traditional model of commercial property owners, which revolves around signing multi-year leases on coveted spaces, is entirely at odds with this brave new world of converted use, pop-up shops, stores-within-a-store, and transitional use spaces.

One San Francisco-based startup is trying to bridge this gap and help fill empty inventory by offering a marketplace that matches premium, high foot traffic, turnkey retail properties with short-term renters. Storefront graduated from the AngelPad accelerator last fall and has been in the market in both San Francisco and New York for several months now.

The startup has partnered with property owners, leasing agents, and brokerages to assemble inventory of various sizes, shapes, and locations in these two markets, sending professional photographers to photograph and list each space. The platform has already placed pop-up shops on behalf of top ecommerce players like StoreEnvy, as well as boutique designers like Todd Snyder and Celestine, and has facilitated rentals as short as a few days, and as long as four months (but currently averages one month).

The value of Storefront is currently twofold, but is likely to expand in the future. It’s not uncommon for a potential pop-up shop merchant to contact several dozen property owners before finding one that is open to the notion of short term use and reasonable about the terms. Storefront shortcuts this discovery process by pre-negotiating with owners and leasing agents.

At the same time, the platform facilitates the booking process by using its own contracts and insurance provider, and by collecting payment in full up front through its site. Eventually, Storefront is likely to expand to offer additional education and services, such as staffing, to temporary merchants and consulting around merchandising, space management, and logistics.

Storefront co-founders Tristan Pollock and Erik Eliason recognized this opportunity when they saw the confluence of two trends. Ecommerce leaders like Bonobos, Indochino, Warby Parker, Etsy, and Everlane have been leading an industry shift offline in an attempt to re-engage customers and build deeper relationships. At the same time, retail vacancy rates across the US are as high as 10 percent on average, roughly two times their historical average. Together, these represent two problems in search of the same solution.

Both Pollock and Eliason have backgrounds in commerce through their time working 8thBridge and BestBuy.com, respectively. The pair have also been working together for nearly five years, having built and recently sold Social Earth, an online community for social entrepreneurship. Their ultimate goal with this current project is to establish enough awareness and credibility within the Storefront brand that property owners and merchants leave behind their fear of facilitating a short-term rental, and come to expect a positive experience. Repeat business on both sides of its marketplace suggest that early on, this is working.

Storefront is not currently monetizing its site, although it tested several revenue models during its beta phase. Eventually, the platform is likely to charge both the listing and renting sides of every transaction although rates are yet to be determined. Because it’s not a licensed real estate broker – something the founders have no plans to change – Storefront will not take a real estate commission, but rather structure its compensation as some form of service fee.

The startup has not yet announced any outside financing, beyond the limited investment it received through AngelPad. Pollock and Eliason have built a lean team of just five full time employees and moved into an office in the SOMA section of San Francisco.

On thing to look out for as the site grows in popularity are regulators issues. In the best cases, municipalities are supportive of Storfront’s mission, and occasionally even have their own initiatives focused on revamping disadvantaged or under-occupied areas. But, as AirBnB and other sharing economy platforms have learned, cities are notorious for byzantine regulations around issues like zoning and occupancy that when not properly addressed can cause nightmares for entrepreneurs. At the same time, entrenched interests like real estate brokers and leasing agencies could easily grow threatened should the Storefront platform take off and begin making waves.

Retail is changing, and the model of 50,000 square foot spaces and 20 year leases is likely dead, whether certain constituencies are willing to accept it or not. Platforms like Storefront will continue to grow in importance as facilitate liquidity in an otherwise disorganized and uncertain environment.

[Image source: Niddle Noodle]