As the countdown to Christmas gathers pace, many online SME businesses are considering venturing offline.
Pop-ups are becoming increasingly popular: figures in the August 2015 report, Britain’s Pop-Up Retail Economy, by the Centre for Economics and Business Research indicate that the pop up retail sector generated over £2.3 billion in turnover in 12 months, up from £2.1 billion the year before. A short-term lease minimises the risk for the business, while also enabling direct engagement with customers.
The pop-up creates opportunities for consumer engagement impossible to replicate offline. Brands can gather valuable data on their customers – experimenting with products while gathering instant feedback. It is also the perfect chance to build brand loyalty, although becoming omni-channel means ensuring that consumers’ online experience seamlessly translates to an in-store one.
One of the key initial considerations is location: choosing somewhere which is both a good fit with brand and audience is paramount. Different communities will require different inventories, styles and store formats. Integral to it all will be a strategy to drive online sales, all of which requires investment. The ability to relocate a pop-up store offers brand exposure to new customers without a capital-intensive expansion or having to honour a commitment to a long lease agreement if things don’t turn out as planned.
Businesses should seek advice on negotiating lease terms and premiums, and budget for capital works, factoring these costs into cash flow forecasts. They should also keep detailed records of the fit out work to maximise a capital allowance claim. Other costs include systems to manage inventory, sales staff, staff training, payment systems and other technology. A company should also have clear metrics on sales conversion to cover the upfront investment required in setting up their offering. Once up and running, actual performance should be closely measured against the budget, requiring an agile strategy to drive sales if performance is not first as planned.
For the smallest online businesses, a pop-up may be the first venture into employing UK staff so putting in place employment contracts, operating a payroll and registering with HMRC are essential. Meeting minimum wage requirements is critical. Another additional complication to factor in is pensions auto-enrolment which will affect new employers in 2016 or 2017, depending on when PAYE income is first payable.
The rewards for setting up shop physically as well as digitally can be immense, particularly at this time of year. That said, SMEs must not launch into it without proper planning. Getting it right can bring great rewards, but it getting it wrong can be detrimental both to the bottom line and the brand.